China Tax Newsletter - July/August 2015

Tax Newsletter


Welcome to the latest issue of our Tax Newsletter. As you may be aware, much has happened since our last issue. In this issue, we highlighted a number of developments in both the PRC and Hong Kong that could be of legal and tax significance to your businesses.

For the PRC, qualified importers and exporters with at least four tax filings per month can now pay taxes to Customs on a monthly basis rather than on a transaction basis under the recent announcement of the General Administration of Customs. The reform was implemented on a trial basis in certain areas but is now a nationwide program.

The State Administration of Taxation (SAT) has decided to strengthen its regulation by implementing two measures. Firstly, a new circular has been issued to reinforce the collection of Individual Income Tax on electronic red-envelops distributed by enterprises to individuals. Secondly, SAT released the Notice on Implementation Measures for Enhancing Random Tax Inspection, aiming to intensify random tax inspection in a more effective and organized manner. Inspection database will be set up and every key taxpayer would expect to be subject to at least one tax inspection in every 5 years! Beyond doubts, these moves were not welcomed by any taxpayers.

On the bright side, the Mainland China and Taiwan had finally signed a Double Taxation Agreement in late August, providing for beneficial withholding income tax rates to be enjoyed by eligible tax residents in both jurisdictions. SAT also published a notice on the tax initiatives to support the "One Belt One Road" plan to enhance economic cooperation among countries in Eurasia.

Last but not least, during the period, PRC authorities also issued (i) the draft Environmental Protection Tax Law, (ii) an announcement on trial implementation of administrative measures for taxation of Coral Resource Tax and (iii) clarifications on application of beneficial Enterprise Income Tax benefits for Shenzhen Qianhai enterprises.

For Hong Kong, we are bringing you a number of updates as well.

Firstly, the tax treaties signed between Hong Kong and Japan, and between Hong Kong and Italy, have both come into force. In addition, the long awaited offshore private equity funds exemption has been passed by Legislative Council and came into force in July.

The new quarterly Board of Review Decisions were issued in July. A total of 6 cases were published, which discuss a number of issues in relation to profits tax and reinforce some relevant principles. Each of the cases is summarized and discussed in this issue.

We welcome your feedback and any questions you may have regarding this issue of the Tax Newsletter.