sailing through waves, staying ahead of opportunities · 2020-03-31 · sailing through waves,...

Sailing through Waves, Staying ahead of Opportunities 1

Sailing through waves, staying ahead of opportunities2019 China tax policy review and 2020 outlook

Foreword

Part I: Continuous optimisation of tax environment to support business operation in Chinese market

Part II: Tax reform to be continued

Part III: Creating a fair law-based investment environment and optimising the legal system of foreign investment to promote high-quality opening-up

Part IV: A closer look at special economic development areas

Part V: BEPS 2.0 around the corner

Outlook for 2020

List of China Tax/Business News Flashes published in 2019

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Contents

4 Sailing through Waves, Staying ahead of Opportunities

Foreword

2019, China’s economy has kept sailing through waves and forging ahead. While the global economic slowdown, China-US trade tensions and other factors have exerted pressure on China’s economic growth. To boost the economic development and maintain stable growth, China continues to expand high-standard opening-up, propel innovation and reform, upgrade industries as well as optimise business environment in 2019:

• Foreign Investment Law, the first basic law governing foreign investments in China, was issued in 2019 and will come into effect in 2020 as an institutional support for an open economic system;

• Economic growth can’t be achieved without scientific and technological innovation and industrial upgrade. The Negative Lists for Foreign Investment (2019 version) further opened up in industries of agriculture, mining, manufacturing and services;

• The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) marked a new stage for the overall development of the Greater Bay Area, providing a platform with innovation resources including talents, capital, technologies, policies, etc.;

The China Tax Policy Review and Outlook is a series of annual publications designed by PwC’s China National Tax Policy Services to review key tax policy developments in China and discuss the trends including impacts on Chinese enterprises from a forward-looking perspective. This 2019 China Tax Policy Review and 2020 Outlook is the fifth issue in the series.

In 2019, China’s economy has kept sailing through waves In

• The new Lingang area, defined as “an area with a specific economic function” in the Shanghai Pilot Free Trade Zone, was officially unveiled. In the future, an institutional system of trade and investment liberalisation and facilitation will be promoted in this area to build up an open industrial cluster with international market competitiveness;

• Scientific and technological innovation and industrial upgrade call for a complete capital market system. The Science and Technology Innovation Board or the “STAR Market”, known as "China’s NASDAQ", was officially launched in 2019 while China’s capital market has been greeted with a brand new sector;

• China has committed itself to the reform of streamlined administration, delegated powers, strengthened regulation and improved services regarding business environment to transform government functions and create a stable and fair business environment. The State Council has officially released the Regulation on Optimising the Business Environment, bringing the work under the rule of law.


These initiatives have had a positive impact on the business environment. The World Bank released its Doing Business 2020, in which China ranked 31st, up 15 places from last year.

Meanwhile, the proactive fiscal and tax policies have continued to strengthen the efficiency, and the tax legislation has also been energetically promoted:

• On the one hand, China reduced taxes and fees on a larger scale. Specific additional deductions for individual income tax (IIT) were implemented from 1 January 2019; a series of Value-added Tax (VAT) reform policies were introduced from 1 April, applicable to those in manufacturing industry with VAT rate reduced from 16% to 13%; a series of inclusive rules of tax and fee cuts for small and micro businesses have also been launched;

• Yet, China was actively pushing forward the process of legislation on taxation. In order to achieve the goal of fully implementing the principle of statutory taxation in 2020, consultation drafts on the VAT Law, the Consumption Tax Law, the Land Appreciation Law, the Urban Maintenance and Construction Tax Law, and the Deed Tax Law have been released in succession during the year. In addition to legalising relevant tax regulations, the consultation drafts have incorporated the achievements of tax reform in recent years to be enforced by law.

The era of BEPS2.0 is sneaking in to global reach:

• After the Organisation for Economic Co-operation and Development (OECD) released the Resumption of Application of Substantial Activities Factor to No or Only Nominal Tax Jurisdictions in 2018, many low-tax jurisdictions have completed the legislation required for substantial activities and issued relevant guidelines and rules. Economic substance laws are taking root in low-tax jurisdictions;

• Taxation on digital economy is also one of the hottest topics in the world. In 2019, the OECD released the two-pillar proposal of taxation on the digital economy for public opinions, and plan to reach a consensus on the proposal by 2020. Once the consensus is achieved, it would be the greatest reform in four decades of the international taxation system history;

• China is playing a significant role in global taxation. The first Belt and Road Initiative Tax Administration Cooperation Forum was held in Wuzhen, Zhejiang, setting up the Belt and Road Initiative Tax Administration Cooperation Mechanism and opening doors for tax cooperation among countries (regions) along the Belt and Road.

The future is knocking on our doors. It is foreseeable that a number of tax laws are expected to be settled in 2020 with the acceleration of China's tax legislation. However, the pace of tax reform will not stop by then. Further progress of taxation policies, changes in collection and administration, and innovation of tax services are expected. At the beginning of 2020, the Coronavirus disease has swept across the country. In order to deal with the epidemic and support the economy, fiscal and tax authorities issued support policies to fight against the epidemic within a short period of time. China's fiscal and tax systems have made a quick response to emergencies. Facing the world, it is on the tiptoe of expectation that how China will participate in setting up the landscape of global tax governance against the backdrop of BEPS 2.0 to give play to China wisdom amongst new challenges.


Part I: Continuous optimisation of tax environment to support business operation in Chinese marketOn 26 November 2019, PwC and the World Bank Group jointly issued Paying Taxes 2020 report. The report elaborates on the “paying taxes” indicator of Doing Business, a flagship report of the World Bank Group, and measures the tax environment of 190 economies in the world. It indicates that China’s performance in Paying Taxes has continued to improve steadily. The positive impact of “tax and fee cuts” practice by China’s fiscal and tax authorities is emerging with a decrease of more than five percentage points in the “Total Tax and Contribution Rate” (TTCR) compared with last year; in addition, the authorities are working to improve tax service, saving “time to comply” for enterprises year on year.


Further unleashing benefits from tax and fee cuts

As a key word of macroeconomic policies and positive finance in the past two years, “tax and fee cuts” was implemented on a larger scale in light of the complex and volatile economic situation domestically and abroad in 2019. Statistics show that the total tax and fee cuts in 2019 amounted to more than RMB 2 trillion, more than 2% of the GDP. Achievements in tax and fee cuts in 2019 were mainly attributed to a series of inclusive and structural initiatives, specifically including:

• Deepening VAT reform: lowering VAT rates to 13%, 9% and 6%; allowing super-deduction of input VAT for taxpayers engaged in production and consumer services; improving input VAT credit chain; expanding the preferential scope of small-scale VAT payers; trial for VAT refunds of excess input VAT credits among all industries.

