CMS, China | Chinese Tax Regulation Update | June 2017

CMS, China

Dear Sir or Madam,

Please find enclosed our update on the latest developments on Chinese Tax Law.

Kind regards,
CMS, China

Topic What is new?
Announcement [2017] No. 14 jointly issued by the State Administration of Taxation, the Ministry of Finance, the People’s Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission 2017-05-09 2017-07-01 Measures on due diligence of tax-related information of non-RPC residents’ financial accounts (AEOI standard / CRS in China)

The Announcement is the finalized version of the “Measures on Due Diligence of Tax-related Information of Non-RPC Residents’ Financial Accounts (Discussion Draft)” (the Discussion Draft) which was released for public discussion in October 2016. There is no significant change between the Discussion Draft and the Announcement, which provides an overall framework for implementation of the global “Standard for Automatic Exchange of Financial Information in Tax Matters” (the AEOI standard) in China, also known as “Common Reporting Standard” (CRS).

The Announcement outlines principles and guidelines for financial institutions in China to conduct due diligence on tax-related information of non-PRC residents’ financial accounts, including:

  • List of financial institutions that are required to conduct due diligence;
  • Types of financial accounts subject to due diligence;
  • Definition of “account holder”, “passive non-financial institution”, etc.;
  • Standard procedure and timeline for conducting due diligence for different types of financial accounts, depending on their existing period and balance amount;
  • Standard CRS reporting procedures and requirements
According to the CRS implementation timeline, China will conduct its first-round information exchange for the non-PRC resident financial accounts in September 2018. Financial institutions located in China should complete registration process at the official website of the State Administration of Taxation (“SAT”) for CRS purpose by 31 December 2017. Annual reporting of the non-PRC resident financial accounts should be completed by 31 May each year.

SAT Announcement [2017] No. 16



Practice of issuing VAT Invoices

The Announcement aims to strengthen the enforcement of compliant practice of issuing VAT invoices and also covers normal VAT invoices. The main contents are as follows:

  • From 1 July 2017, taxpayer identification number or social credit code of the normal VAT invoice recipient (if the VAT invoice recipient is an enterprise) should be correctly reflected in the invoices. The normal VAT invoice recipient is obliged to provide necessary information to the invoice issuer. Unqualified VAT invoices shall not be recognized as valid tax vouchers. Such practice has been forced for implementation only on special VAT invoices so far, but apparently the expansion of enforcement across the board will be conducive to the authorities’ tax administration through overall invoice supervision.

  • The VAT invoices should correctly reflect the transaction nature by including appropriate descriptions. Any data directly imported from the sales system for VAT issuing purpose should be in line with the transaction nature. Taxpayers are suggested to update their sales systems where necessary to meet up the requirements.
Caishui [2017] No. 41 2017-05-27 2016-01-01 Pre-tax deduction policy for advertising and business promotion expenses

Based on the Implementation Rules of the PRC Corporate Income Tax (“CIT”) Law, the Ministry of Finance and the SAT jointly released the Circular on pre-tax deduction policy for advertising and business promotion expenses, effective from 1 January 2016 to 31 December 2020, to replace the outdated circular Caishui [2012] No. 48 (“Circular 48”). The Circular inherits all the stipulations under Circular 48 and can be considered a regulation extending the validity period of Circular 48. The Circular continues to provide a 30% deduction limit of advertising and business promotion expenses for qualified enterprises of cosmetics, medical and drinks industry and allow the deduction within limit among related parties due to valid advertising and business promotion expense allocation arrangements. Deduction of advertising and business promotion expenses in tobacco industry is still prohibited.

Caishui [2017] No. 43 2017-06-06 2017-01-01 Edit on preferential tax policies for small-sized and low-profit enterprises

The Circular, with an effective period from 1 January 2017 to 31 December 2019, has updated the circulars Caishui [2015] No. 34 and Caishui [2015] No. 99 by increasing the upper limit of annual taxable income for recognition of small-sized and low-profit enterprises from the existing RMB 300,000 to RMB 500,000. Such qualified enterprises can calculate CIT based on 50% of the annual income with a preferential tax rate of 20%.

The requirements in relation to the number of employees and total assets of these qualified enterprises shall still comply with Article 92 of the Implementation Rules of the PRC CIT Law. Total employee number includes the number of both the employees who directly sign employment contracts with the enterprise and the staff sent via labour dispatching arrangement. Both the total employee number and the total assets should be calculated on a quarterly average basis.

This information is provided for general information purposes only and does not constitute legal or professional advice. Copyright by CMS, China.

For further information, please contact:

Gilbert Shen
Senior Associate
Head of Tax Practice Area Group
CMS, China
+86 21 6289 6363

+86 21 6289 0731


This information is provided for general information purposes only and does not constitute legal or professional advice. Copyright by CMS, China.

CMS, China
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