CHINA TAX NEWSLETTER

Transcription

1 JANUARY 2016 CHINA TAX NEWSLETTER AMENDMENT OF MONTHLY (QUARTERLY) TAX DECLARATION FURTHER CLARIFICATION ON THE POLICY OF INSTALMENT PAYMENT IMPLEMENTATION OF PILOT SCHEME OF INDIVID. INCOME TAX POLICIES FOR FORMS FOR PREPAYMENT PAGE 2 OF INDIVID. INCOME TAX PAGE 3 COMM. HEALTH INSURANCE PAGE 4 CONTENTS Further Simplification and Standardization of Evidential Materials Required for Exemption of Business Tax and Individual Income Tax on Gift of Real Estate by or to Individuals Promulgation of the Measures on Application of Enterprise Income Tax Incentives Loosened Criteria for Entitlement to Tax Exemption or Reduction for Income Derived from Transfer of Technology Use Right FURTHER SIMPLIFICATION AND STANDARDIZATION OF EVIDENTIAL MATERIALS REQUIRED FOR EXEMPTION OF BUSINESS TAX AND INDIVIDUAL INCOME TAX ON GIFT OF REAL ESTATE BY OR TO INDIVIDUALS Major changes include: (1) Standardised lists of evidential materials are given regarding the materials required for exemption of business tax and individual income tax on gift of real estate by or to individuals; (2) The required evidential materials are simplified; (3) More options of evidential materials are available for selection. Amendment of Monthly (Quarterly) Tax Declaration Forms for Prepayment of Enterprise Income Tax Further Clarification on Issues Related to Enterprise Income Tax Preferential Policies for Legal Person Partners of Limited Partnership Venture Capital Enterprises Further Clarification on Issues Related to the Policy of Instalment Payment of Individual Income Tax on Share Option Incentives and Additional Share Capital from Enterprise Capitalisation Implementation of the Pilot Scheme of Individual Income Tax Policies for Commercial Health Insurance Promulgation of Tax Policies for Funds Mutually Recognised by Mainland China and Hong Kong

2 2 CHINA TAX NEWSLETTER PROMULGATION OF THE MEASURES ON APPLICATION OF ENTERPRISE INCOME TAX INCENTIVES Administrative examination and approval have been repealed for all enterprise income tax incentive application, and filing has been implemented as replacement. The circular also clarifies issues related to the required filing materials, filing frequency, retained filing materials for future inspection, etc. LOOSENED CRITERIA FOR ENTITLEMENT TO TAX EXEMPTION OR REDUCTION FOR INCOME DERIVED FROM TRANSFER OF TECHNOLOGY USE RIGHT Pursuant to Cai Shui [2015] No. 116, income derived by a residential enterprise from technology transfer pertaining to non-exclusive license of five years or more is entitled to the enterprise income tax incentives for income from technology transfer. State Administration of Taxation Announcement [2015] No. 82 further clarifies following issues related to the implementation of the aforesaid policy: (1) Only technologies owned by the enterprise are entitled to the preceding preferential policy; (2) Method of income calculation is clarified and specified; (3) Time for implementation of the preferential policy is specified. AMENDMENT OF MONTHLY (QUARTERLY) TAX DECLARATION FORMS FOR PREPAYMENT OF ENTERPRISE INCOME TAX Notes on completion of the monthly (quarterly) tax declaration forms for prepayment of enterprise income tax are revised, and the original form, Breakdown for Fixed Asset Accelerated Depreciation (Deduction), has been repealed and replaced. The revised tax declaration forms shall apply to tax filings from 1 October The revision is implemented in view of below changes in preferential policies so as to facilitate enterprises entitlement to these policies when declaring and making prepayment of enterprise income tax: (1) Enlarged application scope of the policies of accelerated depreciation of fixed assets; (2) Loosened criteria for entitlement to tax exemption and reduction for income derived from transfer of technology use right; (3) Greater tax exemption and reduction incentives for small low-profit enterprises.