• Inclusive tax relief for small and micro businesses: reducing the effective tax rate of small and micro businesses from 10% to 5% for annual taxable income less than RMB 1 million, and from 25% to 10% for annual taxable income between RMB 1 million and RMB 3 million.

• Alleviating social contribution rates: lowering the proportion of contributions to basic pension by enterprises for urban employees to 16% to decrease the labour cost.

• Overall reform of IIT: rolling out a regime combining aggregate and scheduler IIT taxation systems and optimising the tax rates structure and introducing specific additional deductible items to relieve the IIT burden on low-and middle-income earners.

• Promote innovation and entrepreneurship: extending the scope of accelerated depreciation concession for fixed assets to cover the entire manufacturing industry; renewing the incentive policy of “tax exemption in the first two years and a 50% tax reduction in the following three years” for enterprises engaged in integrated circuit design and software; exempting national/provincial science and technology business incubators, national/provincial university science and technology parks, and national registered public innovation spaces from part of VAT, real estate tax and urban land use tax; allowing VC funds to choose to calculate the IIT of their natural person partners based on single investment funds, applicable to a rate at 20%.

China’s performance in Paying Taxes 2020

138 50

59.2%7Number of payments (time):

Total tax and contribution rate:

Time to comply (hours): Post-filing index:


New breakthroughs in facilitating tax services

Except for carrying out tax and fee cuts initiatives on a larger scale, tax authorities have taken a further step of deepening reform of “streamlined administration, delegated powers, strengthened regulations and improved services” to change the mode of tax collection and administration from “pre-event approval” to “post-event supervision”. At the same time, the authorities continued to facilitate tax services based on taxpayers’ demands and concerns, further improving the tax environment.

Exploring tax services for large enterprises: advance tax ruling

Large enterprises are characterised by multiple hierarchical structures, frequent M&A and reorganisation activities, and complex business matters. Therefore, uncertainties in the application and understanding of tax policies may have a significant impact on the business decisions of such enterprises. To ensure the predictability of the tax implication of major transactions of taxpayers and improve tax compliance, the State Taxation Administration (STA) again proposed to “improve policy service for large-scale enterprises concerning complex tax-related matters and coordinate on tax-related matters across different regions and tax categories” in the Opinions of the STA on Carrying out the “Spring Breeze Action to Bring Convenience to Taxpayers” in 2019 (Circular Shuizongfa [2019] No.19). In practice, some local tax authorities have started to explore and pilot cases of

advance tax ruling. It is anticipated that the introduction of advance tax ruling to China's tax laws will facilitate a more open and transparent tax/business environment between the tax authorities and enterprises.

Further optimising tax de-registration procedures for enterprises: allowing bankruptcy with written-off of “bad debts”

According to the existing Law on the Administration of Tax Collection and its implementation regulations, an enterprise may not go for tax de-registration unless the tax payable, overdue fees and fines have been settled with the tax authorities. Considering that most bankrupt enterprises applying for de-registration are insolvent and they are unlikely to settle the taxes ahead of the application, the STA released the Notice on Deepening the Administrative Reform of “Streamlined Administration, Delegated Powers,


Strengthened Regulations and Improved Services” and Making Greater Efforts to Promote the Optimisation of the Procedures for Handling Tax De-registration (Circular Shuizongfa [2019] No.64), stipulating that where a taxpayer who announces bankrupt ruled by the People's Court applies for tax de-registration to the tax authority with the written order of the People's Court, the tax authority shall issue the tax clearance certificate in a timely manner and allow the written-off of “bad debts” in accordance with the provisions. Since the STA Notice Shuizongfa [2018] No.149 clarified that tax clearance certificates are no longer required or issued instantly under the mechanism of allowing tax de-registration by making a commitment, the market exit efficiency has been enhanced. The new policy was a breakthrough in the practice of tax de-registration of bankrupt enterprises and also an important embodiment of the implementation of law-based administration by Chinese tax authorities.

Consolidated corporate income tax filing for non-resident having establishments or places in China: approval not needed

At the end of 2018, the Resolution of the Standing Committee of the National People's Congress cancelled the approval procedures for consolidated corporate income tax (CIT) filing for non-resident having set up establishments or places (E&P) in China and amended the CIT Law of the PRC accordingly. According to the Public Notice on Issues Relevant to Consolidated CIT Filing for Non-Resident Enterprises (STA Public Notice [2019] No.12), non-resident enterprises with two or more E&Ps within the territory of China may elect to

file CIT by the primary E&P on a consolidated basis, which requires the overall tax payable to be calculated and adjusted on a consolidated basis and subject to level-to-level management and fiscal adjustments but with provisional tax payment settled separately at the respective E&Ps’ locations. In this way, eligible non-resident enterprises are allowed to offset losses from one E&P against profits from other E&P over the country without the approval of tax authorities.

Non-resident taxpayers enjoying tax treaty benefits: record-filing system replaced with “retaining documents for inspection” system

Following the Retention of the Asset Loss Materials in the Filing of Corporate Income Tax Returns for Future Inspection (STA Public Notice [2018] No.15) and the Retention of Materials on Enterprises Enjoying Preferential Corporate Income Tax for Future Inspection (STA Public Notice [2018] No.23), the Administrative Measures on Non-resident Taxpayers Enjoying Tax Treaty Treatment (STA Notice [2019] No.35) came into effect from 1 January 2020, replacing the record-filing system for non-resident taxpayers enjoying the tax treaty treatment with the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. Compared with the previous requirement for withholding agents to verify the eligibility of non-resident taxpayers to enjoy the tax treaty treatment based on the information of such taxpayers, the system of retaining materials for review has alleviated their burden and improved the convenience of non-resident taxpayers to enjoy the treatment to some extent.


Part II: Tax reform to be continued


Steadily advancing IIT reform

2019 marks the beginning of full enforcement of the IIT Law. With the year drawing to a close, the first annual IIT reconciliation filing for comprehensive income will kick off in March 2020, marking a complete end to the first year of the IIT reform. During the year, in addition to the steady implementation of the comprehensive income tax system for IIT, further integration of IIT policies is undergoing orderly, the tax management system for natural persons is gradually improved, and the construction of IIT credit rating system has been accelerated.

In the context of IIT reform, individual taxpayers, withholding agents and tax authorities at all levels are facing the challenges brought by major adjustments of policies and practices. The complexity of cross-border IIT administration greatly increased, particularly for individuals with frequent cross-border business travel activities and enterprises with cross-border secondment plans.

