CMS, China | Chinese Tax Regulation Update | June 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. 10 2020-05-19 2020-05-01 Deferral of income tax payment in 2020 of Small Low-profit Enterprises (“SLPEs”) and individual businesses The Announcement provides the policy of income tax payment deferral in 2020 for SLPEs and individual businesses in order to support the resumption of production and business. SLPEs are allowed to defer the payment of provisional Corporate Income Tax for the period from 1 May 2020 to 31 December 2020 till the first provisional filing period in 2021. Individual businesses are allowed to defer the payment of provisional Individual Income Tax according to the same timing policy granted to SLPEs above.
SAT Announcement [2020] No. 11 2020-05-25 2020-05-14 Effectiveness of the Fourth Protocol of the Mainland China-Macau Double Taxation Arrangement (“DTA”) The Announcement stipulates the effectiveness of the Fourth Protocol of the Mainland China-Macau Double Taxation Arrangement (“Protocol”) signed on November 28, 2019 and this Protocol applies to the incomes obtained on and after 1 January 2020. The key points that are worth attention mainly include the following:

The Protocol allows the incomes obtained by a tax resident of one jurisdiction through “tax transparent entities” to be subject to the DTA benefits.
   
Amendment of Article 4 – Resident: if a non-individual person is a tax resident of both jurisdictions and no mutual agreement is reached by the tax authorities of both jurisdictions, such person shall not be entitled to any DTA relief.
   
The Protocol has updated the “agency permanent establishment” provisions to make them in line with the BEPS standards and defined “closely related enterprises” as the enterprises in the situations where one of them holds directly or indirectly more than 50% equity interest in the other or a third party directly or indirectly holds more than 50% equity interest in both of them.
   
The Protocol expands the scope of “shares” in the condition for qualifying DTA benefits of capital gains into “share-like interest (such as the interest in partnerships or trusts)”.
   
“Main purpose test” has been introduced to avoid the abuse of DTA benefits.
   
The Protocol has added Article 21 – Government Investment to the DTA by granting tax exemption to the investments made by the government of one jurisdiction in the funds for public welfare projects set up in cooperation with the government of the other jurisdiction. Currently this article is specifically applicable to the Guangdong-Macau Cooperative Development Fund.
Announcement [2020] No. 28 jointly released by the Ministry of Finance (“MOF”) and the Statement Administration of Taxation (“SAT”) 2020-05-15 2020-05-15 Extension of expiration dates of preferential tax and fiscal policies in supporting the prevention and control of the epidemic The Announcement extends the expiration date of preferential tax and fiscal policies stipulated in Announcement [2020] No. 8, No. 9, No. 10 and No. 11 (jointly released by the MOF and the SAT or the National Development and Reform Commission) till December 31, 2020 in order to support the prevention and control of the epidemic, the implementation of relief measures and the resumption of business and production.

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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