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© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The Amendments to the PRC IIT Law Were Passed

On 31 August 2018, the Standing Committee of the National People’s Congress passed the amendment to reform PRC IIT Law (“the Amendment”). The Amendment was promulgated through the Presidential Decree No. 9, and will take full effect from 1 January 2019. The revised standard personal deduction and tax rates table will apply from 1 October 2018.

Key amendments

In addition to the key amendments which were discussed in Issues 14 and 16 of KPMG's China Tax Alerts issued in June and July 2018 respectively, the following are notable changes which were raised in the second review of the Draft and passed under the new law:

• Expenditures on supporting the elderly allowable for personal tax deduction: Considering the aging population and financial burden of supporting the elderly, the amendment allows expenditures on supporting the elderly to be tax deductible.

• Deemed expense deduction allowable for income from provision of independent personal services, author’s remuneration and royalties at 20% of gross income: Deemed expense at the rate of 20% of gross income will be allowed for income from provision of independent personal services, income from author’s remuneration and income from royalties. Income tax on author’s remuneration will be assessed on 70% of the net income after deducting the 20% deemed expenses.

• Charitable donations allowable for tax deductions: Charitable donations not exceeding 30% of one’s gross taxable income are allowable for tax deduction. Donations made to certain charities may not be subject to the 30% deductibility cap if approved by the State Council.

Regulations discussed in this issue:

Amendments to the PRC Individual Income Tax (“IIT”) Law (hereafter referred to as “the Amendments”)

Issue 18, August 2018

China Tax Alert

© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

• Withholding agents shall furnish tax withholding statement toindividual taxpayers: In order for individual taxpayers to lodgeaccurate annual tax reconciliation return, withholding agents shallfurnish details of the amount of tax withheld, and other relevantinformation to individual taxpayers.

KPMG Observations

The passing of the Amendment is a significant milestone in the evolution of China’s tax system. Further regulations and guidelines are expected from the State Council in due course.

The following key interest of the practical considerations associated with the new IIT Law are expected to be further addressed in the implementation rules and guidelines:

- Whether an exemption on foreign sourced income will still beavailable to non-domiciled individual (including residents of HongKong, Macao and Taiwan) residing in China for not more than five fullconsecutive years?

- How the new tax laws will interact with the preferential treatmentapplied to annual bonuses?

- The quantum of allowable itemised deduction through the applicationof caps.

- Whether foreign employees’ tax exempt benefits will still beapplicable?

Individual taxpayers and organisations are recommended to review the implications of the Amendment on their personal tax affairs and company policies concerning employees, focusing on the following areas:

- Corporate HR Policy updates

- Implementation of updated HR policy

- Financial impact forecasting and budgeting

- Employee communication

- Individual tax risk assessment

© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

If you have any questions on the above, KPMG will be pleased to assist and provide relevant guidance and assist accordingly.

创新赋能 税道渠成

China

Lewis LuHead of TaxKPMG ChinaT: +86 (21) 2212 3421E: Lewis.lu@kpmg.com

Murray SareliusHead of Global Mobility ServicesKPMG ChinaT: +852 3927 5671E: murray.sarelius@kpmg.com

Vincent PangHead of Tax, Northern ChinaKPMG ChinaT: +86 (532) 8907 1728E: vincent.pang@kpmg.com

Sheila ZhangDirector KPMG ChinaT: +86 (10) 8508 7507E: sheila.zhang@kpmg.com

Michelle ZhouPartnerKPMG ChinaT: +86 (21) 2212 3458E: michelle.b.zhou@kpmg.com

Northern China

Central China

Vivian ZhouDirectorKPMG ChinaT: +86 (10) 8508 3360E: v.zhou@kpmg.com

Jason JiangDirectorKPMG ChinaT: +86 (21) 2212 3527E: jason.jt.jiang@kpmg.com

Contact us

Southern China

Murray SareliusHead of Global Mobility ServicesKPMG ChinaT: +852 3927 5671E: murray.sarelius@kpmg.com

© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2018 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

For any enquiries, please send to our public mailbox: taxenquiry@kpmg.com or contact our partners/directors in each China/HK offices.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate andtimely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on suchinformation without appropriate professional advice after a thorough examination of the particular situation.

