Due to the ongoing situation of COVID-19 in China, especially in Shanghai, the Chinese government has introduced more regulations and policies or extended the deadline of the previously issued regulations and policies to further support both the economic development and the business. In this Newsletter, we will share with you detailed provisions of these policies in Shanghai focusing on the topics of labor and employment, leasing, tax, etc. Depending on the location of your business, there could be more specific implementation rules at local level.
From 1 January 2021 to 31 December 2022, small enterprises with low profit will be subject to EIT of 2.5% on the part of annual Enterprise Income Tax (EIT) taxable income that is no more than CNY 1 million.
According to Announcement (2019) No. 39 issued by Ministry of Finance, State Administration Taxation and General Administration of Customs (Announcement No.39) as well as other related tax regulations, taxpayers that meet the following criteria could apply for the refund of the incremental uncredited input Value Added Tax (VAT, in general, incremental uncredited input VAT = monthly ending balance of the uncredited input VAT – ending balance of the uncredited input VAT in March 2019) from April 2019.
On March 24, 2022, the Ministry of Finance and the State Administration of Taxation (SAT) issued an announcement regarding the Value Added Tax (VAT) exemption for the small-scale taxpayers that will be applicable from April 1, 2022 till December 31, 2022. The SAT issued Announcement (2022) No. 6 and provided official explanation on the same day, to elaborate the implementation measures related to such exemption policy.
Since the tax year of 2021 is ended, Chinese companies, including foreign invested ones, might be required to perform the filing of related party transactions for 2021 with the competent tax authority in 2022. There are four types of Chinese transfer pricing documentation filing obligations, including master file, local file, special issue file and country-by-country report (CbCR). We suggest you to internally review the following conditions of transfer pricing documentation filing obligations and resort to us in case you need any assistance either in assessing the criteria or in preparing related mandatory documentation.
Since 2018, China started to implement the “Negative List” approach for the administration of foreign investment nationwide, and has updated the Negative Lists periodically since then. The Negative Lists set out in a centralized manner special administrative measures with respect to the access of foreign investment. Business sectors not specified in the Negative Lists are subject to administration under the principle of treating domestic investment and foreign investment equally.
On December 31, 2021, the Ministry of Finance and the State Administration of Taxation have decided to continue that the IIT preferential policy of allowances for foreign individuals (e.g. home visit, housing allowance, children’s tuition fee etc.).
On December 29, 2021, the executive meeting of the State Council has decided to continue the implementation of some IIT preferential policies as follows:
Recently, China formally passed the Personal Information Protection Law (PIPL), which is the first comprehensive national level personal data protection law of this country. PIPL will become effective as of November 1, 2021, leaving a short time for the companies operating in China (and even certain foreign companies) to become fully compliant to the new personal data protection regime.
Taxpayers should pay attention to the following Chinese tax regulation updates regarding outbound remittance in China: one record filing for multiple remittances under one contract and the cancelation of the Local Tax Surcharges related to Withholding Value Added Tax (VAT) and Consumption Tax (CT).