China Tax Center China Tax & Investment Express

Transcription

1 Issue No Feb 2018 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 link that leads you to the full content of the announcement (in Chinese). Please feel free to contact your EY client service professionals for further assistance if you find the announcements have an impact on your business operations. CTIE does not replace our China Tax & Investment News* which will continue to be prepared and distributed to provide more indepth analyses of tax and business developments in China. *If you wish to access the previous issues of CTIE and China Tax & Investment News, please contact us. Business circulars Notice regarding the Provisional Measures on Reporting for Outbound Investments subject to Record Filing/Approval (Shanghefa [2018] No. 24) Synopsis On 18 January 2018, seven central government authorities, i.e., the State Administration of Foreign Exchange (SAFE), State-owned Assets Supervision and Administration Commission of the State Council (SASAC), Ministry of Commerce (MOFCOM), China Insurance and Regulatory Commission (CIRC), Peoples Bank of China (PBC), China Banking Regulatory Commission (CBRC), and China Securities Regulatory Commission (CSRC), jointly released the Provisional Measures on Reporting for Outbound Investments subject to Record Filing/Approval (hereinafter referred to as the Provisional Measures via Shanghefa [2018] No. 24. According to the Provisional Measures, the seven central government authorities shall work together to regulate outbound investments subject to record filing/approval. The Provisional Measures became effective on its promulgation date, i.e., 18 January

2 Key features of the Provisional Measures include: Outbound investments subject to record filing/approval According to the Provisional Measures, the domestic investors are required to file relevant information and documentation to the competent governmental authorities before establishment of enterprises overseas. If the information and documentations are in order, the competent government authorities shall complete the record filing or release approval documents. The Provisional Measures also define the abovementioned domestic investors, establishment of enterprises and overseas enterprises established by a domestic investors as below: Domestic investors: domestic entities conducting outbound investments (except for otherwise specified) Establishment of enterprises: forms of establishment of enterprises can be merger, acquisition and other forms of investments Overseas enterprises established by a domestic investors: enterprises in the ultimate destination where the domestic investors ultimately invest for the project construction or the continuous production and operation. In terms of the abovementioned ultimate destination, the MOFCOM s official interpretation regarding the Provisional Measures further emphasized that all the intermediate shell companies between domestic investors and ultimate investee companies shall not be accepted by competent governmental authorities for record filing/approval procedures. This would be helpful for the authorities to learn the true path of funds outflow. However, reinvestments made by the ultimate investee companies are not subject to record filing/approval requirement of outbound investments. Record filing/approval jointly enforced by seven central government authorities According to the Provisional Measures, the competent department of commercial (i.e., the MOFCOM or its local branches), and the competent departments of finance (i.e., the PBC, CSRC, CIRC, and CBRC or their local branches) shall be responsible for the record filing/approval for outbound investment projects within their respective jurisdictions. The relevant competent departments shall, within their own jurisdictions, set out and improve the administration regarding record filing/approval for outbound Investments to encourage the development of outbound investments while implementing the negative lists for prohibited/restricted investments. The relevant competent departments shall review the documents filed by the domestic investors. Outbound investments proposed by central enterprises which are investees of the SASAC and are considered as special supervisory investment projects shall also be subject to the administration and supervision as prescribed in SASAC Order [2017] No. 35 ( Order 35, i.e., Administrative Measures regarding the Supervision on Outbound Investments by Central Enterprises). The PBC, SASAC, CSRC, CIRC, and CBRC shall notify the MOFCOM for their monthly status of record filing/approval matters related to outbound investments by the 15 th working day of the following month. The MOFCOM shall summarize the same and provide feedback to the abovementioned government authorities periodically. The MOFCOM shall establish an electronic platform for the communication and services regarding outbound investments for information sharing and cooperation between the relevant authorities. Upon completion of the record filing/approval procedures, the domestic investors shall complete the required registration formality with the SAFE or its local branches. 2

