Laws of the People's Republic of China
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PROVISIONS OF THE MINISTRY OF FINANCE
OF THE PEOPLE'S REPUBLIC OF CHINA FOR COLLECTION OF
CONSOLIDATED INDUSTRIAL AND COMMERCIAL TAX AND
BUSINESS INCOME TAX FROM RESIDENT
REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES
by the State Council on April 11, 1985
and Promulgated by the Ministry of Finance on May 15. 1985)
ISSUING-DEPT: MINISTRY OF FINANCE
LENGTH: 770 words
In accordance with the provisions of Articles 2 and 8 of the "Consolidated Industrial and Commercial Tax Regulations of the People's Republic of China". Article 1 of the "Income Tax Law of the People's Republic of China Concerning Foreign Enterprises" and Articles 2 and 4 of the "Detailed Rules and Regulations for Implementation" thereof, and Article 9 of the "Interim Provisions of the People's Republic of China Concerning the control of Resident Representative Offices in China of Foreign Enterprises", and the relevant provisions of the tax treaties that the Chinese government has concluded with foreign governments, the following provisions shall be made regarding the collection of the taxes from resident representative offices:
[Article 1] Resident representative offices, engaged in such activities as conducting market surveys, providing business information and business liaison, consultation and other services on behalf of their home offices shall be exempted from the consolidated industrial and commercial tax and enterprise income tax, provided they do not receive proceeds for their operations or services as such.
Resident representative offices, appointed by enterprises within Chinese territory to act as agents mainly outside the territory of China, shall be exempted from taxes on the income derived thereof.
[Article 2] The following proceeds and income of resident representative offices are taxable:
(1) Commissions, rebates and fees received by resident representative offices on behalf of their home offices for engaging in business as agents outside the territory of China for other enterprises, or for liaison, negotiation and middleman services within Chinese territory;
(2) Payments by scheduled instalments or in accordance with the volume of commissioned services made to resident representative offices by their clients, including their home offices, for conducting market surveys, business liaison, information or consultation services within Chinese territory;
(3) Commissions, rebates and fees received by resident representative offices for engaging in business within Chinese territory, as the agents of other enterprises or for liaison, negotiation or middleman services for economic and trade transactions between other enterprises.
[Article 3] Where the amount of commission received by resident representative offices for general liaison or middleman services is specified in the contracts, the taxes shall be assessed on the amount specified therein. Where the amount is not specified in the contracts and no accurate documentation is available so that the amount of commission cannot be exactly fixed, local tax authorities may, by referring to the general commission rate, determine an appropriate amount of commission on the basis of the business volume realised and assess the taxes accordingly. In cases as mentioned in item 1 of Article 2 of these Provisions, where one part of the agency services is performed by its home offices outside the territory of China, resident representative offices shall declare and present relevant certificates and documents to the local tax authorities for the purpose of assessing the amount of commission taxable in China.
[Article 4] Where the commissions, rebates and fees received by resident representative offices for agency or middleman services fall into the categories of taxable items listed in the table of Taxable Items and Tax Rates of the Consolidated Industrial and Commercial Tax Regulations of the People's Republic of China, the consolidated industrial and commercial tax shall be levied at a reduced rate of 5 per cent. In cases where the enterprise income tax shall be levied, the tax shall be assessed on the taxable income calculated exactly from documents provided by the taxpayer as to costs and expenses; where no such documentation is available, the tax shall be assessed on the taxable income calculated on the basis of an appropriate rate of profit, provisionally determined at 15 per cent of the business proceeds in accordance with the provisions of Article 24 of the "Detailed rules and Regulations for the Implementation of the Income Tax Law of the People's Republic of China Concerning Foreign Enterprises".
[Article 5] "Enterprise," as used in the aforementioned Provisions, encompasses "corporation", "company" and "economic organisation".
[Article 6] The Ministry of Finance shall be responsible for the interpretation of these Provisions.
[Article 7] The aforementioned Provisions shall be in force as of 1 January 1985.