Overall integration and amendment to tax policies for non-domiciled individuals

In 2019, on the basis of the new IIT law and its implementation regulations, the fiscal and tax authorities extracted from more than ten policies under the old tax law and integrated the IIT-related clauses for non-domiciled individuals, then established a new IIT policy (referring to the MOF and STA Public Notice [2019] No.34, the MOF and STA Public Notice [2019] No.35) for non-domiciled individuals in regard to domestic law and tax treaty eligibility. The authorities made policy breakthroughs in response to the changes in the new IIT law as well as maintained the continuity and consistency of relevant policies to a certain extent.

The main basis for the change in the taxation policy for non-domiciled individuals settled on the fundamental revision of the criteria for determination of resident/non-resident individuals under the new IIT law and the new system of annual taxation on the individual comprehensive income of residents. In general, the

Sailing through Waves, Staying ahead of Opportunities12 Sailing through Waves, Staying ahead of Opportunities

new taxation policy for non-domiciled individuals is helpful to attract and encourage overseas individuals, including those from Hong Kong, Macao and Taiwan, to work in (mainland) China. For example, the calculation of the days of non-domiciled individuals residing in China is subject to a more accommodative standard and the “allocation before taxation” applied to “time-apportionment method” for calculating IIT liability on wages and salaries helps reduce the actual tax burden of some non-domiciled individuals holding dual posts at home and abroad while the taxation method such as treating bonus obtained from multi-month working period for non-resident individuals makes for the avoidance of double taxation. However, the complexity of handling the taxation of non-domiciled individuals increased greatly. Difference between days of residing specified by domestic laws and days of presence in the context of tax treaty, the determination and change of resident and non-resident identities, and the taxation differences not only impacted personal taxes or enterprise costs, but also put forward higher requirements for individuals and businesses to take the control of tax compliance and tax risk management.

First IIT reconciliation filing for comprehensive income

Annual taxation of comprehensive income of resident individuals is the first step to a regime combining aggregate and scheduler IIT systems. 2019 has witnessed a comprehensive roll-out of the measures on withholding of the comprehensive income of individual residents and the prompt enforcement of specific additional deduction for the employment income earners in the withholding phase upon claiming. 2019 annual IIT reconciliation filing for comprehensive income to kick off in March 2020 marks a completion of taxation on comprehensive income in the first year of tax reform.

The Public Notice on Matters Related to the 2019 Annual IIT Reconciliation Filing for Comprehensive Income issued by the STA at the end of 2019 specified the procedures for the annual reconciliation filing of IIT in 2019. Furthermore, the fiscal and tax authorities jointly issued the Public Notice on the IIT Reconciliation Filing for Comprehensive Income and Relevant Policies (the MOF and STA Public Notice [2019] No.94), clarifying the conditions applicable to exemption of the obligation of IIT reconciliation filing for the comprehensive income for tax years 2019 and 2020.

It can be seen from the documents above, in light of the large base and relatively weak basic tax knowledge and sense of the taxpayers for comprehensive income at the present stage, the authorities, not only made efforts to ease the compliance burden of taxpayers at the initial stage of the IIT reconciliation filing for comprehensive income by streamlining procedures, improving services and offering special exemption for middle and low income groups and those with minimum IIT shortfall, but also leveraged the resources and support from withholding agents and professional service providers and accept delegated tax services to push forward the successful completion of the IIT reconciliation filing. It is therefore important for all related parties, including the taxpayers and withholding agents, to understand their respective responsibilities, establish cooperative mechanism and effectively manage their risks.

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IIT reconciliation filing for comprehensive income is a new but key process to ensure that taxpayers correctly determine their annual IIT liabilities on total comprehensive income with all applicable deductions and incentives properly claimed. However, the reconciliation filing of taxpayers shall not affect the withholding agents’ performance of obligation of full-amount withholding for all taxpayers on relevant income, otherwise taxpayers may not qualify for exemption on reconciliation filing.

Centralised reconciliation filing by withholding agents and the two-year exemption of obligation on reconciliation filing under certain circumstances are expected to help relieve taxpayers’ burden and improve the administrative efficiency at the early stage of the comprehensive implementation of the reconciliation filing. But in the long run, a key step to push forward China's individual tax reform is to enhance the awareness and ability of individual taxpayers on tax compliance to enable them to consciously fulfil the obligation of tax filing.

Continuing to deepen the VAT reform

The Public Notice on Deepening Relevant Policies of VAT Reform (MOF, STA and General Administration of Customs Public Notice [2019] No.39) provided a reduction of VAT rates for taxable activities from 16% and 10% to 13% and 9%, respectively from 1 April 2019; it also cancelled the provision of two-year credit of the input VAT on properties and construction in progress, included the purchase of domestic passenger transport services in the credit scope, and allowed super-credit for taxpayers engaged in production and consumer services, so as to ensure the tax burden in all industries is reduced resulted from the VAT reform. At present, the existing VAT rate still maintains the three brackets at 13%, 9% and 6%, and the reform objective to streamline the brackets from three to two is still in progress. Therefore, we can expect a further adjustment on the VAT rate in the future.

Refund of excess input VAT credit at the end of the period is another policy on tax and fee cuts. Since the policy was piloted in 2018, its application scope and refund proportion have developed to a larger scale gradually. According to Public Notice No.39, taxpayers engaged in all industries, if eligible, are allowed to claim refunds at 60% of their excess input VAT credits from 1 April 2019. In August 2019, the MOF and STA issued another document to further relax restriction on refund of excess input VAT credits. For qualified advanced manufacturing taxpayers, there is no requirement on unutilised excess input VAT credit for six consecutive months and no limitation on the refund cap. The implementation of refund of excess input VAT credit is beneficial to increasing cash flow of enterprises and plays a positive role in their daily operation and reinvestment capability.

Additionally, in order to create areas under special supervision of the customs with international competitiveness and innovativeness, the STA, MOF and General Administration of Customs have revised the policy of granting pilot enterprises the qualification of a general VAT taxpayer in some areas under special supervision of the customs (Special Supervision Zones) to cover 96 comprehensive bonded zones across the country. For pilot enterprises in the comprehensive bonded zones, while the tax bonded policies for import of equipment or goods remain effective, the export tax refund policy also applies to exporting goods. It can help enterprises to prevent from cost increase resulted from the failure to credit input VAT or get refunded, which is a great benefit for the enterprises.


