- China signs multilateral convention against base erosion and profit shifting
- Tax deduction policy for advertising and business promotion expenses
- New requirements to facilitate management of VAT invoices
- Beijing raises minimum wage level in September 2017
- New website expedites applications for housing fund transfers
China's State Administration of Taxation (SAT) clarified certain issues regarding the implementation of corporate income tax (CIT) preferential policies for High and New Technology Enterprises (HNTEs) on 19 June 2017.
The notice states that:
- HNTEs shall start to apply CIT preferential treatment in the year of issuance as stated on the HNTE certificate. However, before reassessment in the year of expiry of the HNTE certificate, the enterprise can still file its provisional CIT returns at a preferential CIT rate of 15%. If the enterprise does not obtain the HNTE certificate successfully by the end of the reassessment year, the reduced CIT shall be clawed back.
- If the tax authorities discover that a HNTE enjoys preferential CIT treatment but does not meet all qualification criteria during its HNTE certificate’s validity period, they can request a competent institution to reassess the company’s HNTE status. If the company fails the reassessment, its HNTE status shall be revoked immediately and it shall pay the outstanding CIT from the year of disqualification.
- HNTEs should file the record recognising their eligibility for preferential CIT treatment, their HNTE certificate, and any other required documents during the annual CIT filing period.
Background information on preferential tax treatment for HNTEs
According to prevailing CIT rules, HNTEs are eligible for the following preferential CIT treatment:
- Reduced CIT rate of 15%
- Staff education expense is deductible up to 8% of total salary expense in the year of assessment
- The reduced CIT rate of 15% is applicable to their foreign-sourced income. For calculation of the foreign tax credit limit, HNTEs can apply the 15% CIT rate to calculate the total tax payable on total income.
China and 67 other jurisdictions signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7 June 2017. More countries are expected to sign the MLI before the end of this year and the first amendment will be effective in 2018. According to the OECD, more than 1,100 tax treaties will be affected by the MLI. The US, China’s largest trading partner, did not sign the MLI or express its intention to do so.
Advertising and business promotion expenses incurred by enterprises that manufacture or sell cosmetics, medicines or beverages (excluding liquor) are tax deductible up to an overall maximum of 30% of the same year’s sales revenue, the State Administration of Taxation announced recently. Expenses that exceed this limit may be carried forward to subsequent years for tax deduction.
However, the advertising and business promotion expenses incurred by tobacco enterprises cannot be deducted when calculating the taxable income.
From 1 July 2017, an enterprise purchaser that requests for an ordinary value added tax (VAT) invoice is required to provide the seller with its tax identification number or unified social credit code. The seller is also required to indicate the purchaser’s tax identification number or unified social credit code in the “Tax Identification Number of Purchaser” column in the ordinary VAT invoice issued.
When a seller issues VAT invoices, it must state accurate sales information that is consistent with that of the actual transaction.
These new requirements seek to facilitate management of VAT invoices, the State Administration of Taxation said.
China’s Ministry of Industry and Information Technology has revised regulations for the administration of telecom business licences, and the changes have been in effect since 1 September 2017.
The regulations, which mainly cover the application, approval, use, change, supervision, inspection, and legal liabilities of telecom business licences, no longer require:
- Record filing for basic and transregional value-added telecom business licences
- Submission of financial statements and capital verification report, as well as pre-approval of company name during application for a telecom business licence
Some of these regulations relate to the establishment of a telecom business management website, a national credit management system, and an annual reporting and disclosure system to facilitate enforcement of telecom law.
To date, 11 locations in China have increased their minimum wage levels. The minimum monthly wage of full-time employees in Shanghai was raised from RMB2,190 to RMB2,300 in April. Shandong, Gansu and Shenzhen raised their minimum wage levels in June, followed by Tianjin, Jiangsu, Fujian, Guizhou and Hunan in July. Beijing raised its minimum wage level from RMB1,890 to RMB2,000 on 1 Sept 2017. The details are shown in the table below.
|Region||With effect from||Minimum Monthly Wage (RMB)*|
|Level 1||Level 2||Level 3||Level 4||Level 5|
|Shanghai||1 Apr 2017||2,300||N/A||N/A||N/A||N/A|
|Shenzhen||1 Jun 2017||2,130||N/A||N/A||N/A||N/A|
|Tianjin||1 Apr 2017||2,050||N/A||N/A||N/A||N/A|
|Beijing||1 Sep 2017||2,000||N/A||N/A||N/A||N/A|
|Jiangsu||1 Jul 2017||1,890||1,720||1,520||N/A||N/A|
|Shandong||1 Jun 2017||1,810||1,640||1,470||N/A||N/A|
|Fujian||1 Jul 2017||1,700||1,650||1,500||1,380||1,280|
|Shaanxi||1 May 2017||1,680||1,580||1,480||1,380||N/A|
|Guizhou||1 Jul 2017||1,680||1,570||1,470||N/A||N/A|
|Gansu||1 Jun 2017||1,620||1,570||1,520||1,470||N/A|
|Hunan||1 Jul 2017||1,580||1,430||1,280||1,130||N/A|
|Qinghai||1 May 2017||1,500||N/A||N/A||N/A||N/A|
*Different cities within each province may have different minimum monthly wage levels depending on their tier, which represents their level of development.
All housing fund (a type of social insurance) services in China have been accessible through a new website since the end of June. Managed by the Ministry of Housing and Urban-Rural Development, the website allows workers who move to another city to apply directly for transfers of housing funds from the previous city.
In the past, a worker had to request for a certificate from his former employer that recognised the transfer of his housing fund to the new city. He had to submit this certificate to the local housing fund bureau in the previous city, which would issue a separate certificate after receiving the first. Then, the worker would have to submit the second certificate to the new city’s housing fund bureau to apply for the transfer.
Besides expediting such applications, the new website also allows workers to easily apply for housing fund withdrawals or housing loans.
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