When do tax liabilities arise in terms of services provision under Chinese law?

As long as the service recipient or the service provider is located in China, tax liabilities will arise on the service income, notwithstanding the location of the provision of services. Indeed, the Chinese subsidiaries are the ones responsible for withholding and paying these taxes prior to remitting the service incomes back to their headquarters.

Such service income will generally be subject to:

• Business tax;
• Urban construction and maintenance tax;
• Education surcharge; and
• Local education surcharge

For value-added tax pilot areas, business tax will be substituted by value-added tax, which will be dependable on the industries of the entities in question.