3 The reporting mechanism General reporting on a regular basis The domestic investors are required to report key information related to their outbound investments to the competent departments with whom they completed the record filing/approval procedures. The report should be done on a regular basis and the scope of information reporting should include but not limited to the following: Monthly/annual information to be filed according to the System of Outbound Investment Statistics Early-stage issues related to the outbound investments/merger, etc. Achievements of outbound investment projects under construction Major issues related to the outbound investments as well as status of complying the local laws/regulations, protection of resources/environment, protection of lawful rights of employees, corporate social responsibilities and security protection, etc. Details of the information reporting shall be stipulated by the relevant departments under separate rulings. Upon receiving the information reported by domestic investors, the PBC, SASAC, CIRC, CBRC and CSRC shall report the same to MOFCOM in the following month of every six months. The relevant information shall be shared among the relevant departments over the platform. Special reporting For any significant adverse or unexpected events related to outbound investments, the domestic investors are required to report to the competent departments as special cases. The competent departments shall report the same to MOFCOM in a timely manner. Interim/follow-up supervision According to the Provisional Measures, the following significant outbound investments shall fall into key supervision by the relevant competent departments within their own jurisdictions: An outbound investment project with Chinese investments amounted to USD300 million or above An outbound investment project involving sensitive countries/regions/industries An outbound investment project with a substantial operational loss An outbound investment project with a significant safety accident or mass incident An outbound investment project with a significant violation Other significant outbound investment project In addition, the MOFCOM shall take lead of interim/follow-up supervision regarding outbound investments via oversight through inspections by randomly selected inspectors of randomly selected entities and the inspection results shall be released to the public ( 双随机 一公开 抽查工作 ). By carrying out the inspections, the information related to record filing/approval of outbound investments shall be covered in a Dictionary of Inspection Targets which will achieve complete coverage of interim/follow-up supervision on outbound investments. 3

4 Disciplinary measures In case the domestic enterprises failed to fulfill the relevant responsibilities as prescribed in the Provisional Measures, the MOFCOM together with the relevant competent departments shall send out reminders, arrange formal meeting or release public notification where appropriate. If the domestic enterprises involve in tax evasion or foreign exchange fraud, the relevant cases shall be transmitted to relevant governmental authorities, such as tax, public security, industry and commerce, as well as foreign exchange departments for further handling. Our observations The issuance of the Provisional Measures constitute a comprehensive framework between the seven central government authorities regarding the administration of record filing/approval for both non-financial/financial outbound investments. In this regard, the seven central government authorities (as well as their local branches) shall enforce a joint supervision on outbound investments according to the prevailing rules released by the seven central government authorities. We have summarized the major rules released by the seven central government authorities in this regard (you can click the circular nos. or titles of each rules for details): Issuing government authorities MOFCOM SASAC CIRC, PBC, and SAFE CBRC Prevailing rules MOFCOM Order [2014] No. 3 ( Order 3 ), i.e., the Administrative Measures for Outbound Investments (Please refer to CTIE for details of Order 3.) Order 35, i.e., Administrative Measures regarding the Supervision on Outbound Investments by Central Enterprises CIRC, PBC, SAFE Order [2007] No. 2, i.e., the Provisional Measures regarding the Administration of Outbound Investments by Insurance Funds as well as its Implementation Rules Yinjianfa [2017] No. 1, i.e., Guidance regarding the Reinforcement of Risk Control on Regulating Banking Services Provided to Go-global Enterprises SAFE Huifa [2015] No. 13, ( Circular 13 ), i.e. Notice regarding further simplifying and improving the foreign exchange administration policies for direct investments (Please refer to CTIE for details of Circular 13.) Key features of the rules Order 3 outlines the scope of outbound investments subject to record filing or approval, scope of prohibited outbound investments, etc. After completion of the record filing or obtaining approval from the MOFCOM or its local branches, the domestic investors shall obtain certificates for outbound investments ( 企业境外投资证书 ). Specifies supervisory matters on outbound investments by central enterprises. Sets out the details regarding outbound investments by insurance funds. This circular is regarding the reinforcement of risks management regarding the banking services to go-global enterprises. According to Circular 13, from 1 June 2015, domestic investors can directly apply to banks for foreign exchange registration of direct investments. As prescribed in the appendix of Circular 13, for outbound investments by non-financial enterprises, certificates for outbound investments released by the MOFCOM or its local branches is one of the required documents for completion of the foreign exchange registration. On the other hand, for outbound investments by financial enterprises, approval documents or no objection letters from the supervising government authorities shall be required. 4

