Circular on Issues Concerning Identification of General VAT Taxpayer
Guo Shui Han [2010] No. 35

State Administration of Taxation made the following provisions on January 25, 2010 with respect to the actual situation that there are more general VAT taxpayers identified this time, in order to regulate and ensure the confirmation work can be conducted in order.

Core Contents:

• Local Taxation Bureaus should set up plans for identification work in stages and in batches as soon as possible, and the work should be completed by the end of June 2010.

• If individual industrial and commercial households who are identified as the general VAT taxpayers need to use subsystem on anti-fake tax control invoice-drawing, they can not use it until such system is upgraded.

Circular on Measures of Management of Qualifications for General VAT Taxpayer
Guo Shui Ling [2010] No. 22

On February 10, 2010, State Administration of Taxation revised measures of management of qualification of general VAT taxpayers, and prescribed as follows:

Core Contents:

• Annual taxable sale represents the taxpayer’s cumulative sales on which VAT shall be levied in a continuous operation period less than 12 months, including duty-free sales.

• The taxpayer, whose annual taxable sales exceed the standard for small-scale taxpayers, should submit General VAT Taxpayer Identification Application Form to tax authorities within 40 days after the end of reporting period to apply general VAT taxpayer qualification.

• As for the taxpayer, whose annual taxable sales exceed regulated standard for small-scale taxpayers and newly opened taxpayers, taxation authorities should conduct on-site inspection as required after accepting application of the taxpayer, and have to prepare inspection report.

• The taxpayer, whose annual taxable sales fail to exceed standard for small-scale taxpayers or newly opened small-scale wholesale enterprises, could also apply for general VAT taxpayer identification subject to a guidance period management.

• The taxpayer whose annual taxable sales exceed standard for small-scale taxpayers but no need to apply for general VAT taxpayer identification as required should be approved.

• Once be identified as a general VAT taxpayer，the taxpayer shall not be converted into a small-scale taxpayer

• The timeframe for taxation authorities to identify general VAT taxpayer qualification is reduced, and the identification should be completed within 20 days since the taxation authority accepted the application.

Comments from bmi:
The new qualification management measure has lowered the standard of general VAT taxpayer, and has simplified application procedure. Enterprises whose annual taxable sales exceed standard for small-scale taxpayers has to submit a general VAT taxpayer application, if not conduct as required, its tax will be levied at 17% for sales and proceeds shall not be offset.

Effective from March 20, 2010

Circular on Issues Concerning Taxable Sales When Discount Offsets VAT
Guo Shui Han [2010] No. 56

On February 8, 2010, taxpayers sold goods in a manner of discount, and State Administration of Taxation indicates that it could be equivalent to the way that professional invoice is issued.

Core Contents:

• If taxpayer sale goods in a manner of discount, and the sales amount and discount amount are marked in the “amount" column on the same invoice respectively, the VAT could be levied on the sales amount after discount.

• The discount amount shall not be charged to the sales amount if it was filled in the “Remarks" column on the invoice.

Circular on Further Enhancement of Registration Management of Permanent Representative Offices of Foreign Enterprises
Gong Shang Wai Qi Zi [2010] No.4

In order to strengthen the management of representative according to the law and actually maintain the order of market economy, State Administration of Industry and Commerce and Ministry of Public Security further regulated on January 4, 2010:

Core Contents:

• Each industrial and commercial department should strictly implement notarial authentication system of overseas legal instrument, and strengthen the inspection of representative office registration material;

• Representatives office who apply for establishment and extension could get a registration certification which is valid for one year;

• The number of representatives should be strictly controlled, and could not be more than 4 (including chief representative);

• Each industrial and commercial department should conduct on-site inspection of the registered address of the newly established representative within 3 months after its receipt of registration certification. For representative who levy various fees for operation activities could be punished according to relevant regulations of unlicensed operation;

• Each industrial and commercial department and administration of public security should further strengthen cooperation to establish a departmental coordination mechanism.

Effective from January 4, 2010

Circular on Provisional Measures of Tax Management of Permanent Representative Offices of Foreign Enterprises
Guoshuifa (2010) No. 18

For the purpose of standardizing the taxation administration of permanent representative offices of foreign enterprises,，State Administration of Taxation provided on 20 Feb, 2010 as follows:

Core Contents：

• Representative offices referred to this Act represent the foreign enterprises established in China and registered in industrial and commercial department (including Hong Kong, Macao and Taiwan enterprises).

• Representative offices shall declare and pay enterprise income tax in accordance with the law on their ownership of income, and declare and pay business tax and VAT on its taxable income in accordance with the law.

• Representative offices shall hold the necessary information to handle the tax registration within 30 days from the date of receiving business documents.　　

• Representative offices should handle the change of registration or the cancellation of registration in accordance with the law; declare and pay enterprise income tax on its liquidation proceeds in accordance with the law prior to the cancellation of registration.

• For the incomplete account books by which the accurate income or costs can not be calculated, the tax authorities will levy by way of converting expenditures into income or using total revenue to check and decide the taxable income.

• Representative offices should set up the account books in accordance with the law, check and accurately calculate the taxable income and taxable amount according to legal and valid voucher, and declare and pay enterprise income tax and business tax within 15 days from the date of the end of quarter.

• The scope of representative offices’ expenditures includes: wages, bonuses, allowances, welfare, purchases of goods (including vehicles, office equipment and other fixed assets), communication fees, travel expenses, rent, equipment rental fees, traffic expenses, entertainment expenses and other expenses paid to staff in and outside China.

• The approved profit margin of the representative offices should not be less than 15%. If it can be able to establish a sound accounting books, accurately calculate its taxable income and taxable amount, and report to the competent tax authority for the record, it then can adjust to an honestly reporting format.

• If representative offices incur taxable value added tax and business tax, they shall calculate and pay the taxable amount according to the law.

• If representative offices need to enjoy the tax treaty treatment, it shall handle relevant procedures in accordance with the law and conduct the matters relating to tax declaration during the timeframe as required by Article VI of this measure.

Effective from January 1, 2010

Circular on Business License for Partnership Enterprise with Foreign Investment and Business License for Branches of Partnership Enterprise with Foreign Investment
Gongshangqiyezi [2010] No. 35

In order to implement Measures for Administration of Establishment of Partnership Enterprise by Foreign Enterprises or Individuals within China, SAIC provided on February 12, 2010:

Core Contents：

• To re-regulate the Business License and License of Branch in style, content and printing

• The new license and the copy are effective from March 1 onwards.

Effective from March 1, 2010

Circular on Management of Enterprises to Report Year-on-year Information of Connected Transactions
Shenguoshuihan﹝2010﹞No.11

On January 13, 2010, the Shenzhen Municipal State Administration of Taxation stipulated on its related problems of the year-on-year information management:

Core Contents：

• Enterprises need to submit the year-on-year information of connected transactions, and should also submit the year-on-year information each in paper format and electronic format.

• The enterprises whose annual sales income in 2008 exceeded RMB100 million should submit the year-on-year information of connected transactions for 2008 to the competent tax authorities prior to March 20, 2010 ;

• For the year-on-year information of connected transactions after 2009 (including 2009), enterprises should submit to the competent tax authorities according to relevant provisions prior to the coming year of June 20.

• Enterprises refusing to submit the year-on-year information of connected transactions will be punished according to the provisions of Article 106 of Implementation Measures, subject to the risks that they may be fined and the taxable amount may be checked.