CMS, China | Chinese Tax Regulation Update | April 2020





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?
SAT Announcement [2020] No. 7 2020-04-08 2019-10-17 Effectiveness of the Protocol of the Sino-Chile Double Taxation Treaty The Announcement stipulates that the Protocol of Sino- Chile Double Taxation Treaty (“DTT”) signed on 29 May 2018 entered into force on 17 October 2019 and is applicable to the incomes received on and after 1 January 2017. According to this protocol, if enterprises of one contracting state engaged in international transportation business in the other contracting state by ship or aircraft, VAT shall be exempt in the other contracting state. In other words, the protocol expands the application of treaty benefit to international transportation incomes from income tax systems to indirect tax systems.
Announcement [2020] No. 20 jointly released by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation 2020-04-14 2020-04-15 Expansion of the pilot program for selective imposition of import duty on finished goods for domestic sales The Announcement has expanded the application of the pilot policy for selective imposition of import duty on finished goods for domestic sales as mentioned in the circular Cai Guan Shui [2016] No. 40, geographic-wise, to all comprehensive free trade zones (”CFTZs”).

Under the traditional practice, when a manufacturing or processing company in the special customs-supervised areas (which are treated to be “outside China” from customs perspectives) sells the finished products to domestic customers in the normal regions of China, relevant import duty and import VAT shall be paid based on the dutiable value of the finished products. Under the pilot policy, however, the manufacturing or processing company in the pilot areas can choose to pay import duty based on the dutiable value of the raw materials that the company imports from abroad for manufacturing the final products (instead of paying import duty based on the dutiable value of the finished products for domestic sales), although the interest resulting from the deferred payment of import duty (which should have been paid when the raw materials were imported, in the event that the company chooses to pay import duty based on the dutiable value of the raw materials) would be levied in the meantime. Under the pilot policy, import duty costs may be saved to a certain extent since the price of the finished products is higher than the import price of the raw materials, but the company may still wish to compare the applicable duty rates of the raw materials and of the finished products before deciding whether to enjoy the pilot policy.

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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