Contact Us

Khoonming HoHead of Tax,KPMG Asia PacificTel. +86 (10) 8508 7082khoonming.ho@kpmg.com

Lewis LuHead of Tax,KPMG China Tel. +86 (21) 2212 3421lewis.lu@kpmg.com

Beijing/Shenyang/QingdaoVincent PangTel. +86 (532) 8907 1728vincent.pang@kpmg.com

TianjinEric ZhouTel. +86 (10) 8508 7610ec.zhou@kpmg.com

Shanghai/Nanjing/ChengduAnthony ChauTel. +86 (21) 2212 3206anthony.chau@kpmg.com

HangzhouJohn WangTel. +86 (571) 2803 8088john.wang@kpmg.com

GuangzhouLilly LiTel. +86 (20) 3813 8999lilly.li@kpmg.com

Fuzhou/XiamenMaria MeiTel. +86 (592) 2150 807maria.mei@kpmg.com

ShenzhenEileen SunTel. +86 (755) 2547 1188eileen.gh.sun@kpmg.com

Hong KongKarmen YeungTel. +852 2143 8753karmen.yeung@kpmg.com

Northern China

Vincent PangHead of Tax,Northern RegionTel. +86 (10) 8508 7516

+86 (532) 8907 1728vincent.pang@kpmg.com

Cheng ChiTel. +86 (10) 8508 7606cheng.chi@kpmg.com

Conrad TURLEYTel. +86 (10) 8508 7513conrad.turley@kpmg.com

Milano FangTel. +86 (532) 8907 1724milano.fang@kpmg.com

Tony FengTel. +86 (10) 8508 7531tony.feng@kpmg.com

Flora FanTel. +86 (10) 8508 7611flora.fan@kpmg.com

John GuTel. +86 (10) 8508 7095john.gu@kpmg.com

Rachel GuanTel. +86 (10) 8508 7613rachel.guan@kpmg.com

Helen HanTel. +86 (10) 8508 7627h.han@kpmg.com

Michael WongTel. +86 (10) 8508 7085michael.wong@kpmg.com

Josephine JiangTel. +86 (10) 8508 7511josephine.jiang@kpmg.com

Henry KimTel. +86 (10) 8508 5000henry.kim@kpmg.com

David Ling Tel. +86 (10) 8508 7083david.ling@kpmg.com

Li LiTel. +86 (10) 8508 7537li.li@kpmg.com

Lisa LiTel. +86 (10) 8508 7638lisa.h.li@kpmg.com

Larry LiTel. +86 (10) 8508 7658larry.y.li@kpmg.com

Lucia LiuTel. +86 (10) 8508 7570lucia.jj.liu@kpmg.com

Alan O’ConnorTel. +86 (10) 8508 7521alan.oconnor@kpmg.com

Shirley ShenTel. +86 (10) 8508 7586yinghua.shen@kpmg.com

Joseph TamTel. +86 (10) 8508 7605laiyiu.tam@kpmg.com

Joyce TanTel. +86 (10) 8508 7666joyce.tan@kpmg.com

Cynthia XieTel. +86 (10) 8508 7543cynthia.py.xie@kpmg.com

Christopher XingTel. +86 (10) 8508 7072christopher.xing@kpmg.com

Irene YanTel. +86 (10) 8508 7508irene.yan@kpmg.com

Adams YuanTel. +86 (10) 8508 7596adams.yuan@kpmg.com

Jessie ZhangTel. +86 (10) 8508 7625jessie.j.zhang@kpmg.com

Sheila ZhangTel: +86 (10) 8508 7507sheila.zhang@kpmg.com

Tiansheng ZhangTel. +86 (10) 8508 7526tiansheng.zhang@kpmg.com

Tracy ZhangTel. +86 (10) 8508 7509tracy.h.zhang@kpmg.com

Eric ZhouTel. +86 (10) 8508 7610ec.zhou@kpmg.com

Vivian ZhouTel. +86 (10) 8508 3360v.zhou@kpmg.com

Central China

Anthony ChauHead of Tax,Eastern & Western RegionTel. +86 (21) 2212 3206anthony.chau@kpmg.com

