Mazars’ comments on tax issues in the People’s Republic of China
March 2019 - VAT rates are falling from 1 April 2019
On 5th March 2019, China Premier, Mr. Li Keqiang announced that the current VAT rates for manufacturing industries and transport and construction industries will be reduced as a measure to beef up the economy. The actual implementation date will be 1st April 2019. When the new VAT rates are implemented, they shall be changed to 13%, 9%, 6% and 0% accordingly.
January 2019 - PRC Individual Income Tax Implementation Rules and related Circulars finalized
In the past month, the Chinese authority has issued various circulars detailing the new rules and regulations on the individual income tax (“IIT”). The final Implementation Rules (the “Implementation Rules”) and the circulars are to implement the new IIT law passed by the Peoples’ Congress in August, 2018.
November 2018 - 5-Year Rule Under the New Individual Income Tax Law – Exposure Draft of the “Implementation Rules”
On 31 August, the Standing Committee of China’s National People’s Congress formally approved the Amendments to the PRC Law on Individual Income Tax (the “New IIT Law”). Please refer to Mazars’ Tax Commentary issued in September 2018, for a summary. The exposure draft of the “Implementation Rules of the new Individual Income Tax Law” (the “Draft Implementation Rules”) was issued on 20 October for public consultation. The deadline for public consultation was set at 4 November of this year.
April 2018 - The PRC SAT issued Public Note 11 to update interpretations of tax treaty articles
On 9 February 2018, the PRC State Administration of Taxation (“SAT”) issued Public Notice  No. 11 (“PN No.11”). The circular updates the SAT’s interpretation of a few selected articles under Double Tax Agreements (“DTAs”) that are concluded by China and clarifies the tax treatments of partnerships.
February 2018 - Beneficial Ownership – Further Guidance From China Tax Authority
In order to be able to enjoy tax treaty benefits with China, the taxpayer must be a tax resident of the jurisdiction which has entered into the tax treaty with China. In addition, in order to obtain a preferential treatment on dividends, interest, and royalties from China, the non-resident must also be the “Beneficial Owner” of such income.
January 2018 - Withholding Tax (“WHT”) Deferral for Foreign Re-investment in China
Under the Enterprise Income Tax Law before the change, dividends derived by a non-tax resident enterprise (“Non-resident entity”) are subject to a withholding tax at 10% unless a more favourable tax treaty benefit applies. In August 2017, the State Council released measures to improve the business environment for foreign investors in China, including the proposal to allow foreign investors to enjoy a withholding tax deferral treatment.
December 2017 - New Rules On The Timing Of Withholding Tax On Payments To Non-Residents
In October 2017, the State Administration of Taxation (“SAT”) released the “Bulletin on Matters Regarding Withholding Enterprise Income Tax at Source for Non-Resident Enterprises” (“SAT Bulletin  No. 37, Bulletin 37”). Bulletin 37 has taken effect on 1 December 2017.