5 In addition, in late 2017, the National Development and Reform Commission (NDRC) released NDRC Order [2017] No. 11 ( Order 11, i.e., Administrative Measures for Enterprises Outbound Investments) which also specifies matters related to record filing/approval for outbound investments which include both financial/nonfinancial investors. However, NDRC is not included in the comprehensive framework for outbound investments introduced by the Provisional Measures. In this respect, domestic investors would need to complete both record filing/approval requirement with the NDRC (or its local branches) and the record filing/approval requirement with the MOFCOM (or its local branches) and the competent departments of finance (i.e., the PBC, CSRC, CIRC, and CBRC or their local branches). After that, domestic enterprises may complete foreign exchange registrations for direct outbound investments and purchase foreign currency. Among these, central enterprises are also subject to measures as prescribed in Order 35. (Please refer to CTIE for details of Order 11.) It is worth noting that both Order 11 by the NDRC and Order 3 by the MOFCOM set out the scope of outbound investments subject to approval, i.e., investments involving sensitive countries/regions/industries. However, the definition of sensitive countries/regions/industries is not consistent between the one prescribed in Order 11 and the one in Order 3. According to the official interpretation of the Provisional Measures, Order 3 which was released in 2014 shall be further revised and updated. In addition, the relevant government authorities will further work on the stipulation of the outbound investment rules. Please stay tuned and we will bring you more updates in this regard. You can click this link to access the full content of the Provisional Measures: You can click this link to access the full content of the official interpretation of the Provisional Measures: You can click this link to access the full content of Order 11: Notice regarding enhancing information sharing and joint supervision (Gongshangqizhuzi [2018] No. 11) Synopsis On 15 January 2018, the State Administration for Industry and Commerce (SAIC) and State Administration of Taxation (SAT) jointly released Gongshangqizhuzi [2018] No. 1 ( Circular 11 ) regarding enhancing information sharing and joint supervision between the local branches of SAIC (hereinafter referred to as local registration authorities ) and local tax authorities. In this regard, Circular 11 proposes the following measures: Expand the scope of information gathering during enterprise registration SAIC shall revise and update the relevant application documents regarding enterprise registration and gather information regarding accounting method and headcount of enterprise during the application for enterprise registration. Tax authorities shall be able to access to the relevant information gathered in enterprise registration through information sharing and shall not enquire duplicated information from enterprises. Where the information registered with the local registration authorities changed, the tax authorities should remind enterprises to apply for alteration timely. Reminder for tax registration/settlement After completion of enterprise registration, local registration authorities shall issue notices to enterprises to remind them to complete tax registration in a timely manner. Also, the SAIC shall revise the Commitment Letter for Simplified Enterprise Liquidation by adding reminders for enterprises to settle their unpaid taxes before they announce public notices for proposing simplified enterprise liquidations. 5

