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Offshore Holding for Foreign Invested Enterprises may now be under China Tax Rules

June 22, 2009

Analysis of:Financial Times | www.ft.com

The mainland tax authority has delivered grim news. In early 2009, the China State Administration of Taxation has issued a few circulars to revise the existing rules governing foreign companies earning income from China. These circulars basically cover all types of income foreign companies may earn from China. It could be a foreign company having a working place in China and earning service income or a foreign company without any place or person in China but earning passive income such as dividend, interest, royalty, rental and capital gain from China. In particular, circular No. 3 and No. 19 set out detailed compliance and disclosure requirements. They include mandatory registration, periodic reporting, final reconciliation, etc. Failure to do any step may cause trouble in remitting money out of China.

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