Yasuhiko OtaniTel. +86 (21) 2212 3360yasuhiko.otani@kpmg.com

Johnny DengTel. +86 (21) 2212 3457johnny.deng@kpmg.com

Cheng DongTel. +86 (21) 2212 3410cheng.dong@kpmg.com

Chris GeTel. +86 (21) 2212 3083chris.ge@kpmg.com

Chris HoTel. +86 (21) 2212 3406chris.ho@kpmg.com

Henry WongTel. +86 (21) 2212 3380henry.wong@kpmg.com

Jason JiangTel. +86 (21) 2212 3527jason.jt.jiang@kpmg.com

Sunny LeungTel. +86 (21) 2212 3488sunny.leung@kpmg.com

Michael LiTel. +86 (21) 2212 3463michael.y.li@kpmg.com

Karen LinTel. +86 (21) 2212 4169karen.w.lin@kpmg.com

Benjamin LuTel. +86 (21) 2212 3462benjamin.lu@kpmg.com

Christopher MakTel. +86 (21) 2212 3409christopher.mak@kpmg.com

Naoko HirasawaTel. +86 (21) 2212 3098naoko.hirasawa@kpmg.com

Ruqiang PanTel. +86 (21) 2212 3118ruqiang.pan@kpmg.com

Amy RaoTel. +86 (21) 2212 3208amy.rao@kpmg.com

Wayne TanTel. +86 (28) 8673 3915wayne.tan@kpmg.com

Tanya TangTel. +86 (25) 8691 2850tanya.tang@kpmg.com

Rachel TaoTel. +86 (21) 2212 3473 rachel.tao@kpmg.com

Janet WangTel. +86 (21) 2212 3302janet.z.wang@kpmg.com

John WangTel. +86 (571) 2803 8088john.wang@kpmg.com

Mimi WangTel. +86 (21) 2212 3250mimi.wang@kpmg.com

Jennifer WengTel. +86 (21) 2212 3431jennifer.weng@kpmg.com

Grace XieTel. +86 (21) 2212 3422grace.xie@kpmg.com

Bruce XuTel. +86 (21) 2212 3396bruce.xu@kpmg.com

Jie XuTel. +86 (21) 2212 3678jie.xu@kpmg.com

Robert XuTel. +86 (21) 2212 3124robert.xu@kpmg.com

Jason YuTel. +86 (21) 2212 3316jjm.yu@kpmg.com

William ZhangTel. +86 (21) 2212 3415william.zhang@kpmg.com

Hanson ZhouTel. +86 (21) 2212 3318hanson.zhou@kpmg.com

Michelle ZhouTel. +86 (21) 2212 3458michelle.b.zhou@kpmg.com

Eric ZhangTel. +86 (21) 2212 3398eric.z.zhang@kpmg.com

Kevin ZhuTel. +86 (21) 2212 3346kevin.x.zhu@kpmg.com

Southern China

Lilly LiHead of Tax,Southern RegionTel. +86 (20) 3813 8999lilly.li@kpmg.com

Vivian ChenTel. +86 (755) 2547 1198 vivian.w.chen@kpmg.com

Nicole CaoTel. +86 (20) 3813 8619nicole.cao@kpmg.com

Sam FanTel. +86 (755) 2547 1071sam.kh.fan@kpmg.com

Joe FuTel. +86 (755) 2547 1138joe.fu@kpmg.com

Ricky GuTel. +86 (20) 3813 8620ricky.gu@kpmg.com

Fiona HeTel. +86 (20) 3813 8623fiona.he@kpmg.com

Angie HoTel. +86 (755) 2547 1276angie.ho@kpmg.com

Aileen JiangTel. +86 (755) 2547 1163aileen.jiang@kpmg.com

Cloris LiTel. +86 (20) 3813 8829cloris.li@kpmg.com

Jean LiTel. +86 (755) 2547 1128jean.j.li@kpmg.com

Sisi LiTel. +86 (20) 3813 8887sisi.li@kpmg.com

Mabel LiTel. +86 (755) 2547 1164mabel.li@kpmg.com

