China Tax Center. China Tax & Investment Express. Tax circulars

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1 Issue No Dec 2014 China Tax Center China Tax & Investment Express (CTIE) * brings you the latest tax and business announcements on a weekly basis. CTIE provides a synopsis of each announcement including a weblink that leads you to the full content of the announcement (in Chinese). Please feel free to contact your Ernst & Young client service professionals for further assistance if you find the announcements have an impact on your business operations. This CTIE does not replace our China Tax & Investment News* which will continue to be prepared and distributed to provide more in-depth analyses of tax and business developments in China. * If you wish to access these previous issues of CTIE and China Tax & Investment News, please contact us. Tax circulars Notice regarding certain matters related to the launch of cleaning up and regulating various tax and other preferential policies (Caiyu [2014] No. 415) Further to the issuance of Guofa [2014] No. 62 ( Circular 62, i.e., Notice regarding cleaning up and regulating various taxes and other preferential policies), on 22 December 2014, the Ministry of Finance (MOF) released Caiyu [2014] No. 415 ( Circular 415 ) in respect to the implementation of Circular 62 (please refer to CTIE for details of Circular 62). Circular 415 reiterates the requirements regarding the revocation of any preferential policies that violate the national laws and regulations starting 1 December Preferential policies that are not contradicted with the law that the local government would like to retain shall be summarized and reported to the MOF by people s governments at the provincial level and other relevant government authorities before the MOF submits those policies to the PRC State Council for approval, otherwise those preferential policies shall be revoked as well. In addition, 6 forms were introduced under Circular 415 for the cleanup exercise. People s governments at the provincial level and other relevant government authorities should report the results of the cleanup to the MOF by the end of March Taxpayers enjoying local preferential treatments that are not supported by any national policies should consider the potential impact Circulars 62 and 415 bring about; they may want to assess the situation in the worst case and pursue options for mitigating the impact. 1

2 You may click this link to access full content of Circular 415: tml You may click this link to access full content of Circular 62: Notice regarding the implementation of the Decisions of the State Council on the Abolishment of Administrative Approval Procedures and Adjustment of Approval Authority for Certain Administrative Approval Items (Shuizongfa [2014] No. 148) Pursuant to Guofa [2014] No. 27 ( Circular 27, i.e., Notice regarding the cancellation of administrative approval and adjustment of approval authority for certain administrative approval items) and Guofa [2014] No. 50 ( Circular 50, i.e., Notice regarding the cancellation of administrative approval and adjustment of approval authority for certain administrative approval items), on 15 December 2014, the State Administration of Taxation () released Shuizongfa [2014] No. 148 ( Circular 148 ) to better implement Circulars 27 and 50 from tax perspectives (please refer to CTIE and CTIE for details of Circular 27 and Circular 50). Circular 148 reiterates the abolishment of the following tax related administrative approval items (please click the circular no. in the table below to access full content of the respective circulars): No. Details Approval government authorities/or related government authorities 1 Approval for preferential corporate income tax (CIT) treatments for qualified small and micro-sized enterprises 2 Approval for preferential tax treatments for employment of unemployed personnel by qualified services/trading companies and business operations by self-employed industrial and commercial households 3 Approval of tax arrears exemption of qualifying enterprises in the Northeast old industrial bases that have completed restructuring 4 Approval for Consumption Tax (CT) refund for wine Circular reference Announcement [2012] No. 14 ( Announcement 14, i.e., Notice regarding certain issues related to the provisional CIT filing of qualified small and micro-sized enterprises), finance departments of Liaoning, Jilin, Heilongjiang and Dalian as joint approval authorities (Please refer to CTIE for details of Announcement 14.) Caishui [2010] No. 84 ( Circular 84, i.e., Notice regarding tax policies for supporting and promoting employment) and Announcement [2010] No. 25 ( Announcement 25, i.e., Notice regarding issues related to the implementation of tax policies for supporting and promoting employment- Announcement 25 was abolished by Announcement [2014] No. 34, i.e., Notice regarding detailed implementation of tax policies to support and promote business start-up and employment of certain groups on 1 January 2014.) (Please refer to CTIE and CTIE for details of Circular 84 and Announcement 25.) Caishui [2006] No. 167 (i.e., Notice on tax arrears exemption of enterprises in the Northeast old industrial bases) and Caishui [2009] No. 58 (i.e., Approval of tax arrears exemption of enterprises in the Northeast old industrial bases) (Official website cannot be located) Guoshuifa [2006] No. 66 (i.e., Trial Measures for the Administration of CT on Wine) 2

