Income Tax Withheld at Source for Non-Resident Enterprises

December 7, 2012 Posted by China Briefing Reading Time: 2 minutes

Dec. 7 – China’s State Administration of Taxation released the “Interim Administrative Measures on Income Tax Withheld at Source for Non-Resident Enterprises (guoshuifa [2009] No.3, hereinafter referred to as ‘Measures’)” in 2009, regulating the administration of income tax withheld at source for non-resident enterprises. Key information can be found below.

For the purpose of the Measures, a “non-resident enterprise” refers to an enterprise established according to foreign (regional) law, whose management organization is not based within the territory of China and has no offices or business premises in China, however, receives income sourced from Chinese territory; or where offices and business premises have been established, but the relevant income has no actual connection to such offices and premises.

According to the Measures, for dividends, bonuses and other equity investment proceeds and interests, as well as for rental income, royalties, property transfer income and other kinds of income subjected to corporate income tax earned by non-resident enterprises from sources in China, measures of withholding tax at source shall be implemented. As such, the withholding obligors are the entities or individuals that bear direct obligation to make relevant payments to the non-resident enterprises pursuant to relevant laws or stipulations of relevant contracts.

Where a withholding obligor fails to withhold taxes or perform its obligation of withholding taxes in accordance with law, the relevant non-resident enterprise shall, within seven days from the payment date of the withholding obligors, declare and pay corporate income tax to the competent tax authority at the place where the income occurs.

Where the place of a withholding obligor is not the place where the relevant income occurs, the competent tax authority at the place where the withholding obligor is located shall – within five working days after determining that the withholding obligor has failed to withhold the relevant taxes in accordance with the law, or is unable to perform the obligation of withholding taxes – send the Letter for Communicating Tax-Related Matters to the competent tax authority at the place where the relevant income occurs and inform the non-resident enterprise of the tax declaration and payment matters.

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In this issue, we discuss corporate income tax, value-added tax, business tax, goods and service tax, withholding tax, and individual income tax as these apply in China, India, and Vietnam, and in the popular holding company destinations of Hong Kong and Singapore. This includes tax rates, descriptions, incentives, and deadlines, as well as main FDI source countries/regions and industry-specific notes.