Kelly LiaoTel. +86 (20) 3813 8668kelly.liao@kpmg.com

Patrick LuTel. +86 (755) 2547 1187patrick.c.lu@kpmg.com

Grace LuoTel. +86 (20) 3813 8609grace.luo@kpmg.com

Ling Lin Tel. +86 (755) 2547 1170ling.lin@kpmg.com

Maria Mei Tel. +86 (592) 2150 807maria.mei@kpmg.com

Chris XiaoTel. +86 (755) 3813 8630chris.xiao@kpmg.com

Eileen SunTel. +86 (755) 2547 1188eileen.gh.sun@kpmg.com

Michelle SunTel. +86 (20) 3813 8615michelle.sun@kpmg.com

Bin YangTel. +86 (20) 3813 8605bin.yang@kpmg.com

Lixin ZengTel. +86 (20) 3813 8812lixin.zeng@kpmg.com

Nicole ZhangTel. +86 (20) 3813 8644nicole.ll.zhang@kpmg.com

Hong Kong

Curtis NgHead of Tax, Hong KongTel. +852 2143 8709curtis.ng@kpmg.com

Ayesha M. LauTel. +852 2826 7165ayesha.lau@kpmg.com

Chris AbbissTel. +852 2826 7226chris.abbiss@kpmg.com

Darren BowdernTel. +852 2826 7166darren.bowdern@kpmg.com

Yvette ChanTel. +852 2847 5108yvette.chan@kpmg.com

Lu ChenTel. +852 2143 8777lu.l.chen@kpmg.com

Wade WagatsumaTel. +852 2685 7806wade.wagatsuma@kpmg.com

Natalie ToTel. +852 2143 8509natalie.to@kpmg.com

Elizabeth DE LA CRUZTel. +852 2826 8071elizabeth.delacruz@kpmg.com

Matthew FenwickTel. +852 2143 8761matthew.fenwick@kpmg.com

Sandy FungTel. +852 2143 8821sandy.fung@kpmg.com

Charles KinsleyTel. +852 2826 8070charles.kinsley@kpmg.com

Stanley HoTel. +852 2826 7296stanley.ho@kpmg.com

Becky WongTel. +852 2978 8271becky.wong@kpmg.com

Barbara ForrestTel. +852 2978 8941barbara.forrest@kpmg.com

John KondosTel. +852 2685 7457john.kondos@kpmg.com

Kate LaiTel. +852 2978 8942kate.lai@kpmg.com

Travis LeeTel. +852 2143 8524travis.lee@kpmg.com

Irene LeeTel. +852 2685 7372irene.lee@kpmg.com

Alice LeungTel. +852 2143 8711alice.leung@kpmg.com

Ivor MorrisTel. +852 2847 5092ivor.morris@kpmg.com

Benjamin PongTel. +852 2143 8525benjamin.pong@kpmg.com

Malcolm PrebbleTel. +852 2684 7472malcolm.j.prebble@kpmg.com

David SiewTel. +852 2143 8785david.siew@kpmg.com

Murray SareliusTel. +852 3927 5671murray.sarelius@kpmg.com

John TimpanyTel. +852 2143 8790john.timpany@kpmg.com

Lachlan WolfersTel. +852 2685 7791lachlan.wolfers@kpmg.com

Daniel HuiTel. +852 2685 7815daniel.hui@kpmg.com

Karmen YeungTel. +852 2143 8753karmen.yeung@kpmg.com

Erica ChanTel. +852 3927 5572erica.chan@kpmg.com

Adam ZhongTel. +852 2685 7559adam.zhong@kpmg.com

Eva ChowTel. +852 2685 7454eva.chow@kpmg.com

Alexander ZEGERSTel. +852 2143 8796zegers.alexander@kpmg.com

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