WTS in China

What businesses in Asia need to know in light of the recent export and sanctions developments and the US-China trade tensions

It is our pleasure to present to you the second edition of our WTS Global Mergers & Acquisitions Newsletter 2023. Presenting updates from 9 countries with a focus on the international M&A industry.

The concern that the expatriates’ IIT burden might surge after 2023 may revive again.

Chinese entities are often indirectly transferred in M&A cases.

The approval of the Multilateral BEPS Convention contains the list of reservations and notifications made by the Chinese government, which becomes effective from 1 September 2022.

China proceeds with the roll-out of its e-invoicing regime.

In March 2022, the central government urged for intensified measures on tax administration on HNWIs, echoed by local tax authorities launching plans to reignite HNWIs-focused tax inspections, leading to a surge in tax audit cases on HNWIs.

Shanghai has revised its regulations to encourage multinational companies to set up regional headquarters (RHQs) in Shanghai.

China’s customs has relaxed the rules for the voluntary disclosure of breaches in customs matters through a recently released circular,

As of 30 May 2022, tech firms in 17 provincial or city regions in China have been given a hassle-free channel to raise foreign loans.

In practice, there is little room for MNEs to reconcile the sometimes conflicting opinions of the two authorities.

To boost the momentum of work and production, the Chinese government has rolled out further VAT incentives and relief to support business operators who are considered vulnerable to business contraction.

The export tax refund process used to be heavily paper-based, requiring cumbersome submissions, especially the proof of foreign exchange income

The Pillar Two model has started a new chapter for international taxation when dealing with the challenges of globalisation and digitalisation. As the world’s second-largest economy, China has actively participated in the discussion and implementation of the Pillar Two model.

RCEP’s major interest concerns how it can add vitality to the Asia-Pacific countries and boost global trade.

Intercompany financing is common among the MNEs. For any borrowing from related parties, the Chinese borrowers must pay interest to them.

For some years, holding investments via sole proprietorship or partnership has been so popular that their portfolio scale has grown substantially beyond expectation.

The Urban Maintenance and Construction Tax Law of the People's Republic of China (hereinafter the ‘UMCT law’) and the ‘Announcement on Determination of Tax Base for UMCT’ (hereinafter the ‘Announcement No. 28’) which came into effect on 1 September 2021 have introduced some changes and clarifications that could have a significant bearing on a taxpayer’s indirect tax burden.

The Chinese authorities confirmed that, at short notice to the public on the eve of the New Year, the following decade-long preferential individual income tax (IIT) treatments, which should have ended on 31 December 2021, will continue for one to two years.

Tariff exemption on the domestic sale of imported materials processed in the Hainan Yangpu Bonded Zone (the Zone).

On 30 September 2021, the China State Taxation Administration responded to five hot questions regarding the Transfer Pricing implications of the COVID-19 impacts.

One question may arise due to COVID-19: will an expatriate change his/her tax position if he/she is stranded overseas for a long period of time due to COVID-19?

In China, the State Administration of Taxation has published a consultation paper that shortens the APA process to just three steps, allowing for a significantly faster processing time in order to provide tax certainty.

China’s General Administration of Customs (GAC) has revised the Administration Measures on Processing Trade Goods. This revision reflects the fact that China customs has changed its attitude on the mortgage of processing trade goods from negative to positive – giving the manufacturer an extra means of re-financing under the COVID-19 pandemic.

Tax executives lead the way to resilience and recovery.

China has recently announced a nationwide implementation of VAT e-invoices.

On 21 September 2020, China unveiled a blueprint for four free trade zones (FTZs) to uplift economic openness and development.

In China, a new export control regime has gone live. Our colleagues from Asia give an overview.

China will see major changes take effect in 2022 regarding the tax honeymoon for expatriates - and this is definitely worth thinking about already now.

On 29 October 2020, China’s State Administration of Taxation released the “2019 Advanced Pricing Arrangement Annual Report” (2019 APA report).

One question may arise due to the coronavirus: does the coronavirus cause any impact on the IIT of individuals stranded in China?

China has recently launched certain measures to simplify VAT filing procedures, especially on VAT invoicing procedures.

Announcements concerning 2019 annual IIT filing and the COVID-19 epidemic.

China has been making steady progress in upgrading its technology for data collection

Preferential VAT policies for certain industries

Risk Control Under New Individual Income Tax

A draft Land VAT Law has been published to seek public’s feedback

China's SAT and Hong Kong’s Financial Services and Treasury Bureau signed “The Fifth Protocol on Avoidance of Double Taxation and Anti-Tax Avoidance Arrangement between Chinese Mainland and Hong Kong”

In August, Beijing’s Chaoyang District has kicked off a desk-top check on share transfer cases

 China allowing a refund of unutilized VAT credits to taxpayers who have a good tax compliance rating

The tax residency stipulations for non-domiciled individuals have been amended by the new individual income tax law

The two announcements are retroactively effective from 1 January 2019

VAT reduction is expected to boost the development of China’s economy, especially the manufacturing sector

The effective date of the new announcement is 1 April 2019

A series of measures have been implemented to encourage foreign trade and mitigate the damage caused by the trade conflict

The new Individual Income Tax laws have introduced six new deduction items for Chinese tax resident, called special additional deductions (SADs)

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The new Individual Income Tax (“IIT”) laws have substantially revised the taxation on non-domiciled individuals

The new policy aims at relieving their cash flow pressure

The tax incentive policies have been extended from pilot areas to the whole nation

It allows a one-off deduction of the full value of new equipment and instruments under the value of RMB 5 million / unit and continues to allow depreciation at a higher or faster rate for equipment or instruments over RMB 5 million / unit

BEPS-related action to improve the clarity regarding BO assessment and allow more non-abusing cases to enjoy tax treaty benefits

The new rules will be effective from 1 May 2018

A BEPS1 related action to improve the clarity in BO assessment and allow more non-abusing cases to enjoy tax treaty benefits

Tax audits: Tax issues that Chinese management are advised to pay attention to

Decree of the President No.61 to introduce the environment protection tax (EPT) has been enacted - new law has taken effect from 1 January 2018

Customs matters such as classification of goods, place of origin, and import valuation are covered by the advance ruling

Announcement 11 to clarify several significant issues on tax treaties clauses on permanent establishments, partnership enterprises, shipping and air transport as well as artists and athletes