CMS, China | Chinese Tax Regulation Update | April 2019





CMS, China

Dear Sir or Madam,

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

Kind regards,
CMS, China

Circular
Number
Issuance
Date
Effective
Date
Topic What is new?
Announcement [2019] No.49, jointly released by the State Administration of Taxation (“SAT”), the Ministry of Finance (“MoF”) and the Poverty Alleviation Office of the State Council 2019-04-02 2019-01-01 Deduction of poverty alleviation donation for Corporate Income Tax ("CIT”) purposes The Announcement is released to encourage enterprises’ participation in poverty alleviation.

1. During the period from 1 January 2019 to 31 December 2022 (“Applicable Period”), poverty alleviation donations made by enterprises through social organizations of public welfare or government of county level and above (including associated departments or affiliated organizations) to target areas for poverty alleviation can be fully deducted from the taxable incomes for CIT purposes. If the target area successfully gets rid of poverty during the Applicable Period, the policy above shall continue to be applicable.
   
2. For calculation of upper limit of public welfare donation for CIT deduction purposes, qualified poverty alleviation donation shall not be further included in the deductible base.
   
3. The policy above also applies to qualified poverty alleviation donations made by enterprises during the period from 1 January 2015 to 31 December 2018, if such donation expenditures are not yet deducted for CIT purposes.

Announcement [2019] No. 52, jointly issued by the MoF, the SAT and the China Securities Regulatory Commission (“CSRC”) 2019-04-03 the date when the first Chinese Depository Receipt (“CDR”) is approved for issuance Pilot tax policy for CDRs issued by innovative enterprises in China The Announcement provides the pilot tax policy for CDRs issued by innovative enterprises in China.

1. Individual Income Tax (“IIT”)
     
  Within the first 3 years (i.e., 36 months) starting from the effective date of the pilot tax policy, capital gains derived by individual investors from disposal of CDRs can be exempted from IIT;
     
  Within the first 3 years (i.e., 36 months) starting from the effective date of the pilot tax policy, dividends of CDRs derived by individual investors shall be subject to differential IIT treatments stipulated under the circulars Caishui [2012] No. 85 and Caishui [2015] No. 101. Domestic depository organizations of the innovative enterprises shall act as the withholding agents which are obliged to declare IIT to in-charge tax authorities with disclosure of full information of the individual taxpayers and the IIT amounts. Foreign taxes paid for the dividend incomes of CDRs can be credited according to relevant foreign tax credit regulations under the PRC IIT Law and applicable double taxation treaties.
     
2. CIT
     
  Capital gains derived by enterprise investors from disposal of CDRs and dividends derived by enterprise investors from the CDRs can be exempt from CIT;
     
  Capital gains derived by public security investment funds (including closed-end and open-end security investment funds) from disposal of CDRs and dividends derived by public security investment funds from the CDRs are not subject to CIT;
     
  Capital gains derived by QFIIs and RQFIIs from disposal of CDRs and dividends derived by QFIIs and RQFIIs from the CDRs shall be treated as capital gains and dividend incomes derived from the base stocks based on which the CDRs are issued for CIT purposes.
   
3. VAT
     
  The difference of sales revenue and purchase cost of the CDRs (“the Gains”) earned by individual investors can be exempt from VAT;
     
  The Gains earned by organizational investors shall be subject to the VAT policies in connection with the transfer of financial commodities;
     
  Within the first three years starting from the effective date of the pilot tax policy, the Gains earned by managers of public security investment funds (including closed-end and open-end securities investment funds) in the course of fund operation can be exempt from VAT;
     
  The Gains earned by QFIIs and RQFIIs through entrusting domestic companies can be exempt from VAT.
     
4. Stamp duty
     
  Within the first three years starting from the effective date of the pilot tax policy, the CDR transferors at the Shanghai Stock Exchange and the Shenzhen Stock Exchange shall pay stamp duty at 0.1% based on the actual transaction prices.


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
Counsel
Head of Tax Practice Area Group
CMS, China
T
+86 21 6289 6363

F
+86 21 6289 0731
E
gilbert.shen@cmslegal.cn

 


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.

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