CMS, China | Chinese Tax Regulation Update | November 2018

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?
SAT Announcement [2018] No. 53 2018-10-29 2018-01-01 Interpretations regarding dividend Withholding Tax (“WHT”) deferral policy for overseas investors’ direct re-investments in China This Announcement is a supplementary regulation to the circular Caishui [2018] No. 102 (“Circular 102”), according to which non-PRC tax resident enterprises using dividends derived from the PRC to make equity re-investments into all non-prohibited projects in China shall qualify for the WHT deferral treatment.

This Announcement has brought further interpretations of Circular 102:

A non-PRC tax resident investor’s using dividends from the PRC to pay for subscribed capital shall be categorized as “capital contribution to PRC tax resident enterprises” defined under Circular 102.  In other words, such situation can be qualified for WHT deferral if all other requirements are met;
The situation that the dividends are firstly transferred from the bank account of the PRC enterprise that distributes the dividends to the special bank account for RMB re-investment of the non-PRC tax resident investor and then transferred from the investor’s special bank account for RMB re-investment to the bank account of the enterprise for re-investment or the share transferee on the very same day shall be regarded as “dividends directly transferred from the distributor’s bank account to the investee’s bank account” defined under Circular 102.  In other words, this situation qualifies for one of the conditions of WHT deferral treatment;
Re-investments which took place during the period from 1 January 2017 to 31 December 2017 shall be subject to the conditions and requirements under the circular Caishui [2018] No. 88 and SAT Announcement [2018] No. 3.
SAT Announcement [2018] No. 52 2018-10-31 2018-01-01 Pre-Corporate Income Tax (“CIT”) deduction policy of liability insurance premiums According to this Announcement, premiums of liability insurances such as employer’s liability insurances and public liability insurances can be deducted from the taxable incomes for CIT purposes.
Caishui [2018] No. 120, jointly issued by the Ministry of Finance, the State Administration of Taxation, the Ministry of Science and Technology and the Ministry of Education 2018-11-01 2019-01-01 Preferential tax policies for technological business incubators, university technology parks and shared business spaces This Circular provides preferential tax policies for technological business incubators of state or provincial level, university technology parks of state or provincial level as well as shared business spaces officially recorded at relevant authorities (jointly referred to as “Qualified Incubators”):

  During the period from 1 January 2019 to 31 December 2021, real estate tax and urban land use tax can be exempted for real estate and lands that are either used by the Qualified Incubators or provided to incubation targets by the Qualified Incubators for free or via leasing.  “Incubation targets” refer to incubation entities, individual entrepreneurs or entrepreneur teams of start-up businesses.
  Revenues derived from provision of “incubation services” can be exempted from VAT. “Incubation services” refer to agent services, operational lease services, research and technology services, information and technology services as well as assurance and advisory services provided to an incubation target.

To enjoy such preferential tax treatment, Qualified Incubators should separately book the revenues and costs related to incubation services. Qualified incubators should report to the tax authorities for enjoying the tax exemption and keep good record of relevant documents for tax authorities’ future reference. The tax authorities are empowered to conduct follow-up administrative procedures.

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
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
“CMS, China” should be understood to mean the representative offices in Mainland China of CMS Cameron McKenna Nabarro Olswang LLP, CMS Francis Lefebvre Avocats and CMS Hasche Sigle, working together. CMS, China is a member of CMS Legal Services EEIG, a European Economic Interest Grouping that coordinates an organisation of independent member firms. CMS Legal Services EEIG provides no client services. Such services are solely provided by the member firms in their respective jurisdictions.   Disclaimer   Privacy Statement

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