China Tax/Business News Flash

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Jul 2014, Issue 17

New requirement for Chinese TREs to disclose outbound investment information

Recently, the State Administration of Taxation (SAT) released the Public Notice Regarding Information Disclosure by Tax Residence Enterprises (TREs) on Outbound Investment and Overseas Income (SAT Public Notice [2014] No.38, hereinafter referred to as Notice 38) with the aim to improve the reporting quality of Chinese TREs’ outbound investment information and to strengthen the tax administration on these companies.

Notice 38 will be effective from 1 September 2014. According to Notice 38, where a Chinese TRE’s shareholding in an overseas company meets a prescribed threshold, it should report relevant information in its provisional and annual Corporate Income Tax (CIT) filing, including the information with respect to the TRE’s outbound investments, profits sharing/distribution of its Controlled Foreign Corporations (CFCs), and the financial statements of the overseas company where applicable. Failure to report may trigger potential penalties and tax adjustments made by the in-charge tax authorities.

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