New Rules for China-source Income and Withholding Income Tax System
[See Chinese and English translation of the legal texts at the bottom of this page]
Under the framework of PRC double tax agreements, the double tax agreement for international transportation services (including air, sea and road transport), and the mutual agreements for the granting of tax exemption on income from the supply of international transportation services, the State Adminstration of Taxation (the SAT) promulgated under decree [2015] No. 60 "The Administrative Measures for Managing the Treatment for Treaty Benefits Claimed by Non-resident Taxpayers under Tax Treaties" (Document [2015] No. 60).
Document [2015] No. 60, effective as from 1st November 2015, has superseded the predecessor document [2009] No. 124, and has included into the withholding income tax system the following new practices:
- Document [2015] No. 60 has expanded the scope of the tax treaty under document [2009] No. 124 to cover the double tax agreements for international transportation services and the mutual agreement for tax exemption on income from international transportation services.
- Document [2015] No. 60 provides that non-resident taxpayers including foreign entities and foreign individuals shall follow a uniform set of formality for claiming treaty benefit under the double tax agreements, the double tax agreements for international transportation services and mutual agreement on tax exemptions on income from international transportation services;
- Document [2015] No. 60 has abolished the requirements for administrative approval for the non-resident taxpayers to receive the treaty benefits with respect to dividend, interest, royalty, and captial gains. Where the non-resident taxpayer submits the tax return on his own, he is required to exercise his judgment whether he is eligible for the treaty benefit and provides to the tax authority with true and correct information in accordance with Article 7 of document [2015] No. 60. Where the China income is withheld at source, the non-resident taxpayer is required to provide the withholding agent with ture and correct information in accordance with Article 7 in document [2015] No. 60;
- Article 7 of document [2015] No. 60 specifies the following information required for the non-resident taxpayer to claim treaty benefits:
- Declaration Form giving Information about the Identity of Tax Residence for the Non-resident Taxpayer (Appendices 1 and 2);
- Declaration Form Setting out Entitlement to Treaty Treatment by Non-resident Taxpayers (Appendices 3 to 10);
- The certificate of tax residence issued by the tax authority in the state of which he is the resident; the certificate of incorporation in lieu of certificate of tax residence where the non-resident taxpayer engaged in international transportation services seeks to claim benefit under the tax treaty provision or a double tax agreement for international transportation services. Both the certificate of residence and the certificate of incorporation should be issued within one calendar year of submitting the application for treaty benefit to the PRC tax authority or tax withholding agent; the photocopy of his passport issued by the state of which he is a resident in lieu of certificate of tax residence where a non-resident individual seeks to claim treaty benefit under the double tax agreement for international transportation services.
- Documentary evidence of contracts, agreements, resolution by the board of directors, resolution of shareholders and proof of payments, all of which are related to the earning of income;
- Documentary evidence showing the entitlement to specific treaty treatment under the treaty provision or double tax agreement for international transportation services, as required under the provisions of other legal texts;
- Other information the non-resident taxpayer can provide to the tax authority of its own accord showing his entitlement to the treaty benefits.
5. Article 8 of the SAT document [2015] No. 60 lays down rules the non-resident taxpayers shall submit the application for treaty benefits at the following point of time:
With reference to different articles in the double tax treaty, the non-resident taxpayers who seek to receive treaty benefits shall submit the declaration form and documents as required by Article 7 at the following points of time:
- the non-resident taxpayer claiming treaty benefits in respect of independent services, dependent services (employment income), government services, teaching and research, and students, should submit the declaration form and documents to the tax authority or tax withholding agent the first time he has earned the relevant income. The non-resident taxpayer is not required to submit the same information to the same supervising tax authority regarding the same provision in the double tax treaty where the conditions for treaty benefit and the information he has submitted remain unchanged;
- the non-resident taxpayer claiming treaty benefits in respect of the earning of business profits from a permanent establishment, the provision of cross-border transportation services, the earning of dividend, interest, royalty, pension or the benefit under double tax agreement of international transportation services, should submit the information to the tax authority the first time he has earned the income, or the agent who withholds taxes at source the first time, in the relevant tax year. The non-resident taxpayer is not required to submit the same information to the same supervising tax authority regarding the same provision in the double tax treaty within 3 calendar years commencing from the tax year in which the he submits the tax declaration form and documents where the conditions for treaty benefit and the information he has submitted remain unchanged;
- the non-resident taxpayer claiming the treaty benefits in respect of capital gain, income earned by acting as artistes and sportsmen or other income earned, should provide tax declaration form and documents to the tax authority or the tax withholding agent each time he earns the income.
. 6. The non-resident taxpayer should informtation in Chinese translation if the original documents are written in English.
See the link to the original texts of document [2015] No. 60 in SAT website (in Chinese): [read]; [English translation].