6 Cooperation in regard of simplified enterprise liquidations Within one working day after enterprises have announced public notices for going through simplified enterprise liquidations, the local registration authorities should share the relevant information with tax authorities through designated channels. After obtaining the relevant information, the tax authorities should check the tax-related information of the enterprises. The tax authorities shall not reply to the local registration authorities with objections for the following situations: The enterprise has not applied for any tax-related matter The enterprise has applied for certain tax-related matters but has not applied for tax invoices and has no underpaid taxes or any unfinished tax-related applications in process The enterprise has settled all tax clearances procedures (i.e., settled tax invoices, tax payables etc.) during the announcement period. Further cooperation between local registration authorities and tax authorities The local registration authorities and tax authorities shall work together to improve their cooperation on the application of Value-added Tax (VAT) invoices. Tax authorities shall make good use of information gathered during enterprise shared by the local registration authorities and share black list of tax violations of taxpayers with local registration authorities. According to Circular 11, the SAIC shall update certain documentation related to enterprise registration and simplified enterprise liquidation. Relevant enterprises should stay tuned for further notices in this regard. You can click this link to access the full content of Circular 11: Tax circulars Guidelines on the Implementation of Corporate Income Tax (CIT) Policies related to the Super Deduction of Research and Development (R&D) Expenses (Version 1.0) Synopsis In January 2018, the SAT announced the Guidelines on the Implementation of Corporate Income Tax (CIT) Policies related to the Super Deduction of Research and Development (R&D) Expenses (Version 1.0) (hereinafter referred to as the Guidelines ) which summarized all the prevailing CIT policies in this regard. The Guidelines consist of five sections, i.e., general introduction of the super deduction policy, key features of the super deduction policy, the accounting requirements to apply to the super deduction policy, the record filing and reporting requirements for the super deduction policy, and the super deduction policy for qualifying technology-based small and medium-sized enterprises (i.e., the 175% super deduction). Among these, it is worth noting that the Guidelines make it clear that the documents filed for the application of super deduction policy should be maintained for 10 years after an enterprise has utilized the super deduction treatment for the relevant R&D projects. According to the Guidelines, an enterprise should be able to provide the relevant documents to substantiate its eligibility to the super deduction policy during inspection. Otherwise the enterprise would have to pay the reduced tax payment and shall be penalized according to the prevailing tax rules. The Guidelines can be used as a good reference for relevant taxpayers to apply for the tax benefit. Taxpayers should refer to the Guidelines to properly enjoy the tax benefit while ensuring their tax compliance. If in doubt, consultation from tax professionals are always recommended. You can click this link to access the full content of the Guidelines: 6

7 Public notice (PN) regarding the expansion of the scope of the pilot program on allowing qualifying enterprises in Special Customs Supervision Zones to be registered as general VAT taxpayers (SAT/MOF/GAC PN [2018] No. 5) Synopsis Further to SAT/MOF/GAC PN [2016] No. 65 ( PN 65 ) which launched a pilot program to allow qualifying enterprises in seven special customs supervision zones to be registered as VAT taxpayers from 1 November 2016, the SAT, Ministry of Finance (MOF) and General Administration of Customs (GAC) jointly released SAT/MOF/GAC PN [2018] No. 5 ( PN 5 ) on 12 January 2018 to expand the scope of the pilot to 17 additional special customs supervision zones, i.e., Ningbo Export Processing Zone, Chengdu Hi-tech Industrial Development Zone, Alataw Comprehensive Bonded Zone, Beihai Export Processing Zone, Tianzhu Comprehensive Bonded Zone in Beijing, Minhang Export Processing Zone in Shanghai, Binzhou Comprehensive Bonded Zone, Dalian Export Processing Zone, Fuzhou Bonded Port Zone, Fuzhou Export Processing Zone, Qianwan Bonded Port Zone in Qingdao, Donghu Comprehensive Bonded Zone in Wuhan, Wuxi Hi-tech Comprehensive Bonded Zone, Suzhou Hi-tech Comprehensive Bonded Zone, Zhenjiang Comprehensive Bonded Zone, Huaian Comprehensive Bonded Zone, and Wujiang Comprehensive Bonded Zone. (Please refer to CTIE for details of PN 5.) Under the pilot, enterprises located in these pilot areas that satisfy the criteria of general VAT taxpayers may be registered as general VAT taxpayers by applying with their supervising tax authorities and Customs. According to PN 5, after 36 months an enterprise had been registered as a general VAT taxpayer under the pilot, the enterprise may apply to withdraw from the pilot: The enterprise should lodge application to the supervising tax bureau and customs to withdraw from the pilot. The enterprise is required to settle all tax due (including tax payment, export tax refund) before the application is completed. Any input VAT credit brought forward from the previous periods before the enterprise withdraw from the pilot shall not be deductible or refundable but should be transferred into costs. Once the application is completed and the enterprise has officially withdrawn from the pilot, the enterprise shall be subject to tax policies applicable to non-pilot enterprises in special customs supervision zones and should not re-apply for the pilot within 36 months. In this respect, after an enterprise is withdrawn from the pilot, it should not apply or issue special VAT invoices for its sales other than sales of services, intangible assets or immovable assets. PN 5 became effective on 1 February You can click this link to access the full content of PN 5: You can click this link to access the full content of the Interpretation of PN 5 from the SAT: You can click this link to access the full content of PN 65: Other tax, business and customs related circulars recently announced by central government authorities: Notice regarding the public opinion consultation on the Decision of the SAT on the Amendments to the Administrative Measures for Self-employed industrial and Commercial Households Subject to Tax on Fixed Term and Fixed Amount Basis (Discussion Draft) Notice regarding the application for tax preferential treatments related to the importation of key technological equipment and machinery for year 2018 (Gongxintingcaihan [2018] No. 12) 7

