China Tax Newsletter - September/ October 2015

Tax Newsletter

Welcome to the latest issue of our Tax Newsletter. 

A number of developments have taken place in the PRC and Hong Kong that could be of legal and tax significance to your businesses. 

In the PRC, the State Administration of Taxation (SAT) issued Announcement No. 60 promulgating new rules to assess non-resident tax payers' entitlement to treaty benefits when they conduct tax filings for PRC sourced income. In support of PRC's innovation strategy, the Ministry of Finance and the SAT have issued a notice to explain the enterprise income tax preferential treatment policies for enterprise partners of venture capital limited partnerships and exemptions for technology transfers, as well as individual income tax treatment for equity and share incentives. With regards to the export of film and television services by Chinese service providers, the Ministry of Finance issued Notice 118 on the application of zero-rated VAT policies to such export services. Also, implementation measures for the work on tax policy self-compliance checks and an action plan for the 'Internet + Taxation' have been issued by the SAT. Further, the issues concerning differentiated individual income tax policies on dividends and bonuses of listed companies have been clarified in Circular 101. 

Also, the State Council has proposed a 5-year timetable to accelerate the integration and optimization of special customs supervision areas. The State Council has also opined on the implementation of the market access negative list system, which is aimed to improve administrative efficiency and to encourage more investment into China. This negative list will be put into trial in pilot regions in China and implemented nationwide by 2018. Last but not least, the Shanghai Government further encourages the development of foreign-invested R&D centers by providing various supporting measures in intellectual property protection, environmental impact assessment, customs clearance and inspection, and foreign exchange administration on non-trade foreign exchange payment. 

In Hong Kong, the HKSAR Government has issued a consolidated response on the implementation of the Automatic Exchange of Information (AEoI) regime to comply with the latest international standards. It is anticipated that a Bill will be introduced into the Legislative Council in early 2016. In addition, orders were made by Chief Executive in Council under the Inland Revenue Ordinance to implement the tax information exchange agreements (TIEAs) with six Nordic jurisdictions (ie Denmark, the Faroes, Greenland, Iceland, Norway and Sweden), as well as implementing the Fourth Protocol to the Comprehensive Arrangement for the Avoidance of Double Taxation (CDTA) with the PRC. Also, the European Commission clarified Hong Kong's tax co-operation status under the Spanish national list as a result of a technical error. 

Finally, following the abolition of pre-approval requirements on non-residents' entitlement to the tax treaty benefits in the PRC, Hong Kong residents claiming tax treaty benefits are required to produce a certificate of residence to the withholding agent or tax authorities in mainland China. 

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

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