Accelerating all-round tax legislation

The Opinions on an Effective Implementation of the Principle of Statutory Taxation was promulgated in 2015, clearly stating that government would strive to complete the reform task of implementing the principle of statutory taxation by 2020. There are 18 tax categories in China currently1 while the legislation on nine of them have been completed at the end of 20192. In 2019, the following progresses were achieved in legislating tax laws:

Law of the People’s Republic of China (PRC) on VAT (Draft for Consultation) (VAT Law Draft for Consultation)

The MOF and the STA issued VAT Law Draft for Consultation on 27 November 2019 to solicit public comments. The Draft for Consultation followed the principle of maintaining the overall framework of the current tax system and the average level of the current tax burden to achieve a smooth transition of the VAT system. In recent years, the finance and tax authorities have carried out VAT reform many times and their outcome will be enforced by VAT legislation.

Law of the PRC on Land Appreciation Tax (Draft for Consultation) (LAT Law Draft for Consultation)

The MOF and STA jointly released LAT Law Draft for Consultation on 16 July 2019, moderately adjusting a few items that do not meet the requirements of economic and social development and tax reform on the premise of maintaining the overall framework of the existing LAT system and the average level of tax burden. For example, adjusting the scope of taxation and specific tax preferential treatments, clarifying the time of tax obligation, adjusting the period for tax filing and payment as well as the administration of tax collection.

The legislation of LAT is conducive to the improvement of China’s property taxation system by taking advantage of the LAT in raising fiscal revenue, adjusting the distribution of land value appreciation benefits, promoting healthy and stable development of the real estate market. It is expected that the subsequent formulation of implementation regulations and measures will have a more direct impact on taxpayers’ burden, compliance costs, etc. In particular, there are differences in deductible items, deduction standard and allocation method of land costs across the country. It remains to be seen whether these differences can be eliminated after the new LAT law and relevant provisions come into effective.

Law of the PRC on Consumption Tax (Draft for Consultation) (CT Law Draft for Consultation)

The MOF and STA jointly released CT Law Draft for Consultation on 3 December 2019, incorporating the consumption tax reform and policy adjustments implemented in recent years and making appropriate adjustments to a few items that do not meet the requirements of economic and social development and reform while maintaining the overall framework of the current consumption tax system and the average level of tax burden. For example, it has unified the scope of taxpayers, supplemented and improved schedules of tax items and rates, included products consuming high energy and causing heavy pollution and some high-end consumer goods into the scope of taxation, and authorised the State Council to adjust tax rates.

1 18 tax categories: corporate income tax, individual income tax, value-added tax, consumption tax, environmental protection tax, resource tax, urban land use tax, property tax, urban construction and maintenance tax, arable land occupation tax, land appreciation tax, vehicle purchase tax, vehicle and vessel tax, stamp tax, deed tax, tobacco tax, tariff, vessel tonnage tax.

2 9 categories with legislation completed: corporate income tax, individual income tax, vehicle and vessel tax, environmental protection tax, tobacco tax, vessel tonnage tax, arable land occupation tax, vehicle purchase tax, resource tax.

Sailing through Waves, Staying ahead of Opportunities

In order to expand local sources of income and guide local governments to improve their consumption environment with a view to the Notice of the State Council on the Reform Plan to Adjust the Income Distribution Between the Central and Local Governments After Implementing A Larger-Scale Tax and Fee Cuts (Circular Guofa [2019] No.21), the reform of consumption tax aims to gradually shift the collection time of certain items from production (import) to wholesale or retail, which was not reflected in the Draft for Consultation. In view of the fact that such work will continue after the consumption tax legislation, a statement on piloting the consumption tax reform has been added to the Draft for Consultation, and the State Council has been authorised to formulate specific implementation measures, leaving room for the implementation of the reform.

Law of the PRC on Urban Construction and Maintenance Tax (Draft) (Draft UCMT Law)

After the MOF and the STA published the Law of Urban Construction and Maintenance Tax (Draft for Consultation) in the fourth quarter of 2018, the Standing Committee of the National People’s Congress (NPC) released the Draft UCMT Law for further public comments on 28 December 2019. The current scope and rates of taxation remained unchanged in the Draft UCMT Law (the three brackets of tax rate in the interim measures were maintained as the minimum tax rate of 1%, which was abolished in the previous draft for consultation in 2018, was re-incorporated in the Draft UCMT Law). It has defined the basis of tax calculation and the content of tax cuts and exemption, and settled the amount of tax payable and the timing of tax liability arising.

Law of the PRC on Deed Tax (Draft) (Draft DT Law)

The Standing Committee of the National People’s Congress released the Draft DT Law on 28 December 2019 to solicit public comments. The Draft DT Law has kept the current tax rate unchanged, expanded the scope of tax cuts and exemption, and replaced the provision “a taxpayer shall, within 10 days from the day the tax obligation arises, conduct tax filing with its competent tax authority in the place where the land or property is located, and settle the tax payment before the deadline approved by the authority” with “a taxpayer shall, before going through the legal procedures of land and property title registration, conduct tax filing and settle the deed tax”.


A new era of institutional openness started by the Foreign Investment Law

Part III: Creating a fair law-based investment environment and optimising the legal system of foreign investment to promote high-quality opening-upThe year of 2019 marks the 70th anniversary of the founding of the People's Republic of China. It is also the first year following the 40-year reform and opening-up as well as a key period of stepping up to a higher level of opening-up for China to the outside world. In 2019, the Chinese government released a number of new measures to continue to expand the opening-up, and optimised the legal system of foreign investment to create new heights of high-quality opening-up.

With the enforcement of the Foreign Investment Law and its implementation regulations from 1 January 2020, “the three laws on foreign investment” (i.e. the Law on Chinese-Foreign Equity Joint Ventures, the Law on Chinese-Foreign Contractual Joint Ventures and the Law on Wholly Foreign-Owned Enterprises) were abolished after 40 years’ adoption. An existing wholly foreign-invested enterprise established in accordance with “the three laws on foreign investment” may, within five years after the implementation of the Foreign Investment Law, alter its organisational form or structure and go through the registration of alteration in accordance with the provisions of the Company Law, the Partnership Enterprise Law and other laws, or continue to retain its original organisational form and structure.

As a basic law on foreign investment, the Foreign Investment Law and its implementation regulations have established the basic framework and rules of China’s new foreign investment system, bringing substantial changes to China’s foreign investment management system.

Adopting the negative lists for foreign investment

The Foreign Investment Law and its implementation regulations clearly stipulate that foreign investments enjoy pre-establishment national treatment and are subject to restrictions imposed by the negative lists. This marks an end of the management mode of the case-by-case examination and approval system for foreign investments, and represents a more open and flexible foreign investment law reform in China which complies with the changes in economic globalisation and international investment rules.


