China Business News

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China Social Security System: Updated social insurance rates for 2015

The social security law applies to Chinese citizens as well as foreigners who work or reside in China. The social security system includes basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. 

China issues new measures for the General Anti-Avoidance Rules

The State Administration of Taxation issued on December 2, 2014 the Administrative Measures for the General Anti-Avoidance Rules (Trial Implementation) and the Measures became effective on February 1, 2015.  The Measures further clarify the scope of application and the procedures of GAAR. The GAAR represent procedures to fight against tax evasion, tax avoidance and abuse of trade treaties. Henceforth, the State Administration of Taxation (SAT) intends to carry out investigations on corporate transactions without commercial purpose and economic substance.

Hong Kong - China Double tax arrangement amended

Hong Kong and mainland China signed the Fourth Protocol to the Double Tax Agreement on April 1, 2015. The Fourth Protocol provides amendments to the Hong Kong - China double tax agreement. It is expected to come into effect within this year.

KEY POINTS

Exemption from capital gains tax in China for HK residents and investment funds

Hong Kong takes measures to combat parallel trading

Mainland Chinese traders take advantage of the tax-free and the multiple-entry visa policies in Hong Kong to stock up on everything they need from jewelry to milk powder in order to resell them at profit in mainland China. Those mainlander’s visitors are called “locust” by Hong Kong residents as they have the tendency of stripping shelves of goods and clogging up public transports.

Double tax treaty of Mexico with mainland China and Hong Kong

Trade between China and Latin America grows more and more, so it increased by 8% in 2012. However, many Latin American countries have an unfavorable tax system to invest in China, making dividends, interest and royalties taxed twice and reducing profitability of the investments. One way to counter this problem is often the appeal of tax treaties between two countries. It is this that has recently entered Mexico with China and Hong Kong. The article introduces the main points of the both tax treaties.

Spain Double Tax Treaty with Hong Kong

Recently, Hong Kong has increased its number of tax treaties with other countries, in order to enhance economic cooperation and avoid taxation of companies taxed under two jurisdictions. It is in this light that Hong Kong has entered into treaty with Spain on April 1, 2011.

Hong Kong supports the automatic exchange of information

In July 2014, the Organization for Economic Co-operation and Development (OECD) released its Standard for Automatic Exchange of Financial Account Information and called on governments to obtain detailed financial account information. It includes two components: the Common Reporting Standard, determining reporting rules and due diligence procedures and the Model Competent Authority Agreement, containing detailed rules on the exchange of information.

Hong Kong: New restrictive rules for obtaining a tax residence certificate

The Hong Kong Inland Revenue Department issued new rules for obtaining a certificate of Hong Kong residence status on January 29, 2015, with effect from February 1, 2015. This certificate is provided by the Hong Kong authorities to a resident which allows the resident to claim tax benefits under the Double Taxation Agreements (DTAs). The new rules make it more difficult to obtain them.

Overview

China to set up three New Free Trade Zones in Tianjin, Guangdong and Fujian

On December 12, 2014, Chinese Premier Li Keqiang announced the establishment of three new Free Trade Zones. The three new zones will be established in the provinces of Guangdong, Fujian and Tianjin and are based on economic hubs in the Pearl River Delta, Yangtze River Delta and Bohai region. In addition, the Shanghai Free Trade Zone will be expanded. These two measures will come into effect in the middle on March 2015.

Double Tax Treaty Between China and Switzerland

Switzerland and China signed a new tax treaty on September 25, 2013 in order to avoid double taxation and to prevent from fiscal evasion as regards taxes on income. The new Treaty replaces the existing treaty from 1990. The agreement has become effective since November 15, 2014 and applies to income derived on or after January 1, 2015.

The key features of the main changes are summarized in this table:

The State Administration of Taxation issues “Administrative Measures for Individual Income Tax on Equity Transfer”

SAT issued the Public Announcement No. 67, “Administrative Measures for Individual Income Tax on Capital Gains from Equity Transfer” that came into effect since January 1, 2015. This Announcement introduces new rules to strengthen the individual income tax on capital gains from equity transfer. Tax payers must pay the individual income tax on revenue derived from equity transfer based on the income from transfer of property. The tax rate is at 20%.

Main points:

New reporting and disclosure of information rules for companies in China

The SAIC has released some regulations – The New Rules – that deals with the new reporting and disclosure of information for companies in China, including foreign enterprises. This regulation has come into effect on October 1, 2014. The main objective is to bring a more market oriented approach to regulate business activities in the country, and to alleviate administrative formalities for companies.

The New Rules include the following provisions:

China issues Draft Foreign Investment Law transforming foreign investments regime

China’s Ministry of Commerce released a draft of a new Foreign Investment Law for public comment on January 19, 2015. If the Law becomes adopted, it will have a strong impact on the regime for foreign investment in China; it will reduce barriers to foreign investments, enhance transparency and control the regulations in restricted industries.

Overview of the major changes

New immigration requirements for short-term employment in China

The Government issued a notice on November 6, 2014 to provide clarifications on the visa requirements for some foreigners having a short-term employment in China. It will become effective on January 1, 2015. This Notice allows for enhancement of the understanding for foreign companies as regards their short-term workers and the different types of visa required. It only deals with foreigners who come for less than 90 days. Foreigners coming to China to work for more than this period continue to follow the regular requirements.

China – Russia New Double Taxation Treaty

The new double taxation treaty and protocol between China and Russia was signed on October 13, 2014. The agreement replaces the former treaty of 1994. Upon ratification, the New Treaty will probably apply to income derived on or after 1 January 2016. It might have a significant impact on economic cooperation between the two countries.

Major changes:

Beijing - Shanghai - Shenzhen - Hong Kong - Paris

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