3 No. Details Approval government authorities/or related government authorities 5 Approval for CT refund for sales returns 6 Approval for paying CT overdue due to shut out or sales returns of CT taxable goods that have been exported and exempted from CT 7 Approval for record filing for the list of second-tier and lowertier branches of enterprises from which 100% of CIT revenue derived shall be paid to the state treasury at the central level 8 Approval for changing the corporate structure of enterprises paying CIT on a consolidated basis 9 Recognition of capital contribution in the form of shares of listed companies not subject to Stamp Duty (SD) Order 51 Circular reference In addition, Circular 148 also cancels the licensing and recognition requirements for certified tax agents. You may click this link to access full content of Circular 148: You may click this link to access full content of Circular 27: You may click this link to access full content of Circular 50: MOF/ Order [2008] No. 51 ( Order 51, i.e., Implementation Rules for Provisional Regulations of the PRC on CT) Guoshuihan [2010] No. 184 (i.e., Notice regarding issues related to the administration and collection of CIT on certain companies including Industrial and Commercial Bank of China Limited) Announcement [2012] No. 57 (i.e., Administrative Measures for Combined CIT Filing for Cross-region Operations) (Please refer to CTIE for details of this announcement) Caishui [2010] No. 7 (i.e., Notice regarding SD policy related to capital contribution in the form of securities/shares of listed companies) (Please refer to CTIE for details of this circular) Notice regarding the confirmation of certain content of the tax arrangement between the Mainland China and Macao by the competent tax authorities of both parties ( Announcement [2014] No. 68) On 18 December 2014, the released Announcement [2014] No. 68 ( Announcement 68 ) to confirm certain content in the Arrangement between the Macao Special Administrative Region (hereinafter referred to as Macao ) and the Mainland China (hereinafter referred to as the Mainland ) for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as the DTA ). 3

4 According to Announcement 68, the competent tax authorities of the Mainland and Macao have discussed the enforcement of Paragraph 3 of Article 11 1, and concluded that the prescribed other financial institutions mutually recognized by governments of both Sides, which shall be subject to tax exemption for interest arising in One Side by institutions of the Other Side, specifically refer to: Monetary Authority of Macao, Fundo De Pensões ( 退休基金会 ) and Social Security Fund in Macao; and China Development Bank, the Export-import Bank of China, Agricultural Development Bank of China, National Council for Social Security Fund, and China Export & Credit Insurance Corporation in China. 1 Paragraph 3 of Article 11 stipulates that, notwithstanding the provisions of Paragraph 2, interest arising in One Side and derived by the Government of the Other Side, a local authority or any financial institution wholly owned by that Government as well as other financial institutions mutually recognized by governments of both sides, or by any other resident of that Other Side with respect to debt-claims indirectly financed by the Government of that Other Side, a local authority, or any financial institution wholly owned by the Government shall be exempt from tax in the first-mentioned Side. You may click this link to access full content of Announcement 68: You may click this link to access full content of the Interpretation of Announcement 68 from the : You may click this link to access full content of the DTA: Notice regarding certain matters related to the adjustment of Value-Added Tax (VAT) filing ( Announcement [2014] No. 69) To cope with the current adjustments of CT policies announced through Caishui [2014] No. 93 ( Circular 93. i.e., Notice regarding the adjustments of CT policies), the released Announcement [2014] No. 69 ( Announcement 69 ) on 15 December 2014 to impose adjustment on VAT filing (please refer to CTIE for details of Circular 93). According to Announcement 69, from 1 February 2015, general VAT taxpayers engaging in the manufacture of automobile tires, ethanol and motorcycles are required to file a statistics form for sales of the aforementioned products (i.e., Attachment of Announcement 69) as supporting documents for VAT filing. Relevant taxpayers should note this change and complete the required documents properly. You may click this link to access full content of Announcement 69: You may click this link to access full content of the Interpretation of Announcement 69 from the : You may click this link to access full content of Circular 93: 4

