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Juha Lassila

China imposes tougher tax rules and administrative restrictions on Representative Offic... - 0 views

www.chinalawinsight.com/...ions-on-representative-offices

china tax rep_office

shared by Juha Lassila on 25 Dec 10 - No Cached
  • On February 20, 2010, the State Administration of Taxation (SAT) issued the “Measures for the Administration of Taxation on Representative Offices of Foreign Enterprises” (Guo Shui Fa [2010] No. 18)
  • a) Increased Deemed Profit Rate
  • The Actual Profit Method is subject to the ability of the Rep Office to properly record its operations in its financial accounting books and accurately calculate its taxable income and profit through proper reflection of the actual functions it performs and risks assumed and then report returns based on such records to the tax authorities on a quarterly basis.
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  • , if a Rep Office is unable to maintain complete accounting books, or cannot accurately calculate its returns or costs, the Rep Office will be taxed according to the Deemed Profit Method, which is based on the Rep Office’s costs or revenue. The selection will depend upon which amount can be more accurately illustrated by the Rep Office. The tax authority will designate a deemed profit rate to the Rep Office and calculate the taxable income based on such deemed profit rate.
  • he minimum deemed profit rate under the Deemed Profit Method was increased from 10 to 15 percent
  • c) Liability for Rep Offices to pay Value-Added Tax (VAT)
  • b) Abolishment of Tax Exemption
  • a foreign company which seeks to set up a Rep Office must show that the foreign company has been set up at least for two years.
  • n the case of a renewal the applicant will need to prove that the foreign company still exists. Further a limitation has been introduced as to the term of new and renewed Rep Office licenses for one year at a time (compared to the usual three years).
  • a maximum of four representatives, including the chief representative, are generally allowed in a Rep Office.
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