tax planning in china - representative offices
DESCRIPTION
An NCO China Presentation: Tax Planning in China - Representative Offices. www.ncochina.comTRANSCRIPT
Tax Planning forSmall and Medium Sized Enterprises in China
Recent Tax Changes Concerning Representative Offices
Tax Changes Concerning Representative Offices
• Major changes include:– Application for Enterprise Income Tax (EIT) exemption
from ROs will no longer be accepted;– Existing tax exempted ROs will be cleared up;– Business tax will be paid on actual China source
income and profit tax will be paid on actual profit;– Cost plus method used for RO with inaccurate
revenue records;– Actual revenue/deemed profit method used for RO
without accurate expenses or cost records.
Tax Changes Concerning Representative Offices
• Major changes - continued:– The minimum deemed profit rate has been increased
to 15%;– 15% - 30% for construction, design, consulting
service;– 30% - 50% for management service;– No less than 15% for other services;– Minimum tax burden has been increased from 8.8%
to 10.9%.
Issues for Clarification
The following issues require further clarification from tax authorities:
• If the RO is used for preparatory and auxiliary purposes, will the RO is allowed to apply for tax exemption according to tax treaty?
• If so, how do you deem an RO to be for preparatory and auxiliary purposes?
• How do we define China source income when an RO is not supposed not to carry out any operation in China from legal standpoint?
• How will the tax officer determine the deemed profit rate?
• The business tax rate for legal entities is from 3% to 20%. Will the same rate apply to ROs?
Contact Us
NCO China
• tel: +86 (10) 8447 8118• fax: +86 (10) 8447 9349• e-mail: [email protected]• website: www.ncochina.com