5 Business circulars Provisional Regulations on Immovable Property Registration (State Council Order [2014] No. 656) On 24 November 2014, the State Council approved the Provisional Regulations on Immovable Property Registration (hereinafter referred to as the Provisional Regulations ) through State Council Order [2014] No. 656, which shall become effective on 1 March Key features of the Provisional Regulations are as follows: Items Definition of immovable properties Registration of immovable properties (hereinafter referred to as the registration ) Provisions Immovable properties refer to immovable objects such as land, ocean, real estate and woods. The following rights with respect to immovable properties are subject to registration under the Provisional Regulations: Collective land ownership Ownership of real estate such as buildings or structures Ownership of forest or woods Contract managerial rights of farmland, woodland or lawn Use right of construction land Use right of housing land ( 宅基地 ) Use right of sea area Easement Mortgage Government authority in charge Registry of immovable properties Other rights with respect to immovable property which are required to be registered by law Department in charge of land and resources under the State Council (hereinafter referred to as the department in charge ) shall be responsible for guiding and supervising registration matters nationwide. Each people s government at the county or above level shall designate an authority to be in charge of the registration matters in the area. Registry of immovable properties shall cover the following information: Natural conditions, such as the location, boundary points, space, and purpose Status of ownership, such as the subject matter, type, content, source, terms and changes of rights with respect to immovable properties Notification of restriction rights with respect to immovable properties Other relevant matters 5

6 Items Procedures for the registration Provisions For registration due to buy, sell or mortgage with respect of immovable properties, both parties involved should jointly lodge the application for registration. Sharing and protection of the registered information However, the application for registration may be lodged by one party under one of the following situations: Initial registration for non-registered immovable properties Rights acquired with respect to immovable properties due to inheritance or bequests Establishment, alteration, transfer, termination of rights with respect to immovable properties due to the effectiveness of legal documents released by the people s court or arbitration commission or decisions made the people s government Alteration due to changes of obligee s name, title or other natural conditions Deregistration due to renounce of right Alteration for correction of error, or registration for right of dissent Other conditions The department in charge shall establish an unified information management platform for immovable properties (hereinafter referred to as the platform ), which shall achieve real-time sharing of information with the relevant government authorities such as the public security bureaus, finance and tax authorities as well as government authorities at different administration levels from national to county levels. The relevant government authorities may make inquiry, replicate and conduct investigation on the registered information with respect of immovable properties according to the relevant laws and regulations. Miscellaneous Registration certificates for all types of immovable properties issued before the effectiveness of the Provisional Regulations shall remain valid. The department in charge and the relevant government authorities shall jointly stipulate the detailed implementation rules on the Provisional Regulation. Our observations The Provisional Regulations launch the registration scheme and platform with respect to immovable properties, and set out provisions regarding the definition of immovable properties, registration procedures and real-time sharing of information between various government authorities. The establishment of the platform would not only make easy the sharing of information but also, in the longer run, be a key component for real estate related tax reform and building foundation for personal credibility system. An implementation rule of the Provisional Regulations would likely further regulate on the details. We will pay close attention to the development and provide timely update in this regard. Relevant parties and individuals should read the Provisional Regulations and follow the registration requirements accordingly. You may click this link to access full content of the Provisional Regulations: Agreement between the Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Agreement between the Mainland and Macao on Achieving Basic Liberalization of Trade in Services in Guangdong under the Mainland and Macao CEPA On 18 December 2014, the Ministry of Commerce (MOFCOM) has entered new agreements with Hong Kong and Macao respectively, for achieving the basic realization of services trade liberalization between Guangdong and Hong Kong/Macao under the framework of CEPA (hereinafter referred to as the Hong Kong Agreement and Macao Agreement ). 6