Ensuring equality between foreign-invested enterprises and domestic-funded enterprises

The Foreign Investment Law and its implementation regulations provide specific rules on the equality between foreign-invested enterprises and domestic-funded enterprises in the chapter of “Investment Promotion”. For example, foreign-invested enterprises are entitled with equal chance to apply state policies that support business development and participate in the standard setting in accordance with the law, to participate in government procurement activities through fair competition, and to raise funds through public offering of stocks, corporate bonds and other securities or via means of financing. The above measures to protect foreign investment defined in a form of law has provided a legal guarantee for foreign-invested enterprises to enjoy equal chances in China and helps to enhance the investment confidence of foreign investors in China.

Strengthening protection for foreign investments

The Foreign Investment Law and its implementation regulations have spared an exclusive chapter for investment protection. In order to strengthen the protection for intellectual properties (IP) of foreign-invested enterprises, the Law prohibits transfer of proprietary technologies via administrative means, and intensifies accountability for IP infringement. At the same time, a mechanism for complaints from foreign investment will be set up to provide an alternative solution to protect the legitimate rights and interests of foreign-invested enterprises and their investors in addition to administrative reconsideration and litigation.

Streamlining the administration of foreign investment

The Foreign Investment Law and its implementation regulations also fully reflect the requirements for the transformation of government functions to “streamline administration, delegate powers, strengthen regulation and improve services”. The application of foreign investment licenses shall be reviewed and approved based on the same conditions and procedures for domestic investments, which further streamlines the procedures for foreign investment management, so as to reduce the compliance burden of foreign enterprises and improve foreign investment facilitation.

Minimising the negative lists and expanding the incentive catalogue - signs of a new opening-up

Referring to the 2018 National Negative List and the 2018 Pilot Free Trade Zone (PFTZ) Negative List, the National Development and Reform Commission (NDRC) and the Ministry of Commerce again revised the negative lists of administrative measures for foreign investment in 2019 to further shorten the list for foreign investment access, with effect from 30 July 2019.

• The 2019 National Negative List kept the style structure of the 2018 National Negative List. Compared with the 2018 National Negative List, the items on the 2019 list decreased to 40 from 48, which continued to liberalise market access for agriculture, mining and manufacturing and also promoted the service industry including transportation, infrastructure, culture, value-added telecommunications, to broaden the opening-up.

• Compared with the 2018 PFTZ Negative List, items on the 2019 Version decreased from 45 to 37. On the basis of the national initiatives for the opening-up, the 2019 PFTZ Negative List removed restrictions on foreign investment in areas such as fishery, publication printing and exploitation of wildlife resources and continued to take advantage of pilot free trade zones in opening up as “experimental field”.

While cutting down the negative lists for foreign investment access, the NDRC and the MOC also revised the Catalogue of Industries for Guiding Foreign Investment (2017 Revision) and the Catalogue of Priority Industries for Foreign Investment in Central and Western China (2017 Revision). The two departments also issued the Catalogue of Industries for Encouraging Foreign Investment (2019 Version) (2019 Catalogue of Encouraged Industries) to further expand the scope of foreign investment encouraged. 2019 Catalogue of Encouraged Industries consists of the National Catalogue of Industries for Encouraging Foreign Investment (National Catalogue) and the Catalogue of Priority Industries for Foreign Investment in Central and Western China (Catalogue of Central and Western China). Among them, the National Catalogue continues to focus on manufacturing to encourage foreign investment, and strengthen support for the opening-up and development of production services; the labour-intensive, advanced technology industries and supporting facilities have been added to the Catalogue of Central and Western China to help the central and western China to undertake the transfer of industries with foreign investment.


Part IV: A closer look at special economic development areas


Implementing the talent subsidy policies to promote the flow of high-end talents in the GBA

Subsequently, Circular Yuecaishui [2019] No. 2 issued by the Department of Finance of Guangdong Province and Guangdong Provincial Tax Service clarifies in principle the specific matters to be implemented under Circular 31. Nine cities in the Pearl River Delta have also successively formulated and issued local talent subsidy policies and management measures, providing strong policy support for overseas high-end and scarce talents working and developing in the GBA. As of 31 December 2019, all cities except Shenzhen have announced their interim measures in succession. On the whole, the overall framework of the interim measures in each city is similar, mainly including the scope of talents and recognition standards, calculation methods of IIT financial subsidies, procedures of subsidy application and subsidy grant, etc. At the same time, the interim measures may vary in talent scope and recognition standards, calculation methods of financial subsidies, review of subsidy distribution procedures, application processing time and accountability, due to different development needs of each city. Enterprises and overseas talents in the GBA can study and compare the differences in the IIT subsidy policies for talents based on actual needs, and enterprises can adjust their talent deployment strategy, and seize the business opportunities and opportunities brought by the development of the GBA while fully enjoying the policy benefits.

According to the current IIT regulations in the mainland, foreigners employed by mainland enterprises are subject to PRC IIT for their wages and salaries. The progressive tax rate of IIT on wages and salaries in the mainland ranges from 3% to 45%, which, in some cases, is higher than the maximum tax rate of 15% in Hong Kong and 12% in Macao. Prior to 2019, Qianhai Free Trade Zone of Shenzhen and Hengqin Free Trade Zone of Zhuhai implemented policies of subsidising IIT for overseas talents.

Following the publication of the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area on 18 February 2019, governments at all levels in Guangdong, Hong Kong and Macao successively formulated and released a number of policies. In terms of the flow of talent, the Notice Regarding Preferential IIT Treatment for the GBA (Circular Caishui [2019] No.31, Circular 31) issued by the MOF and the STA in March clarifies that Guangdong Province and Shenzhen Municipality will provide IIT rebates to overseas (including Hong Kong, Macao and Taiwan) high-end talents and talents in short supply who work in the GBA based on the difference on IIT burden between Mainland China and Hong Kong, and such rebates are exempt from IIT. The policy extends the benefits of the IIT subsidy to nine cities in the Pearl River Delta of Guangdong Province in the GBA (namely Shenzhen, Guangzhou, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing).


New Lingang area of China (Shanghai) Pilot Free Trade Zone, China’s window to economic globalisation

In August 2019, new Lingang area of China (Shanghai) Pilot Free Trade Zone (the New Area) was officially unveiled. According to the Overall Plan for the New Lingang Area of the China (Shanghai) Pilot Free Trade Zone (the Plan) issued by the State Council, the New Area will match the standard of the most competitive free trade zones worldwide to facilitate foreign investments and capital flows, and realise the free flow of goods, transportation, employment and information. The New Area will be built into a special economic function zone with global influence and competitiveness, to spearhead a new round of reform and opening-up of the Yangtze River Delta.

