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Detailed Implementation Regulations for China's new Corporate Income Tax Law - Impact on foreign investments
On 6 December 2007, the State Council approved the long-awaited Detailed Implementation Regulations ("DIR") for the implementation of China's new Corporate Income Tax Law ("CIT"). The final DIR was prepared by the Ministry of Finance and the State Administration of Taxation after rounds of consultations with local governments, central ministries, multinational companies, domestic groups, scholars, professional firms, etc.
The DIR contains 8 chapters and 133 articles. We are pleased to provide the PwC unofficial translation of the DIR (Appendix A - see below) for your perusal.
Because the CIT Law introduces many new tax concepts and adopted new terminologies, and the detailed explanation of various important tax policies has been deferred to the State Council, it was hoped that the final DIR would contain as much details as possible to enable taxpayers to fully assess the impact of the CIT Law on their China operations.
In our September 2007 News Flash, we have already highlighted the key draft provisions of the DIR. Whilst many of these provisions remain in the final DIR, there are also notable important changes in the final DIR. In this issue, we summarize those important changes and certain key provisions that many foreign investors and their foreign investment enterprises (FIEs) would find most relevant:
- Foreign investment enterprises
- New tax incentives
- Grandfathering of current preferential tax treatments
- Anti-tax avoidance rules
- Tax deductions
- Corporation restructuring
- Foreign investors
- Withholding income tax on dividends
- Concept of "Tax resident enterprises"
- Financing - Thin-capitalization rule
- PwC observation
- Appendix A: PwC unofficial translation of the DIR (pdf file, 100KB)
- Appendix B: Major CIT preferential tax treatments concerning foreign investors and FIEs
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