An overview of the tax practice of corporate income tax and personal income tax for multinational taxpayers


2022-08-08: [Chinese Article Link]  With regard to the tax treatment principle for corporate and personal income taxes of transnational taxpayers, it is necessary to determine which country is resident and which country is taxed on the basis of compliance with the tax agreement between the two countries, and then whether it belongs to another country on the basis of compliance with the domestic tax laws of the other country. In China and Germany, for example, corporate income tax, where the general body that complies with the China-Germany tax agreement is based on the criteria for determining the resident taxpayer's location in Germany and, in turn, for paying corporate income tax, is determined by our tax laws as a resident taxpayer, provided that there is a legal person's place of registration or the actual regulatory body in China as a resident of our enterprise income tax, or that, although it belongs to non-resident companies in our country, there is also a duty to pay taxes, the taxpayers of Chinese resident enterprises that have paid corporate income tax in Germany are subject to tax evasion. Thus, for example, Hong Kong, although of the same nationality, is an offshore enterprise that is not within the mainland in tax law and must be implemented on the basis of compliance with the Hong Kong-China tax agreement, in accordance with the general principles described above. This applies, for example, to corporate income tax, which, if paid in Hong Kong under the China Hong Kong Tax Agreement, is subject to the following determination as to whether it belongs to the country's corporate income tax taxpayer. Our corporate income taxpayers have two concepts: one is a resident taxpayer and the other is a non-resident taxpayer; the criterion for judging a resident taxpayer is that the legal person is registered and the actual authority is in China; the criterion for judging a non-resident taxpayer is that a non-registered legal person in our country has been established in our territory and the actual authority is not established in our country. Resident taxpayers and non-resident taxpayers who are in our territory and who receive income relating to the establishment of institutions in our territory are subject to a 25 per cent tax rate and non-resident taxpayers who are in our territory and who receive income unrelated to the establishment of institutions in our territory are subject to a 10 per cent tax rate. The criterion of the place of incorporation of legal persons is well understood, as long as the establishment of a business is registered by a legal person, whereas the actual regulatory body generally understands that the general meeting of shareholders or the body established by the board of directors in China exercises overall management of the production business in China. For example, the establishment of a production ministry in China, as a production workshop alone, without comprehensive management of production operations, is not an effective regulatory body. Moreover, it is important to note that the dividends of dividends paid by resident enterprises in China are tax-free, with the exception of all taxes imposed under the corresponding tax obligations. If, for example, a tax has already been paid in Hong Kong under the China Hong Kong Tax Agreement, then it will be determined whether the individual income taxpayers belong to our country. The taxation of taxpayers in our country's cross-border (strictly cross-border) personal income tax obligations is cumbersome, distinguishing between resident taxpayers and non-resident taxpayers in terms of the tax obligations derived from individual tax items as a whole. For example, in the case of wages, a distinction should be drawn not only between the taxation and exemption of resident taxpayers or non-resident taxpayers, but also between the non-taxation of non-tax obligors and the tax distinction between ordinary employees and directors. In general, resident taxpayers have an unlimited duty to pay taxes on their worldwide taxable income; non-resident taxpayers have a limited duty to pay taxes only on their taxable income derived from China. The criteria for determining the resident status of a tax are that the country has a habitual residence or residence in its territory for a period of one tax year. (Note: our tax year is a natural year, from 1 January to 31 December of each year.) For example, a person residing abroad in the country for the period from 1 April of one year to 31 March of the following year is not counted as a tax year, at which point it is not counted as a tax payer for one of our tax residents. If an individual leaves the country for no more than 30 days at a time or more than 90 days at a time during a tax year, it is considered to be a taxpayer for one tax year. Taxes and tax exemptions can be discussed only when a tax is judged as a resident taxpayer and a non-resident taxpayer. On the basis of the characterization of the number of days for which a resident taxpayer or non-resident taxpayer receives five years of tax-exempt pay, and on the basis of the table below, the actual number of days of his or her stay in China on the day of his or her entry into, departure from and departure from China is calculated on the basis of one day, and on the basis of the numeric basis of the number of days of his or her salary earned on the date of his or her entry into, departure from and departure from China, on the basis of the determination of his or her tax obligation in the country, on the basis of the number of days of his or her entry into, departure from and departure from the country, on the basis of half day of his or her actual employment in China. The following is a combination of tax exemptions and non-taxes imposed by resident taxpayers or non-resident taxpayers and a table showing the tax treatment of individual taxes derived from the wages of individual workers in our country, as follows: The nature of the taxpayer's income from wages in the country, from wages outside the country. In-country payments or domestic burdens Pay in-country payments Pay in-country payments No more than 90 days for non-resident taxpayers to pay taxes in our country, and no taxes in our country. More than 90 days (Agreement 183 days) not more than 1 year Paying taxes in my country, not in my country. More than one year, no more than five years, residents pay taxes in our country, and tax exemptions are applied. More than five years. Taxes in my country. This form applies to ordinary staff and, in the case of corporate executives, the proceeds of internal payments are no longer distinguished from non-tax issues and are taxed uniformly in the country, while the proceeds of offshore payments are executed in accordance with the same provisions as for ordinary employees in the above table. (b) After five years of residence in China, in subsequent years from the sixth year of residence in China, any person who has resided in the territory of China for one year shall file a tax report on his or her income derived from within or outside the country; in the case of a person who has resided for less than 90 days or less than one year, he or she shall be subject to the provisions of the above-mentioned table and shall be recalculated for a period of five years from the sixth year of residence for less than 90 days from the year in which he or she has resided again for one year. The above refers to wages, and if the Hong Kong company distributes dividends to domestic (de facto domestic) individuals, and if the domestic individuals in this area belong to the resident taxpayers referred to above, they should pay taxes on income received worldwide; if they are non-resident taxpayers, they should be derived from taxes earned in China. Taxes derived from dividends are calculated at a 20% rate for all dividends. In addition, tax concessions from dividends and equity transfers in the next tax are taxed on all taxable acts within the range of any provisions other than those cited. Special provisions on dividends: As of 8 September 2015, personal income taxes on dividends are temporarily waived on shares of listed companies acquired by individuals from the public distribution and transfer market for a period of more than one year. If the equity holding period is less than one month (including one month), the full amount of the dividends from the dividends is credited to the taxable income (20 per cent tax); if the equity holding period is more than one month to one year (including 1 year), the 50 per cent reduction is applied to the taxable income credit (10 per cent tax); and if the above-mentioned proceeds are subject to a uniform application of a 20 per cent tax rate for personal income tax. The policy of differentiated personal income tax on the dividends of the national SME share transfer system is also implemented in accordance with the above-mentioned policy, which refers to individuals, including resident taxpayers and non-resident taxpayers. In addition, there are special tax concessions for dividends received by foreign individuals that are part of our taxable obligations. Under the current policy, the income tax for dividends earned by foreign individuals is exempt from the personal income tax only in two cases: first, the dividends received by foreign nationals from foreign investment enterprises; and second, the dividends received by foreign nationals holding a B-unit or an overseas share (including a H-stock) from the dividends received by an enterprise in China that is found to have a B-unit or an overseas share. Special provisions on transfer of shares: 1, (in-countryly listed companies, defined as shares in shares A or B) are not subject to personal income tax for the time being.2 The difference in the value of transfers made by private investors in the Mainland to H shares in shares listed in the Hong Kong joint stock is exempt from personal income tax from 17 November 2014 until 16 November 2017. Source: Tax House