Unlike other areas in the Shanghai Free Trade Zone, the New Area has many innovations and improvements in respect of institutional system, risk management, and industrial system. By creating a mature investment and trade system and an open functional platform, the New Area will become an important carrier for China's further integration to economic globalisation in 2035. Therefore, the establishment of the New Area is not just an expansion of space or the translation of policies, but the establishment of a new system, new industry, and new economy that open up to the world, becoming a new hub of the global economic network.


To achieve the established development goals for the New Area, tax system and policies with international competitiveness were set forth in the Plan, including:

• CIT at the rate of 15%: Qualified enterprises engaged in critical-process manufacturing and R&D in the sectors of integrated circuits, artificial intelligence, biomedicine, civil aviation etc. are eligible for a reduced CIT rate of 15% for five years starting from the year of establishment;

• Tax subsidies for overseas talents: Policies on subsidising overseas talents' individual income taxes will be explored based on experience obtained from trial practice in other areas;

• Special tax policies in the physical enclosure area: Foreign goods entering into the physical enclosure area, as well as goods and services traded among enterprises in the physical enclosure area are subject to special tax policies;

• VAT policies on service export: Eligible scope of VAT policies on service export in the New Area is to be expanded.

The New Area has been given greater autonomy in the reform. In addition to above specific tax policies, the Plan also states that the government will explore tax policies in investment and financing activities and financial businesses via free trade accounts, as long as they do not result in tax base erosion and profit shifting. In the future, tax policies of the New Area may have further breakthroughs and innovations. At the same time, the New Area will also be given priority in the future for the implementation and universal application of new pilot policies. Enterprises in the new Area will benefit more from the pilot implementation of policies. At present, Shanghai has released policies for the New Area on administrative measures, development of key industries, support for financial innovation and development, and measures for talent introduction. Relevant fiscal and tax policies are also being studied and developed, and are believed to be officially promulgated and implemented soon.

The establishment of new Lingang area is a new opportunity for enterprises considering business development in the Yangtze River Delta. Combining their own situations with policy directions, enterprises may consider adjusting operating model, group structure, investment and financing, manpower allocation, and so forth to maximise the benefits brought about by the favourable policies in the New Area.


Part V: BEPS 2.0 around the corner


Fulfilling substantial activities requirement to attack cross-border tax avoidance

Low-tax jurisdictions generally refer to jurisdictions imposing no or only nominal CIT. Because of the relatively preferential tax system, such jurisdiction often becomes a preferred location where multinational companies centralise their profits. In response to the risk of profit shifting caused by such abuse of tax incentives, the OECD has been working to formulate relevant work to create a level playing field.

Dating back to 1998, the OECD released Harmful Tax Competition: An Emerging Global Issue (1998 Report), which clarified the framework of harmful tax practices and proposed relevant criteria for the evaluation of harmful preferential taxation systems and for determining what constitutes a low-tax country. After that, in order to address harmful tax practices more effectively, the OECD issued Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report on BEPS (BEPS Action 5). The OECD's Forum on Harmful Tax Practices has repeatedly discussed how to further refine and improve the framework of the 1998 Report. Finally consensus was reached on the revisions of the Report, including the tax benefits enjoyed by entities in low-tax jurisdictions should be in line with their substantial business activities.

In November 2018, the OECD released the Resumption of Application of Substantial Activities Factor to No or only Nominal Tax Jurisdictions (the Report). As part of the implementation of the BEPS Action 5, the Report aims to prevent shifting profits derived from certain mobile business activities to “no or nominal tax jurisdictions” without corresponding local substantial activities. Its main contents include:

1 Mobile business activities subject to the substantial activities requirements cover company headquarters, distribution centres, service centres, financing, leasing, fund management, banking, insurance, shipping, holding companies and the provision of IP;

2 Substantial activities requirements for non-IP income;

3 Substantial activities requirements and basic methods for IP income;

4 Status of high-risk IP businesses;

5 Establishment of effective compliance mechanisms for information collection, risk identification, and information exchange purposes.

Since the Report was released, many low-tax jurisdictions have completed domestic legislation on substantial activities requirements, which officially took effect in countries such as the Cayman Islands, the British Virgin Islands, and Bermuda in 2019. The Forum on Harmful Tax Practices has also reviewed the domestic legislation on substantial activities in various low-tax jurisdictions. According to the review results published by the OECD, most jurisdictions passed the review and their tax regimes were considered as not harmful practice. Additionally, the subsequent implementation of national and regional legislation will continue to be subject to OECD supervision and review.


Taxation of the digital economy to welcome new rules

As a new economic pattern emerged, the digital economy has had a profound impact on global interaction and business. In the digital economy, a variety of digital technologies are used for information collection, storage, analysis, and sharing. The way of social interaction has changed dramatically, and many emerging industries have also been created. Network-based information and communication technologies with digital and intelligent features have also made modern economic activities more flexible, convenient and efficient.

However, the rapid development of the digital economy has brought challenges to international taxation, and the traditional tax system and regulatory model have been unable to adapt to the changing global business landscape to a certain extent. For example, companies today can easily sell products and services remotely without having physical presence in the market country. The international community believes that new tax rules is urgently needed in the digital economy era to address issues such as taxing rights and tax base erosion. In 2019, as the OECD released two public consultation documents on digital economy taxation, the structure of the international digital economy taxation plan has become increasingly clear. According to the OECD plan, Inclusive Framework members will agree on a digital economy taxation plan in 2020. Once agreed, this will be the most significant change in the international tax system in the recent four decades.

The public consultation document on digital economy taxation in 2019 covers two pillars:

• “Unified approach” under Pillar One aims to allocate more taxing rights to the country where the consumers are located, regardless of whether the business activities constitute physical presence in that country. This approach combines the characteristics of the three proposals raised by OECD Inclusive Framework members and is applicable to large consumer-facing businesses. Therefore, not only highly digital enterprises (such as high-tech and online platform enterprises) will be affected, but also the taxation on other types of enterprises (such as the retail sector) may also face changes;

• Pillar Two, the global anti-base erosion proposal introduces the global minimum tax rules. The rules aim to levy taxes on the difference between the effective tax rate of a multinational group and the minimum tax rate, and to adopt other measures to ensure that multinational groups pay sufficient tax. The difference between the two Pillars is while Pillar One aims to reshape profit allocation rules applicable to large consumer-facing businesses, Pillar Two’s global minimum tax rules apply to all large multinational groups (except carve-out), as a result, additional taxes and compliance costs may be incurred for more enterprises.

