Notice On Not Withhold Tax Temporarily When Foreign Investors Using Profits Earned To Make Investment In China
All the tax bureaus relevant:
To implement the decision and deployment of the central committee and the state council of China, apply to the requirements from <<The Notice of State Council of China On Measures Of Foreign Investment Growth>>, promote foreign investment growth, improve the quality of foreign investment, encourage foreign investors continue to expand investment in China, now we make this notice for not withholding tax temporarily when foreign investors using profits earned invest in China directly
1 When foreign investors use profits earned which be gained from domestic enterprises in China, to make investment in projects under the encouraged category in China, the profits earned can be tax-deferred, and will not be withheld tax temporarily.
2 The usage of profits earned which can be tax-deferred, and will be not withheld tax temporarily, should be meet the following requirement at the same time:
2.1 Foreign investors need to use the profits earned make investment in China directly, including increasing the capital, building new projects, and equity acquisition, but not including the acquisition of shares of listed companies (except the strategic investment); the detail is:
2.1.1 Capital increase of resident enterprise in China;
2.1.2 Set up a new enterprise in China;
2.1.3 Equity acquisition of a non-connect Chinese enterprise.
2.1.4 Other method appointed by General Tax Bureau or the Ministry of Finance of China.
The enterprise which accepting the investment from foreign investors by upper method is called “invested enterprise???in the following items.
2.2 Profits earned by foreign investors is equity investment income from a Chinese enterprise, such as dividends after retained earnings.
2.3 If making the investment by cash, by using the profits earned by foreign investors, the money must be transfer directly to the account of the invested enterprise, from the account of the Chinese enterprise where foreign investors get profit. If making the investment by physical or portfolio, the ownership of relevant assets must be switched to the invested enterprise directly.
2.4 The encouraged category in China, means the business scope of invested enterprise is in the following category:
2.4.1 The encouraged category in the Catalog of Industries for Foreign Investment.
2.4.2 The list of industries with advantages for foreign investment in the central and western of China
3 Foreign investors who meet the requirements of article 2, should declare tax, in accordance with requirements of the tax administration, and also need to provide the docs apply to the policy conditions, to the profit distributing enterprise. The profit distributing enterprise which meets the qualification will not be withheld relevant tax temporarily.
4 The tax authorities shall strengthen the follow-up management according to law.
5 Foreign investors which apply requirements of this notice, may enjoy the treatment in accordance with the provisions but actually didn’t enjoy it yet, can make the application of return relevant tax within three years from the date of actual payment of the relevant tax.
6 In the subsequent management, if the tax authorities in cities (including) have questions about whether the business scope of the invested enterprise belong to article 2, can ask the national development and reform department, business department to get their opinion about it, and the relevant departments shall cooperate with tax authorities accordingly.
7 When foreign investors take back the investment by using through equity transfer, buyback, liquidation and other means, they need to pay the relevant tax within 7 days after get the investment back.
8 Foreign investors who enjoy the treatment of this notice, if the invested enterprise is restructured and meet the special conditions, can continue to enjoy treatment of no withholding tax policy.
9 The foreign investors in this notice refer to the non-resident enterprise in article 3, paragraph 3 in the Chinese law of corporation income tax. The domestic enterprises in this notice refer to the resident enterprises established in China according to law.
10 This notice shall be implemented from January 01, 2017. The dividends, bonuses and other equity investment gains by foreign investors after January 01, 2017 (including that date) may be applicable to this notice, and the tax paid shall be implemented in accordance with article 5 of this notice.
General Tax Bureau Of China
The Ministry of Finance Of China
The National Development and Reform Commission Of China
The Ministry of Commerce Of China
Dec.21 2017
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