Note: This is a machine translated version of the Chinese news media article. A mature and nuanced reading is suggested.




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An overview of the tax practice of corporate income tax and personal income tax for multinational taxpayers


2022-08-08: [Article Link]  With regard to the tax treatment principle for corporate and personal income taxes of transnational taxpayers, it is necessary to determine which country is resident and which country is taxed on the basis of compliance with the tax agreement between the two countries, and then whether it belongs to another country on the basis of compliance with the domestic tax laws of the other country. In China and Germany, for example, corporate income tax, where the general body that complies with the China-Germany tax agreement is based on the criteria for determining the resident taxpayer's location in Germany and, in turn, for paying corporate income tax, is determined by our tax laws as a resident taxpayer, provided that there is a legal person's place of registration or the actual regulatory body in China as a resident of our enterprise income tax, or that, although it belongs to non-resident companies in our country, there is also a duty to pay taxes, the taxpayers of Chinese resident enterprises that have paid corporate income tax in Germany are subject to tax evasion. Thus, for example, Hong Kong, although of the same nationality, is an offshore enterprise that is not within the mainland in tax law and must be implemented on the basis of compliance with the Hong Kong-China tax agreement, in accordance with the general principles described above. This applies, for example, to corporate income tax, which, if paid in Hong Kong under the China Hong Kong Tax Agreement, is subject to the following determination as to whether it belongs to the country's corporate income tax taxpayer. Our corporate income taxpayers have two concepts: one is a resident taxpayer and the other is a non-resident taxpayer; the criterion for judging a resident taxpayer is that the legal person is registered and the actual authority is in China; the criterion for judging a non-resident taxpayer is that a non-registered legal person in our country has been established in our territory and the actual authority is not established in our country. Resident taxpayers and non-resident taxpayers who are in our territory and who receive income relating to the establishment of institutions in our territory are subject to a 25 per cent tax rate and non-resident taxpayers who are in our territory and who receive income unrelated to the establishment of institutions in our territory are subject to a 10 per cent tax rate. The criterion of the place of incorporation of legal persons is well understood, as long as the establishment of a business is registered by a legal person, whereas the actual regulatory body generally understands that the general meeting of shareholders or the body established by the board of directors in China exercises overall management of the production business in China. For example, the establishment of a production ministry in China, as a production workshop alone, without comprehensive management of production operations, is not an effective regulatory body. Moreover, it is important to note that the dividends of dividends paid by resident enterprises in China are tax-free, with the exception of all taxes imposed under the corresponding tax obligations. If, for example, a tax has already been paid in Hong Kong under the China Hong Kong Tax Agreement, then it will be determined whether the individual income taxpayers belong to our country. The taxation of taxpayers in our country's cross-border (strictly cross-border) personal income tax obligations is cumbersome, distinguishing between resident taxpayers and non-resident taxpayers in terms of the tax obligations derived from individual tax items as a whole. For example, in the case of wages, a distinction should be drawn not only between the taxation and exemption of resident taxpayers or non-resident taxpayers, but also between the non-taxation of non-tax obligors and the tax distinction between ordinary employees and directors. In general, resident taxpayers have an unlimited duty to pay taxes on their worldwide taxable income; non-resident taxpayers have a limited duty to pay taxes only on their taxable income derived from China. The criteria for determining the resident status of a tax are that the country has a habitual residence or residence in its territory for a period of one tax year. (Note: our tax year is a natural year, from 1 January to 31 December of each year.) For example, a person residing abroad in the country for the period from 1 April of one year to 31 March of the following year is not counted as a tax year, at which point it is not counted as a tax payer for one of our tax residents. If an individual leaves the country for no more than 30 days at a time or more than 90 days at a time during a tax year, it is considered to be a taxpayer for one tax year. Taxes and tax exemptions can be discussed only when a tax is judged as a resident taxpayer and a non-resident taxpayer. On the basis of the