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.
What is new?
SAT Announcement  No.24
Clarifications on various tax issues related to
This Regulation covers various income tax issues of a
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 
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
The Draft Amendment is open for public opinions till
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,
SAT Announcement  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
Circular Guoshuifa  50
The SAT urges local tax authorities to strengthen IIT
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.
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