China Releases Circular on Inspection of Corporate Income Tax

Oct. 12 – To strengthen the administration on collection of corporate income tax generated from trans-regional operations, China’s State Administration of Taxation (SAT) released the “Circular on Inspection of Distribution of Consolidated Payments of Corporate Income Tax on Trans-Regional Operations (guoshuihan [2012] No. 445, hereinafter referred to as the ‘Circular’)”on September 24.

According to the Circular, the inspected objects are enterprises that operate cross-regionally and pay tax on a consolidated basis defined under the “Interim Measures for Collection and Administration of the Consolidated Payment of Corporate Income Tax (guoshuifa [2008] No.28 hereinafter referred to ‘Measures’) (including the headquarters and secondary subsidiaries).”

The Measures provide that, where a resident enterprise sets up a trans-regional business office or establishment without legal person qualifications within the territory of China (i.e. – the office or establishment exists in another autonomous region, municipality directly under the central government, or specially-designated city in the State plan), the resident enterprise shall be an enterprise that pays taxes on a consolidated basis.

However, enterprises whose total income tax is attributed to the central government (as well as enterprises whose headquarters and subsidiaries are located in the same province, autonomous region, or municipality directly under the central government) are not included under the inspection scope of the Circular.

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