characterization of the number of days for which a resident taxpayer or non-resident taxpayer receives five years of tax-exempt pay, and on the basis of the table below, the actual number of days of his or her stay in China on the day of his or her entry into, departure from and departure from China is calculated on the basis of one day, and on the basis of the numeric basis of the number of days of his or her salary earned on the date of his or her entry into, departure from and departure from China, on the basis of the determination of his or her tax obligation in the country, on the basis of the number of days of his or her entry into, departure from and departure from the country, on the basis of half day of his or her actual employment in China. The following is a combination of tax exemptions and non-taxes imposed by resident taxpayers or non-resident taxpayers and a table showing the tax treatment of individual taxes derived from the wages of individual workers in our country, as follows: The nature of the taxpayer's income from wages in the country, from wages outside the country. In-country payments or domestic burdens Pay in-country payments Pay in-country payments No more than 90 days for non-resident taxpayers to pay taxes in our country, and no taxes in our country. More than 90 days (Agreement 183 days) not more than 1 year Paying taxes in my country, not in my country. More than one year, no more than five years, residents pay taxes in our country, and tax exemptions are applied. More than five years. Taxes in my country. This form applies to ordinary staff and, in the case of corporate executives, the proceeds of internal payments are no longer distinguished from non-tax issues and are taxed uniformly in the country, while the proceeds of offshore payments are executed in accordance with the same provisions as for ordinary employees in the above table. (b) After five years of residence in China, in subsequent years from the sixth year of residence in China, any person who has resided in the territory of China for one year shall file a tax report on his or her income derived from within or outside the country; in the case of a person who has resided for less than 90 days or less than one year, he or she shall be subject to the provisions of the above-mentioned table and shall be recalculated for a period of five years from the sixth year of residence for less than 90 days from the year in which he or she has resided again for one year. The above refers to wages, and if the Hong Kong company distributes dividends to domestic (de facto domestic) individuals, and if the domestic individuals in this area belong to the resident taxpayers referred to above, they should pay taxes on income received worldwide; if they are non-resident taxpayers, they should be derived from taxes earned in China. Taxes derived from dividends are calculated at a 20% rate for all dividends. In addition, tax concessions from dividends and equity transfers in the next tax are taxed on all taxable acts within the range of any provisions other than those cited. Special provisions on dividends: As of 8 September 2015, personal income taxes on dividends are temporarily waived on shares of listed companies acquired by individuals from the public distribution and transfer market for a period of more than one year. If the equity holding period is less than one month (including one month), the full amount of the dividends from the dividends is credited to the taxable income (20 per cent tax); if the equity holding period is more than one month to one year (including 1 year), the 50 per cent reduction is applied to the taxable income credit (10 per cent tax); and if the above-mentioned proceeds are subject to a uniform application of a 20 per cent tax rate for personal income tax. The policy of differentiated personal income tax on the dividends of the national SME share transfer system is also implemented in accordance with the above-mentioned policy, which refers to individuals, including resident taxpayers and non-resident taxpayers. In addition, there are special tax concessions for dividends received by foreign individuals that are part of our taxable obligations. Under the current policy, the income tax for dividends earned by foreign individuals is exempt from the personal income tax only in two cases: first, the dividends received by foreign nationals from foreign investment enterprises; and second, the dividends received by foreign nationals holding a B-unit or an overseas share (including a H-stock) from the dividends received by an enterprise in China that is found to have a B-unit or an overseas share. Special provisions on transfer of shares: 1, (in-countryly listed companies, defined as shares in shares A or B) are not subject to personal income tax for the time being.2 The difference in the value of transfers made by private investors in the Mainland to H shares in shares listed in the Hong Kong joint stock is exempt from personal income tax from 17 November 2014 until 16 November 2017. Source: Tax House

Note: This is a translated version of the Chinese news media article. A mature and nuanced reading is suggested.

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