China Tax Newsletter - January / February 2016

Tax Newsletter

In this issue, we have covered a number of developments and cases in the PRC and Hong Kong which could impose legal and tax implications to your business. 

In the PRC, there has been an important development in the past few months - the VAT reform will be fully rolled out and take effect by May 1, 2016. This was announced by Premier Li Keqiang in the Annual Government Working Report to the National People's Congress. As you may see more details in the later article, this would significantly affect further industries/sectors including construction, real estate, finance and insurance, and lifestyle services industries. Premier Li also promised to ensure tax burden for all industries will not increase, and we certainly expect to see more tax circulars about the implementation details in the short future. 

Further, with the aim to promote the technology development, China has provided more clarifications pertaining to the super deduction of R&D expenses as well as the updates on the qualification criteria for High & New Technology Enterprises. 

We noted that the PRC government is working on upgrading its tax payment credit administration system for a more effective monitoring of taxpayers' behavior; and on the other hand, it is also trying to streamline the approval formality by updating the catalogue of the tax administrative approval items. 

More interestingly, echoing to the upsurge discussion of information disclosure, the State Administration of Taxation (SAT) has shed some lights on the extent of assistance that could be provided by the tax authorities to other contracting states. 

In Hong Kong, the HKSAR Government has announced a set of concessionary tax measures in the 2016-17 Budget to (1) reduce profits tax and salaries tax, (2) raise allowances and deduction ceiling and (3) expand the scope of tax deduction. 

In addition, under the new Mainland-Hong Kong Mutual Recognition of Funds scheme, sale and purchase or non-trade transfer of units of a recognized Hong Kong fund in Mainland are subject to stamp duty in Hong Kong. 

In a recent case regarding double stamp duty, the Court of First Instance has held that tax refund is available for a series of property purchases and sales, so long as the Hong Kong resident homeowner ends up with only one residential property within the prescribed period. Besides, the Court of Final Appeal has held that Sheng Kung Hui did not have the intention and status of a trader in the surrender and re-grant of land and emphasized that there is no universal principle or definition of trade. 

Finally, we have highlighted the new tax network with six Nordic jurisdictions and Russia and summarized three advance ruling cases reflecting the implementation of the new tax treatments regarding court free amalgamation. 

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

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