China: Non-Resident Financial Accounts Tax Information Due Diligence and Preferential Tax Policies for SME's
China Issued Non-Resident Financial Accounts Tax Information Due Diligence Administrative Measures
In May 2017, the Ministry of Finance, the State Administration of Taxation, and other four ministries of the People’s Republic of China co-issued the Non-Resident Financial Accounts Tax Information Due Diligence Administrative Measures (hereinafter referred to as the “Measures”), effective since July 1, 2017.
Commissioned by the G20, the Organization for Economic Co-operation and Development (OECD) issued Financial Account Tax Information Automatic Exchange Standards (hereinafter referred to as the “Standard”) in July 2014. The Standard was passed by the G20 Brisbane Summit. It provides powerful information tools for countries to strengthen international tax cooperation and combat cross-border tax evasion. Under the G20’s vigorous promotion, there are already 100 countries (regions) committed to implement the Standard.
The Measures are intended to provide the legal basis and operational guidelines for the implementation of the Standard in China by transforming the international standard into the specific requirements under China’s national conditions. It is not only an important measure for China to actively promote the implementation of the Standard, but also specific embodiment of China in fulfilling the international commitments.
The Measures will have minor impact on the public, instead it will have greater impact on those non-residents who have opened account(s) in China or those passive non-financial entities with non-resident controlling persons.
China Expanded the Scope of Preferential Tax Policies for Small and Low-Profit Enterprises
In June 2017, the Ministry of Finance and the State Administration of Taxation of the People’s Republic of China issued the Circular on Expanding the Scope of Preferential Tax Policies for Small and Low-Profit Enterprises (Cai Shui [2017] No. 43). From January 1, 2017 to December 31, 2019, the threshold of taxable income for small and low-profit enterprises will be raised from 300,000 yuan to 500,000 yuan,
and for those with annual taxable income below 500,000 yuan (inclusive), the taxable income will be determined at 50% of the actual income, and the applicable income rate will be 20%. At the same time, the State Administration of Taxation also issued the State Administration of Taxation Notice No. 2317 of 2017, which introduces the supporting measures on tax collection and administration.
Enterprises with annual taxable income between 300,000 yuan to 500,000 yuan will benefit the most from the preferential policies. The preferential policies will reduce taxes and fees, expand preferential policy scope, continue to stimulate micro-entities’ vitality, which is conducive to maintaining stable and healthy economy and social harmony and stability.
Gong Jian
Partner of Pan-China
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