Corporate Tax 2010 - BMR Advisors

Hendersen Taxand
China
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
Not available.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
No. There is no branch profit tax.
China
5.3 Is there a participation exemption or relief for
reinvestment
The reinvestment refund incentive is abandoned under the corporate
income tax rules in 2008.
6 Branch or Subsidiary
6.5 Would a branch benefit from tax treaty provisions, or some
of them
No. A branch would not benefit from tax treaty provisions.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
There is no tax imposed upon the formation of a subsidiary. The
capital contribution is subject to stamp duty at the rate of 0.05%.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
No. There are no other significant taxes or fees incurred by a local
subsidiary.
In practice, it is currently not possible for foreign enterprises to
establish branches. Approvals to establish branches have only been
granted to several specific industries, e.g. financial institutions,
shipping and oil and gas companies. Most of the foreign direct
investment takes the form of subsidiaries.
However, it is common for foreign enterprises to establish
representative offices in China. A rep office is an extension to its
head-office and its business scope is limited to liaison activities
which are of a non-profit making nature.
6.3 How would the taxable profits of a local branch be
determined
The taxable profit of a local branch of a foreign enterprise is
determined by the same method as that of a foreign invested
enterprise, i.e. actual basis method. However, as mentioned above,
a branch is not a common investment vehicle by Foreign Investors.
The taxable profit of a representative office may be determined by
one of the following methods:
Actual basis method.
Deemed income/profit method.
Cost-plus method.
A representative office may apply for a tax-exempt status subject to
certain conditions.
Currently there is no withholding tax or other tax imposed as the
result of a remittance of profits by the branch.
7 Anti-avoidance
7.1 How does your jurisdiction address the issue of preventing
tax avoidance For example, is there a general antiavoidance
rule or a disclosure rule imposing a requirement
to disclose avoidance schemes in advance of the
company’s tax return being submitted
The new EIT Law devotes an entire chapter entitled “Special Tax
Adjustment” to anti-avoidance. In the chapter, a general Anti-
Avoidance Rule is defined: “competent tax authorities may adjust
taxable income where business transactions are arranged without
reasonable business purpose”.
There is no disclosure requirement to disclose avoidance schemes
in advance of the company’s tax return being submitted. But the
company is required to enclose a statement of the annual business
transactions between the company and its affiliates when the annual
EIT return is submitted.
When the tax authority conducts an affiliated business
investigation, the company and its affiliates shall provide the
relevant information of the affiliated transaction like pricing,
expense pricing method, and profit margin etc.
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