Shenzhen Specifies Taxable Project Filing Details for NREs

Shenzhen’s tax authority made a new announcement recently in order to better regulate tax collection from non-resident enterprises. The document underlines the taxable project filing obligations of non-resident enterprises as well as their related domestic partners, and clarifies relative filing details such as time limits.

The “Announcement on Strengthening Taxable Project Registration and Filing for Non-resident Enterprises (shenguoshuigao [2011] No.7)” released on August 2 specifies filing details for contracted projects and tax withholding at source.

Contracted projects and service provision
A non-resident enterprise which is contracted to conduct a project or provide a service in Mainland China shall commence temporary tax filing at the local tax bureau within 30 days from the date when the contract is signed.

A domestic institution or individual that offers a contract for a project or service (a principal) to a non-resident enterprise shall commence project contract filing at the local tax bureau within 30 days from when the contract is signed. The paperwork for filing shall include the involved non-resident enterprise’s tax registration record, contract and tax power of attorney. Where there are any changes in the project or service contract, the principal shall submit a report elaborating on the actual changes to the local tax bureau within 10 days since the contract content is changed.

China-sourced income tax withholding
The enterprise income tax (EIT) on a non-resident enterprise’s China-sourced equity income such as dividends and bonus, interest, rent, royalties, income from property transfer, and other incomes that are subject to EIT payment shall be withheld at source (within Mainland China). The institution or individual that is directly liable for the related payments to the non-resident enterprise – according to related laws or contracts – shall be the tax withholding agent.

A tax withholding agent that signs a project contract with a non-resident enterprise committing to tax withholding at source shall commence filing of the project contract at the local tax bureau within 30 days from the date the contract is signed.

Liability
If filings by a domestic intuition or individual and a non-resident enterprise are not proceeded within the time limits stipulated in State Administration of Taxation (SAT) Decree No.19 and the SAT document coded guoshuifa [2009] No.3, the local tax authority is empowered to force amendment by the involved parties and give a penalty of less than RMB2,000.

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