China Business News

S.J.Grand offers quality research, case studies and essential updates on the latest China tax and business issues through our news feed, periodic newsletters and our online resource library.

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Circular 146- A new Corporate Income Tax (CIT) treatment for some overseas related payments

On the 18th March 2015, Circular 146 provided new CIT regulation for overseas parties. It gives further leeway and insight to local tax authorities on both royalties and oversea fees for foreign actors involved. Indeed, the latter charges need to be relevantly justified and foreign firms must perceive them only if their activity in China has some legitimate economic substance and fulfill what the intercompany agreement stipulated. This a step further in the Chinese anti-tax avoidance policy.

Long-awaited china international payment system (CIPS) turns out to be for trade deals only

Today, one third of Chinese trade is denominated in RMB, which is  ranked 7th global currency worldwide. The outstanding growth of trade settled in RMB is embodied by 14 RMB hubs settled worldwide. Therefore, with the CIPS not covering transactions anymore, very little value is added to the existing system. The CIPS was supposed to ease China’s RMB transactions by enabling them to be done faster and at a cheaper rate. It is now downgraded to trade deals which questions Shanghai’s role as an international RMB hub.

Indirect asset transfers – New taxation rules under Bulletin 7

Bulletin 7 was released on the 6 February 2015 following Circular 698 and Bulletin 24. It is the more recent regulatory instrument on indirect transfer and embodies the intensification of Chinese efforts against anti-tax avoidance. It is a specific application of the General Anti Avoidance Rule (GAAR) in the area of indirect transfer of Chinese Taxable assets (CTA). From now, indirect transfer of CTA with no relevant commercial purposes will be taxable in China.

This will significantly affect:

Fujian Pilot Free Trade Zone

Fujian PFTZ has a strategic position of being on the coast across Taiwan and the starting point of 21st century Maritime Silk Road. Fujian PFTZ has a total area of 118.04 sq. km and covers the following three areas:

Tianjin Pilot Free Trade Zone

Tianjin Pilot Free Trade Zone (PFTZ) has been officially launched on April 21, 2015. Tianjin PFTZ has a total area of 119.9 sq. km and covers the following three parts:

Guangdong Pilot Free Trade Zone

On 21 April 2015, China officially launched China (Guangdong) Pilot Free-Trade Zone (“Guangdong PFTZ”) which is located in Guangdong province, near Hong Kong and Macau. The zone covers an area of 116.2 sq. km which is about 1/10th the size of Hong Kong, and comprises of three areas: Nansha New Area (Guangzhou), Qianhai-Shekou (Shenzhen), and Hengqin (Zhuhai).

Local preferential policies are not yet completed

In November 2014, the Chinese Government issued a Notice to call local authorities to clean-up local preferential policies. It raised concerns for foreign companies that enjoyed preferential tax treatment. Indeed, they often made investment based on the incentives.

China eases restrictions on the currency control system

On March 30, 2015, the Chinese State Administration of Foreign Exchange (SAFE) issued Circular 19 related to the currency controls system. The measures will come into effect on June 1, 2015. The new regulation facilitates restrictions on the currency control system which is likely to boost foreign investments.

Major updates:

Companies will be able to inject capital with a qualified bank in the area where the business is incorporated without registering with the local SAFE bureau before.

Corporate Income Tax Matters on Payments to Overseas Related Parties and how it will impact multinationals

The State Administration of Taxation released Announcement No. 16 on 18 March 2015. The new regulation sets out different criteria on non-deductibility of outbound payments, service fees and royalties to overseas related parties by Chinese companies.

2015 SME Conference: Fraud risk in China

SJ Grand Financial and Tax Advisory and The European Union Chamber of Commerce are delighted to invite you to the SME Conference on Thursday 14th May 2015 in Shenzhen.

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.


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.

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