8 Notice regarding a list of imported equipment, components and materials eligible for Custom Duty and VAT exemption for key technological projects ( ) (Caiguanshui [2017] No. 33) Notice regarding the rules on internal auditing (CNAO Order [2018] No. 11) Notice regarding the Fundamental Catalogue of Voluntarily Disclosed Affairs of the Ministry of Commerce (Trial) Notice regarding cleaning up and regulating the registration of foreign investment enterprises (Gongshangbanzi [2018] No. 18) Notice regarding opinions on promoting a cooperative development of the e-commerce, courier and logistics industries (Guobanfa [2018] No. 1) Notice regarding the 2018 Catalog of Goods under Automatic Import Licensing Administration (MOFCOM/GAC/AQSIQ [2017] No. 87) Notice regarding the delegation of business registration for foreign investment enterprises to the Market Supervision and Administration Bureau of Wuxi Binhu District in Jiangsu Province (Gongshangqizhuzi [2017] No. 227) Notice regarding the establishment of the Jizhou bonded logistics center (type B) (Shujiahan [2017] No. 559) bg%5dcontainers%2f_default%2fno+container 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 Martin Ngai (Beijing) martin.ngai@cn.ey.com Fisher Tian (Tianjin) fisher.tian@cn.ey.com Samuel Yan (Dalian/Shenyang) samuel.yan@cn.ey.com Lucy Wang (Qingdao) lucy-c.wang@cn.ey.com Joanne Su (Xi an) joanne.su@cn.ey.com Vickie Tan (Shanghai) vickie.tan@cn.ey.com Raymond Zhu (Wuhan) raymond.zhu@cn.ey.com Audrie Xia (Suzhou) audrie.xia@cn.ey.com Andrew Chen (Nanjing) andrew-jp.chen@cn.ey.com Patricia Xia (Hangzhou) patricia.xia@cn.ey.com Chuan Shi (Chengdu) chuan.shi@cn.ey.com Clement Yuen (Shenzhen) clement.yuen@cn.ey.com Rio Chan (Guangzhou/Changsha) rio.chan@cn.ey.com Jean Li (Xiamen) jean-n.li@cn.ey.com David Chan (Hong Kong) david.chan@hk.ey.com Heidi Liu (Taipei) heidi.liu@tw.ey.com Service Line Tax Leaders Andrew Choy (International Tax) andrew.choy@cn.ey.com Paul Wen (People Advisory Services) paul.wen@hk.ey.com Kenneth Leung (Indirect Tax) kenneth.leung@cn.ey.com Travis Qiu (Transfer Pricing) travis.qiu@cn.ey.com Becky Lai (Tax Policy) becky.lai@hk.ey.com Jesse Lv (Transaction Tax) Jesse.lv@cn.ey.com Samuel Yan (Global Compliance & Reporting) samuel.yan@cn.ey.com Sector Leaders Catherine Li (Financial Services) catherine.li@cn.ey.com Alan Lan (Energy & Resources) alan.lan@cn.ey.com Martin Ngai (Technology, Media, Telecommunications) martin.ngai@cn.ey.com Vickie Tan (Life Science) vickie.tan@cn.ey.com Gary Chan (Real Estate) gary.chan@cn.ey.com Audrie Xia (Consumer Products) audrie.xia@cn.ey.com Walter Tong (Automotive & Transportation) walter.tong@cn.ey.com Raymond Zhu (Government & Public Sector) raymond.zhu@cn.ey.com Greater China Tax Leader Henry Chan henry.chan@cn.ey.com Author China Tax Center Jane Hui jane.hui@hk.ey.com 9

10 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young, China All Rights Reserved. APAC no ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com/china Follow us on WeChat Scan the QR code and stay up to date with the latest EY news. 10