State taxation bureaus and local taxation bureaus of provinces, autonomous areas, municipalities directly under the central government and separately planning cities,To regulate the administration over the tax collection on the permanent representative offices of foreign enterprises, the State Administration of Taxation formulated the Provisional Measures for the Administration of the Tax Collection on Permanent Representative Office of Foreign Enterprises, which is hereby printed and distributed to you, and please implement it as required. Please report to the State Administration of Taxation (International Taxation Department) in a timely manner when problems arise in the process of execution.
                              State Administration of Taxation
                                                                                            February 20, 2010

Provisional Measures for the Administration of the Tax Collection on Permanent Representative Offices of Foreign Enterprises

Article 1 To regulate the administration on the taxation of permanent representative offices of foreign enterprises, the Measures shall in accordance with the Law of the People’s Republic of China on the Administration of Tax Collection (hereinafter referred to as the tax collection administration law) and the detailed rules, the Law of the People’s Republic of China on Enterprise Income Tax and the implementing regulations, the Provisional Regulations of the People’s Republic of China on Business Tax and the implementing regulations, the Provisional Regulations of the People’s Republic of China on Value Added Tax and the implementing regulations and related taxation laws and regulations be formulated.

Article 2 The permanent representative offices of foreign enterprises in the Measures refer to the permanent representative office of foreign enterprises (inclusive of Hong Kong, Macao and Taiwan-funded enterprises) and other organizations established within China after being registered in the industrial and commercial administrative authorities or approved by related departments in accordance with related provisions of the State Council (hereinafter referred to as the representative offices).

Article 3 the representative offices should report and pay the enterprise income tax for imputed income, and report and pay the business tax and added value tax for taxable earnings by law.

Article 4 The representative offices should within 30 days upon gaining the industrial and commercial registration (the approval of related departments) report and handle taxation registration in the competent taxation authority where it is domiciled with the following materials:
(1)A duplicate of a business license or the original and copies of the approval document of the competent authority.
(2)A duplicate, original and copies of certificate of organization code.
(3)Original and copies of certification (certificate of title, leasing agreement) of registration address and business address; original and copies of legal certificates of title including property certificate or trading contract should be offered if it is self-owned housing property; original and copies of leasing agreement should be offered if the place is rented, and if the lessor is natural person, the original and copies of property certification shall also be offered.
(4)Original and copies of passport or other legal identify documents of the chief representative (responsible person).
(5)Related decision documents of the establishment of representative offices of foreign enterprises and the list of other representative offices established within China (inclusive of title, address, contract and name of chief representative). And
(6)Other materials required by taxation authorities.
Article 5 Where the content of taxation registration of representative office alters or the stay of representative offices within China expires and the business activities are terminated in advance, they should in accordance with tax collection management law and related provisions report and handle the alteration or cancellation registration in the competent taxation authorities; representative offices should report and pay enterprise income tax for the liquidation by law before handling cancellation registration.

Article 6 Representative offices should in accordance with related laws, administrative regulations and provisions of the competent finance and taxation departments under the State Council set up accounts and books, keep accounts based on legal and valid receipts and certifications, conduct verifications, accurately compute taxable earnings and taxable income in the matching principle of actual performance and the undertaking risks, report and pay enterprise income tax and business  tax to the competent taxation authorities according to the actual situation within 15 days upon the end of one quarter and report and pay the added value tax to the competent taxation authorities according to the actual situation within the taxation period as prescribed in the Provisional Regulations of the People’s Republic of China on Value Added Tax and the implementing regulations.

Article 7 For the representative offices which have no complete accounts and books, fail to accurately verify and calculate income or cost expenses or have no way to file a report according to the actual situation in accordance with Article 6 of the Measures, taxation authorities have the right to check and decide on taxable income amount by the following two means:
(1)Compute income based on expenditure: be subject to the representative offices which can accurately reflect expenditures but the income or cost expense.
1.formula:
Income amount=expenditures in the phase/ (1-verified profit rate-business tax rate);
Taxable enterprise income tax amount=income x verified profit rate x enterprise income tax rate.
2. expenditures of representative offices includes: wages, bonus, allowance, welfare fees, purchase fees (inclusive of fixed assets of vehicles and office equipment), communication expenses, traveling expenses, rent, equipment leasing charges, transportation expenses, entertainment expenses and other expenses to staff within China.
(a)Expenditures for purchasing fixed assets and that of decoration of representative offices for establishment or relocation should be converted to compute tax as expenditures at one time when it accurs.
(b)Interest income shall not be computed as expenditures; the actual entertainment expenses shall be calculated into expenditures with actual amount.
(c)Expenses for the public welfare, relief donation, overdue fine, fine or advance payment for their headquarters within China in the form of currency shall be not the expenditures for the business activities, nor shall it be expenditures of representative offices.
(d)Other expenses includes: fees and delivery charges of purchasing samples for headquarters from within China; storage charges and customs clearance fees arising from sample delivery to China from abroad; fees of hiring interpreters for personnel from headquarters to visit China; and expenses for purchasing binding documents paid by representative offices when the headquarters offer bids for a certain project within China.
(2)Check and decided on taxable income amount based on income: be subject to representative offices which can accurately reflect income but cost. Formula:
Taxable enterprise income tax amount = income x verified profit rate x enterprise income tax rate.

Article 8 The verified profit rate of representative offices shall not be below 15%. Representative offices which adopt the means of verified tax collection may be adjusted to be applied to the declaration means according to the actual situation if establishing and perfecting accounting accounts and books, accurately calculating taxable earnings and taxable income and reporting to the competent taxation authority for filing.

Article 9 Representative offices should calculate taxable tax in accordance with related laws and regulations of added value tax and business tax if any.

Article 10 Representative office should in accordance with taxation agreement and related provisions of the Circular of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Non-Residential Enjoyment of the Treatment in the Taxation Agreement (Trial) (Guo Shui Fa [2009] No. 124) handle the issues and taxation declaration within the time limit as prescribed in Article 6 of the Measures when enjoying the treatment in the taxation agreement.

Article 11 The Measures shall enter into effect as of January 1, 2010. Where other provisions are inconsistent with the Measures, the Measures shall prevail. The Circular of the State Administration of Taxation on Related Issues of Strengthening Administration of Tax Collection on Permanent Representative Offices of Foreign Enterprises (Guo Shui Fa [1996] No. 165), the Circular of the State Administration of Taxation on Issues Concerning the Administration of Tax Collection on Permanent Representative Office of Foreign Enterprises (Guo Shui Fa [2003] No. 28) and the Circular of the State Administration of Taxation on Issues Concerning Tax Exemption Approval Procedures for the Establishment of Representative Office by Foreign Governments within China (Guo Shui Han [2008] No. 945) shall be simultaneously revoked, and all parts across China shall not accept and approve the applications of representative offices for enterprise income tax exemption and conduct liquidation on representative offices that have been verified to be exempt from tax in accordance with the Measures.

Article 12 State taxation bureaus and local taxation bureaus of provinces, autonomous areas, municipalities directly under the central government and separately planning cities shall in accordance with the Measures formulate special operation procedures and report to the State Administration of Taxation (International Taxation Department) for filing.

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