Respectively on June 28, 2018 and June 30, 2018, the National Development and Reform Commission and Ministry of Commerce jointly issued the Special Administration Measures on Foreign Investment Access (Negative List) (2018 Edition) (hereinafter referred to as the “2018 Negative List”) and the Special Administrative Measures on Foreign Investment Access to Pilot Free Trade Zones (Negative List) (2018 Edition) (hereinafter referred to as the “2018 Negative List of FTZ”), to be implemented respectively on July 28, 2018 and July 30, 2018.
The State Administration of Taxation (“SAT”) issued Announcement on Issues Concerning ‘Beneficiary Owners’ in Tax Treaties, SAT [2018] No. 9, effective from April 1, 2018 (“Announcement 9”), which replaced the former Guo Shui Han [2009] No. 601 and SAT [2012] No. 30 by revising the ‘adverse factors’ for the assessment of beneficiary owners (“Assessment”), widening the scope of the ‘safe harbor’ rules, and allowing ‘look through’ for the Assessment with certain conditions, etc. Moreover, the SAT has issued an interpretation to Announcement 9 for further clarifications (“Interpretation”).
This issue of Tax China Newsletter mainly includes: (1) Certain types of distributed profits re-invested in resident enterprise by overseas investors will enjoy beneficial tax deferral policy (Announcement of the State Administration of Taxation (“SAT”) [2018] No. 3 and Cai Shui [2017] No. 88); (2) The definition of the beneficial owner in tax treaties has been further clarified under Announcement of the SAT [2018] No. 9; (3) Announcement of the SAT [2018] No. 11 has further clarified a number of issues in the implementation of double taxation treaties; (4) The SAT issued the Announcement of the SAT [2017] No.46 regarding the country by country report; and (5) Implementation Regulations of Environmental Protection Tax Law is in effect since January 1, 2018.
China is experiencing a certain decrease in foreign investment resulting, amongst other reasons, from the increasing labor and other costs. The State Administration of Taxation, the Ministry of Finance, the Ministry of Commerce and the National Development and Reform Commission, have jointly launched a new tax preferential policy for overseas investors, Cai Shui (2017) No. 88, Circular on Policy Issues concerning Temporarily Not Levying the Withholding Tax on Distributed Profits Used by Overseas Investors for Direct Investments  in order to boost the economy, further encourage foreign investments, and promote continuing operations within China on a long-term basis. The new tax policy allows the foreign investors to temporarily defer the withholding taxes on distributed profits that are re-invested directly into China, if certain conditions are met.
On May 19, 2017, following the negotiations commenced in 2011, the Social Security Agreement between the Kingdom of Spain and the People’s Republic of China was formally signed. The signing took place during the meeting of G-20 labor ministers in Bad Neuenahr (Germany) and was formalized between China’s Human Resources and Social Security Minister, Mr. Yin Wimin, and Spain’s Employment and Social Security Minister, Ms. Fátima Bañez.