7 The Hong Kong Agreement and Macao Agreement provide most-favored treatments to Hong Kong and Macao, which generally stipulate that any preferential treatments offered by the Mainland to other countries and regions shall be extended to Hong Kong/Macao, to ensure that Hong Kong/Macao will continue enjoying the most preferential measures offered by the Mainland in terms of services trade liberalization. The Hong Kong Agreement and Macao Agreement came into effect on the day of signing, i.e., 18 December 2014 and shall be implemented on 1 March The Hong Kong Agreement and Macao Agreement are expected to enable Hong Kong/Macao investors to take early advantage of the opening up of Guangdong market in various service sectors, deepen cooperation and enhance competitiveness of service industries. Management of the relevant businesses should read the Agreements to understand the details. You may click this link to access full content of the Hong Kong Agreement (English version): You may click this link to access full content of the Macao Agreement (Chinese version only): Customs circular Notice regarding the usage of electronic guarantee letter within customs areas (GAC Announcement [2014] No. 89) To cope with the reform of integrated regional customs clearance for goods imported/exported via the customs areas of Beijing-Tianjin-Shijiazhuang, Yangtze Economic Zone and the customs area of Guangdong, on 9 December 2014, the General Administration of Customs (GAC) released GAC Announcement [2014] No. 89 ( Announcement 89 ) to launch a pilot run of integrated regional electronic guarantee (hereinafter referred to as the pilot run ) in the customs areas of Beijing-Tianjin-Shijiazhuang, Yangtze Economic Zone (hereinafter referred to as the pilot customs areas )from 20 December 2014 (please refer to CTIE and CTIE for details of GAC Announcement [2014] No. 45 ( Announcement 45 ) and GAC Announcement [2014] No. 84 ( Announcement 84 ) regarding the integrated customs clearance reform in the customs areas of Beijing-Tianjin-Shijiazhuang and Yangtze Economic Zone, respectively). Under the pilot run, enterprises in the pilot customs areas may enter into electronic guarantee with Customs as the beneficiary in respect of certain amount of customs-related payments. Once the guarantee letter is signed and filed to the Customs in charge of the enterprise, the guarantee shall be applicable to all Customs offices in one pilot customs area ( 一关备案 区域通用 ). Subject to the results of pilot run, the integrated regional electronic guarantee shall be expanded to Customs in Guangdong and other customs areas. Record filings for integrated regional electronic guarantee are to be completed with the Customs in charge where the enterprise is registered or where the goods of the enterprise are physically imported/exported. However, the Operational Guidelines for Pilot Areas under the Integrated Regional Electronic Guarantee are not announced on GAC s official website along with Announcement 89. Enterprises operating in the pilot customs areas should check with customs in charge for the relevant details. You may click this link to access full content of Announcement 89: You may click this link to access full content of Announcement 45: You may click this link to access full content of Announcement 84: 7

8 Other business, customs and tax related circulars recently announced by central government authorities Notice regarding a catalog of new energy vehicles eligible for the Vehicle Purchase Tax exemption (the third batch) (MIIT/ Announcement [2014] No. 81) Notice regarding the implementation of the Decisions of the State Council on the Cancellation of Administrative Approval Procedures and Adjustment of Approval Authority for Certain Administrative Approval Items (Yinfa [2014] No. 359) _.html Notice regarding the issuance/abolishment of certain decisions for commodity classification of the World Customs Organization (GAC Announcement [2014] No. 93) 8

9 Contact us For more information, please contact your usual EY contact or one of the following of EY s China tax leaders. Office Tax Leaders Henry Chan (Beijing) henry.chan@cn.ey.com Alan Lan (Tianjin) alan.lan@cn.ey.com Samuel Yan (Dalian/Shenyang) samuel.yan@cn.ey.com Lucy Wang (Qingdao) lucy-c.wang@cn.ey.com Vickie Tan (Shanghai/Wuhan) vickie.tan@cn.ey.com Patricia Xia (Hangzhou) patricia.xia@cn.ey.com Chuan Shi (Chengdu) chuan.shi@cn.ey.com Rio Chan (Guangzhou/Xiamen) rio.chan@cn.ey.com Lawrence Cheung (Shenzhen) lawrence-f.cheung@cn.ey.com Clement Yuen (China South) clement.yuen@cn.ey.com Audrie Xia (Suzhou) audrie.xia@cn.ey.com Service Line Tax Leaders Andrew Choy (International Tax & Transfer Pricing) andrew.choy@cn.ey.com Paul Wen (Human Capital) paul.wen@hk.ey.com Becky Lai (Tax Policy) becky.lai@hk.ey.com David Chan (Transaction Tax) david.chan@hk.ey.com Robert Smith (Indirect Tax) robert.smith@cn.ey.com Greater China Tax Leader Walter Tong walter.tong@cn.ey.com Author China Tax Center Jane Hui jane.hui@hk.ey.com 9

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