As the deadline to reach the consensus on taxation of the digital economy is getting closer, OECD will accelerate their research work on digital economy taxation. International tax rules are facing major changes, and multinational companies may face new nexus rules, profit allocation rules, and “upgraded” BEPS measures. Multinational companies should pay close attention to the development of proposal for the digital economy and actively participate in the OECD public consultation. It is anticipated that the final tax rules on digital economy will lead the world into a new era of taxation.



China renewing tax treaties to implement BEPS measures

In the past two years, China has signed new tax treaties or protocols with a number of countries/regions, including India, Italy, New Zealand, Hong Kong Special Administrative Region of China and Macao Special Administrative Region of China. Among them, the new Protocol to the China-India tax treaty, the new China-New Zealand Double Tax Agreement, and the Fifth Protocol to the Arrangement between Mainland China and Hong Kong Special Administrative Region have become effective in 2019 and apply to China for income acquired after 1 January 2020. The remaining tax treaties and protocols have not yet entered into force as of the end of 2019.

New tax treaties or protocols incorporate BEPS measures, with latest developments in international tax rules. For example:

• The newly signed tax treaties/protocols, other than the Fifth Protocol of Mainland China and Hong Kong Special Administrative Region, have added provisions on tax transparent entities in response to the recommendations of BEPS Action 2;

• The tie-breaker rule for determining the treaty residence of a dual resident entity was modified in response to the recommendations of BEPS Action 6;

• Some recommendations of BEPS Action 7 were adopted and the requirements for permanent establishments were strengthened from different perspectives;

• In order to prevent the abuse of the agreement, the preamble was amended, emphasising that the purpose of the tax arrangement is not only to eliminate double taxation, but also to prevent no or lower taxation through tax avoidance; meanwhile a new clause entitled “Eligibility determination to enjoy benefits of treaties/arrangements", namely “main purpose test” was added, which were also recommendations of BEPS Action 6.


In addition to the changes mentioned above, the new tax treaties/protocols have their own unique characteristics, such as:

• The new China-Italy tax treaty has reduced the preferential tax rates for the withholding income tax on dividends, interest and royalties (subject to certain conditions);

• The new China-New Zealand tax treaty has reduced the preferential tax rates for the withholding income tax on dividends (subject to certain conditions);

• The newly added “Teachers and Researchers” clause in the Fifth Protocol of Mainland China and Hong Kong Special Administrative Region provides tax relief to eligible mainland and Hong Kong teachers and researchers working on the other side, effectively facilitating the flow of teachers and researchers between both sides;

• The newly added “government investment” clause in the Fourth Protocol of Mainland China and Macao Special Administrative Region stipulates that the income obtained by the government of one side from the other side-based funds under mutual investment that are mainly used for people’s livelihood projects shall enjoy tax exemption treatment in the other side. The aim is to reduce the tax burden on the cooperation projects for benefiting the people between the two sides, to further promote capital flows between the mainland and Macao, and to help the economic development of the two sides and the development of the GBA.


Outlook for 2020The New Year has arrived. The COVID-19 outbreak in early 2020 will have a very significant impact on China's economic growth. According to forecasts from domestic and foreign institutions, the GDP growth rate may decline in the first quarter, and the next three quarters may gradually pick up depending on when the epidemic ends. In order to support the prevention and control of the epidemic and promote economic development, China's finance and taxation authorities issued a number of fiscal and tax policies in relation to the epidemic situation in a short period of time, covering support for treatment and prevention, material supply, public donations, and resumption of work and production. Relevant policies and detailed implementation rules will continue to be issued with a view to the epidemic control. In addition, some local governments have also introduced measures to postpone the adjustment of the social contribution base and refund social contributions to reduce the burden of enterprises. We believe this series of policies will help China control the epidemic and mitigate the economic shock brought by it.

Although China suffered a sudden epidemic outbreak in early 2020, the pace of tax reform will not stop. There are still many highlights in 2020 fiscal reform to look forward to.


Speeding up tax legislation

According to the National People’s Congress’ plan, China will fully implement the statutory taxation principle in 2020. According to the statutory taxation principle, new tax categories shall be backed with corresponding tax laws, and the current tax regulations shall be legalised. To achieve this goal, the Resource Tax Law was officially approved in 2019. In the same year, the authorities issued consultation drafts on a number of tax laws, including the land appreciation tax law, VAT law, and consumption tax law. The Standing Committee of the National People’s Congress released the drafts on deed tax and urban maintenance construction tax for public opinion. By the end of 2019, nine tax categories have been legislated. It is foreseeable that tax legislation will be further accelerated in 2020, and breakthrough progress is expected.

Advance tax ruling system of large enterprises getting fledged

With the rule of law in China’s taxation, Chinese taxpayers have become increasingly demanding of the certainty of their tax laws. Drawing on international experience, the STA has continued to explore advance tax rulings practices of large enterprises in recent years, and has mentioned in several tax documents the promotion of advance tax rulings of large enterprises. In 2019, the STA organised discussions with industry professionals and drafted the Work Flow for Advance Ruling on Major Tax-related Matters (still under discussion), which is of great significance to the implementation of advance tax rulings of large enterprises. At the local level, some tax authorities have successfully piloted advance tax ruling, which provided valuable practical experience for the research work of the STA. With the development of the STA's research work, we believe that the advance tax rulings of large enterprises will be closer to taxpayers, and the transparency of tax collection and management procedures will be effectively improved.

Increasing super deduction ratio of R&D expenses

Scientific and technological innovation is an important driving force for economic development. For a long time, the fiscal and tax authorities have continuously introduced a series of tax reduction measures to encourage R&D and support innovation, motivating the innovation and development of enterprises. After the fiscal and tax authorities increased the super deduction ratio of R&D expenses to 75% and expanded to cover all enterprises in 2018, the State Council Executive Meeting in 2019 proposed to “explore increasing the super deduction ratio of R&D expenses for key manufacturing industries”. Therefore, the super deduction ratio of R&D expenses for key manufacturing industries might further increase.

Electronisation of special VAT invoices

Since the nationwide implementation of VAT e-invoices in 2016, it has developed rapidly. Nowadays, all industries enjoy the efficiency and convenience brought by electronic invoices. Due to the successful introduction of the general VAT e-invoices, the 2019 State Council Executive Meeting proposed to expand the practice to special VAT invoices by the end of 2020. Once the electronisation of special VAT invoices is realised, taxpayers can not only greatly reduce the use and management costs of invoices, but also provide tax authorities with a wealth of tax-related big data such as transactions, logistics, capital flows, and invoice flows to improve the supervision capacity of tax authorities.

Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting

In 2017, the Chinese government signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument or MLI). The Multilateral Instrument aims to quickly revise bilateral tax treaties to implement relevant BEPS Action recommendations. Each contracting jurisdiction needs to complete the domestic ratification process for the Multilateral Instrument and notify the OECD upon completion for the amendments of the MLI covered tax treaty to take effect. Therefore, the effective date of the amendments of a particular MLI covered tax treaty depends on the effective date of the Multilateral Instrument in China and the other contracting country. China is already conducting the necessary domestic legislative procedures to ratify the Multilateral Instrument, and is expected to implement the Multilateral Instrument in the near future.

New tax rules for digital economy to settle down

In 2019, the OECD released two public consultation documents on digital economy taxation and planned to reach a consensus on a digital economy taxation in 2020. Members of the Inclusive Framework on BEPS are having different opinions on the two pillars at this stage, but they are negotiating to reach an agreement within the target period. At the end of January 2020, members of Inclusive Framework on BEPS agreed the structure design of “unified approach” under Pillar One, while Pillar Two has yet achieved further progress. In any case, it is expected that major changes in international tax standards will soon occur. As a major player in the digital economy, China is likely to respond quickly and take timely action.


List of China Tax/Business News Flashes published in 2019

Jan 2019, Issue 1 – 2019 Outlook – A crucial year for deepening value-added tax reform

https://www.pwccn.com/en/china-tax-news/2019q1/chinatax-news-jan2019-1.pdf

Jan 2019, Issue 2 – “Market players can do anything unless prohibited by the law” – The Negative List for Market Access vitalizes the market


Jan 2019, Issue 4 – Substantial activities requirements vs harmful tax practice


Jan 2019, Issue 5 – IIT treatment for natural person partner of venture capital funds was finally released


Mar 2019, Issue 7 – 2019 Spring Breeze Action: implementing the reduction of taxes and fees as well as innovative services for Large Business Enterprises

https://www.pwccn.com/en/china-tax-news/2019q1/chinatax-news-mar2019-7.pdf

Mar 2019, Issue 9 – Taxes and levies reduction for enterprises - Observations on fiscal and tax highlights of China’s Government Work Report in 2019


Mar 2019, Issue 10 – OECD consultation to reshape the international tax system for the digitalised age commences


Mar 2019, Issue 11 – The latest regulations on Individual Income Tax (IIT) and IIT rebate policies in the Mainland to improve the talent mobility in the Greater Bay Area


Mar 2019, Issue 12 – Strengthening the facilitation and protection of foreign investment, the <Foreign Investment Law> provides support to a high-level opening-up


Mar 2019, Issue 13 – “Transforming from the Old IIT Regime to a New One” Series V - leverage policy essentials to attract talents amidst the release of new policy for non-China domiciled individuals


Mar 2019, Issue 14 – A Remarkable Year of VAT Reform in China



Mar 2019, Issue 15 – The latest regulations on Individual Income Tax (IIT) and IIT rebate policies in the Mainland to improve the talent mobility in the Greater Bay Area (Continued I)


Apr 2019, Issue 16 – Consolidated corporate income tax filing for non-tax resident enterprises – A new alternative is provided

https://www.pwccn.com/en/china-tax-news/2019q1/chinatax-news-apr2019-16.pdf

May 2019, Issue 17 – CIT policy for perpetual bond interest Confirmed

https://www.pwccn.com/en/china-tax-news/2019q2/chinatax-news-may2019-17.pdf

May 2019, Issue 18 – Cayman Islands revised its substance legislation and guidance

https://www.pwccn.com/en/china-tax-news/2019q2/chinatax-news-may2019-18.pdf

Jun 2019, Issue 19 – The Reform of “Streamlined Administration, Delegated Powers, Improved Regulations and Services” Facilitates the De-registration of Enterprises, Tax De-registration Procedures are Refined Continually

https://www.pwccn.com/en/china-tax-news/2019q2/chinatax-news-jun2019-19.pdf

Jun 2019, Issue 20 – The latest regulations on Individual Income Tax (IIT) and IIT rebate policies in the Mainland to improve the talent mobility in the Greater Bay Area (Continued II)

https://www.pwccn.com/en/china-tax-news/2019q2/chinatax-news-jun2019-20.pdf

Jul 2019, Issue 21 – Shortening the Negative Lists and Lengthening the Encouraged Industry Catalogue – The Scope for Foreign Investment is Further Widened

https://www.pwccn.com/en/china-tax-news/2019q3/chinatax-news-jul2019-21.pdf

Jul 2019, Issue 22 – Mainland and the HKSAR signed the Fifth Protocol to the Mainland/HK Double Taxation Arrangement


Jul 2019, Issue 23 – Highlight of Land value added tax policy - Consultation draft for public comment


Aug 2019, Issue 24 – China (Shanghai) Pilot Free Trade Zone expanded to the new Lingang area – a new window to economic globalisation

https://www.pwccn.com/en/china-tax-news/2019q3/chinatax-news-aug2019-24.pdf

Aug 2019, Issue 25 – Cooperating with MNCs - new incentives in Shanghai to attract MNC regional headquarters


Aug 2019, Issue 26 – Pilot program for general VAT taxpayers in the Comprehensive Bonded Zones – another breakthrough to reduce enterprises’ tax burden



Aug 2019, Issue 27 – China and India signed a new protocol to China/India Double Taxation Agreement


Oct 2019, Issue 33 – Enhanced Super-credit Value-added Tax Policy for the livelihood services

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-oct2019-33.pdf

Oct 2019, Issue 34 – BVI Economic Substance Rules

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-oct2019-34.pdf

Nov 2019, Issue 36 – New measures for Non-resident Taxpayers claiming treaty benefits – From “Record-filing Procedure” to “Retaining Documents for Inspection Mechanism”

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-nov2019-36.pdf

Nov 2019, Issue 38 – VAT Legislation in Full Swing – Highlights of the Consultation Draft

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-nov2019-38.pdf

Dec 2019, Issue 39 – Consultation draft of the Consumption Tax Law – making room for future reforms

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-dec2019-39.pdf

Dec 2019, Issue 40 – Kicking off the first annual comprehensive income reconciliation filing under the new IIT regime

https://www.pwccn.com/en/china-tax-news/2019q4/chinatax-news-dec2019-40.pdf


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Contacts in PwC

With over 3,750 tax professionals and over 200 tax partners across Hong Kong, Macao, Singapore, Taiwan and 25 cities in Mainland China, PwC’s Tax and Business Service Team provides a full range of tax advisory and compliance services in the region. Leveraging on a strong international network, our dedicated China Tax and Business Service Team is striving to offer technically robust, industry specific, pragmatic and seamless solutions to our clients on their tax and business issues locally.

For more information of any China tax matters, please contact your client partner or any of the partners responsible for or working in your area:


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