A number of tax regulations in China have been updated due to changes in government policy. To help you understand what these updates are and how they will affect your organisation, we have prepared a table summarising them.

Circular Number

Issuance Date

Effective Date


What is new?

SAT Announcement [2011] No.24



Clarifications on various tax issues related to non-tax-resident-enterprises

This Regulation covers various income tax issues of a non-tax-resident-enterprise ("non-TRE"):

  • Timing of tax liabilities for amounts due to a non-TRE but not yet been paid;
  • Tax treatments for guarantee fees, gains from transfer of land-use rights, rental income from financial lease or real estates derived by a non-TRE;
  • Time to recognise dividend income derived by a non-TRE;
  • Clarifications for certain unclear issues in Circular [2009] No.698 ("Circular 698"). Circular 698 was issued in 2009 to strengthen taxation of transfer of equity in China by non-TREs. Specifically, Circular 698 for the first time stipulated that an indirect transfer of equity in a Chinese company (by transferring an offshore company which holds equity in China) may be taxed in China, if the offshore structure lacks business substance. This Regulation now further clarifies certain issues such as the timing for recognizing equity transfer gains under instalment payments, definition of effective controlling party, which tax authority to report to if shares in more than one Chinese companies are indirectly transferred, who shall report if more than one non-TREs indirectly transfers the equity in a Chinese company at the same time, etc. The Regulation also further defines the scenarios under which the off-shore structure shall be disregarded.

Individual Income Tax ("IIT") Law Amendment (Draft)



The Draft Amendment is open for public opinions till 2011-5-25

The current Draft contains the following major amendments:

  • The standard monthly deduction is raised from RMB 2000 to RMB 3000 (expatriates enjoy an additional monthly deduction of RMB 2800 same as in the past);
  • The progressive tax rate table is modified from 9 layers to 7 layers and the scale of each layer is adjusted;
  • The tax declaration period is extended from 7 days of the following month to 15 days of the following month.

Based on the above, low and medium income tax payers will pay less tax while high income tax payers with a monthly income of above approx. RMB 20000 will have to pay more tax. However, the changes in the tax burden are overall not significant.

The highest IIT rate of 45% is not changed. The overall IIT system remains simple but relatively simple without considering family status or different levels of living costs all over China, etc.

SAT Announcement [2011] No.24



Calculation of IIT for an annual bonus if part of the tax for the annual bonus is borne by the employer

This Regulation clarifies how IIT shall be calculated for an annual bonus if part of such tax is borne by the employer, i.e. net arrangements.

Circular Guoshuifa [2011] 50



The SAT urges local tax authorities to strengthen IIT collection

This Circular was issued by the SAT to local tax authorities to urge the latter to strengthen IIT collection. Among other things, emphasis has been made to strengthen the IIT administration on expatriates working for permanent establishments in China. Local tax authorities are encouraged to set up and keep records for expatriates working in China for tax administration purposes.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 18/05/2011.