3 CHINA TAX NEWSLETTER 3 FURTHER CLARIFICATION ON ISSUES RELATED TO ENTERPRISE INCOME TAX PREFERENTIAL POLICIES FOR LEGAL PERSON PARTNERS OF LIMITED PARTNERSHIP VENTURE CAPITAL ENTERPRISES Pursuant to Cai Shui [2015] No. 116, starting from 1 October 2015, where a limited partnership venture capital enterprise has invested in the equities of a non-listed small or medium high-tech enterprise for two years, its legal person partners may offset the taxable income amount distributed to them by the limited partnership venture capital enterprise in accordance with 70% of the investment amount of the non-listed small or medium high-tech enterprise. Any shortfall from the current year s offset may be carried forward to subsequent tax years for offsetting. State Administration of Taxation Announcement [2015] No. 81 further clarifies following issues related to the implementation of the preceding policy: (1) Scope of the limited partnership venture capital enterprises; (2) Scope of the legal person partners; (3) Application scope of the preferential policy; (4) Where a legal person partner invests in several limited partnership venture capital enterprises, the investment amount which can be used for offsetting and the distributable taxable income amount may be aggregated; (5) Calculation of the investment amount of a legal person partner of a limited partnership venture capital enterprise in a non-listed small or medium high-tech enterprise; (6) Determination and distribution of taxable income amount of limited partnership venture capital enterprises shall be carried out pursuant to the relevant provisions of Cai Shui [2008] No. 159; (7) The legal person partners of a limited partnership venture capital enterprise shall submit the Breakdown of Distribution of Taxable Income Amount Among Legal Person Partners of a Limited Partnership Venture Capital Enterprise ; FURTHER CLARIFICATION ON ISSUES RELATED TO THE POLICY OF INSTALMENT PAYMENT OF INDIVIDUAL INCOME TAX ON SHARE OPTION INCENTIVES AND ADDITIONAL SHARE CAPITAL FROM ENTERPRISE CAPITALISATION Pursuant to Cai Shui [2015] No. 116, for share option incentives and additional share capital from enterprise capitalisation obtained by individual shareholders in a small or medium high-tech enterprises, the individuals may pay instalments of individual income tax within five calendar years (included). State Administration of Taxation Announcement [2015] No. 80 further clarifies following issues involved in the implementation of the preceding policy: (1) Method for determining the fair market price of the share option incentives; (2) Circumstances where payment of individual income tax in instalments is allowed for additional share capital obtained from enterprise capitalisation; (3) Detailed procedures for filing of the instalment payment of individual income tax. With regard to the issue of whether individual income tax should be levied on a joint-stock enterprise for additional share capital obtained from conversion of capital reserve of share premiums, the regulations stated in the recently released Cai Shui [2015] No. 116 and State Administration of Taxation Announcement [2015] No. 80 contradict with those stated in the previous circulars Guo Shui Fa [1997] No. 198 and Guo Shui Han [1998] No As the new regulations do not nullify the old regulations, it is expected that the State Administration of Taxation would issue circular to resolve the contradictions in the future. (8) Filing procedures required for a legal person partner for entitlement to the preferential policy; (9) Implementation time of the policy which is 1 October 2015.

4 4 CHINA TAX NEWSLETTER IMPLEMENTATION OF THE PILOT SCHEME OF INDIVIDUAL INCOME TAX POLICIES FOR COMMERCIAL HEALTH INSURANCE Pursuant to Cai Shui [2015] No. 56, where individuals in pilot areas purchase a qualified commercial health insurance product, their relevant expenditure is deductible in the current year (month) for income tax purpose, capped at RMB2,400 per year (or RMB200 per month). Where enterprises and public institutions in pilot areas purchase a qualified commercial health insurance product for their employees, the expenditure shall be included in the employees wages and salaries respectively, and such purchase is deemed as being done by these employees and the expenditure is deductible for income tax purpose under the above limit. Cai Shui [2015] No. 126 further clarifies issues related to the scope of pilot areas, specifications and administration of the commercial insurance products, and collection and administration of the pre-tax deduction of the expenditure for individual income tax purpose. The policies shall be implemented with effect from 1 January 2016, while Shenzhen is not in the scope of pilot areas. PROMULGATION OF TAX POLICIES FOR FUNDS MUTUALLY RECOGNISED BY MAINLAND CHINA AND HONG KONG Starting from 18 December 2015, the following policies will be put into implementation: (1) Where investors from Mainland China trade shares of funds registered in Hong Kong but recognised by both Mainland China and Hong Kong, a mainland individual is temporarily exempt from individual income tax on income generated from price difference within three years, and is subject to the withholding individual income tax at the rate of 20% on returns of funds distributed to him/her; income generated from price difference during transfer and returns of funds obtained by a mainland enterprise shall be included into the total revenue of the enterprise when calculating the enterprise income tax payable. (2) Where investors from Hong Kong trade shares of funds registered in Mainland China but recognised by both Mainland China and Hong Kong, both the individual and the enterprise are temporarily exempt from enterprise income tax for income generated from price difference; the individual and the enterprise are subject to the withholding income tax at the rate of 10% for returns of funds, dividends and bonus, and 7% for interest. The mainland fund will not withhold income tax for the investors when distributing returns of funds. (3) Business tax: Where a mainland enterprise trades shares of funds registered in Hong Kong but recognised by both Mainland China and Hong Kong, it is subject to or exempt from business tax for income generated from price difference pursuant to related policies in force. Income from trading of shares of funds recognised by both Mainland China and Hong Kong under other circumstances is temporarily exempt from business tax currently. (4) Stamp duty: A Hong Kong investor is temporarily exempt from stamp duty for trading shares of funds registered in Mainland China but recognised by both Mainland China and Hong Kong; a mainland investor is subject to the tax regulations of Hong Kong for trading shares of funds registered in Hong Kong but recognised by both Mainland China and Hong Kong.

5 The Newsletter is published for the clients of BDO China Shu Lun Pan Certified Public Accountants LLP and Lixin Certified Tax Agents Co., Ltd. The contents are for reference only which should be kept confidential. Although we try to ensure the accuracy, please note that the content is just the extract of related documents with our brief unbiased comments, thus detailed information should be referred to the full regulation mentioned when in practice. Readers are advised to consult tax advisors before acting on any information in this newsletter. For more information or advice on the above subjects or other tax issues, please contact: JESSE WANG Tel: / JASON HU Tel: ROBERT PEDERSEN Partner, International Tax Services Tel: To ensure compliance with US Treasury Department regulations, we wish to inform you that any tax advice that may be contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the US Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. BDO International is a worldwide network of public accounting firms, called BDO Member Firms. Each BDO Member Firm is an independent legal entity in its own country. The network is coordinated by BDO Global Coordination B.V., incorporated in The Netherlands, with its statutory seat in Eindhoven (trade register registration number ) and with an office at Boulevard de la Woluwe 60, 1200 Brussels, Belgium, where the International Executive Office is located.