International Tax Newsletter - Spring 2011 - China - Corporate Income Tax

  • The State Administration of Taxation (SAT) has published further clarifications of certain definitions and concepts in the tax rules on corporate restructuring — e.g., the application of preferential tax policies after a corporate merger or spin-off and limits on the utilization of tax losses in mergers. These are effective retroactively from 1 January 2010 but are applicable to certain corporate restructurings from 1 January 2008.
  • From 1 July 2010 to 31 December 2013, business tax is exempted on revenue derived from qualified offshore outsourcing services provided to overseas customers by companies registered in 21 designated cities or their direct subcontractors. The qualified offshore outsourcing services include Information Technology Outsourcing (ITO), Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO).
  • With respect to the Double Taxation Agreement (DTA) between China and Singapore, the SAT has issued Interpretation Notes (IN) which provide its first extensive interpretations and practice guidelines for implementation of a DTA. This IN provides clear guidance and many examples to illustrate tax treatments of permanent establishment (including the case where a contracting state establishes a permanent establishment in a third state), beneficial owner, dividends, interests, royalties, capital gains, etc. The interpretations in this IN prevail over all of the previous interpretations of tax treaties generally and will also be applicable to other DTAs entered by China with other countries where other countries' provisions of the relevant articles are consistent with Singapore's.
  • Effective from 1 December 2010, foreign invested companies will be subject to urban maintenance and construction tax and educational surcharges. In general, these will be levied at 10% of turnover tax (i.e., value added tax and business tax). Foreign invested companies have been exempt from such surcharges, but this change unifies the treatment of domestic companies and foreign invested companies.


International Tax Newsletter - Spring 2011 

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