China Reversed its Position on FIVCIEs

Originally published 26 January 2011

Keywords:China, FIVCIEs, State Administration of Taxation, SAT,

Shortly after we published our article, China Continues the Flow-through Treatment for FIVCIEs, the State Administration of Taxation (the "SAT") released another public notice (SAT Notice No. 2 of 2011, "Notice 2") on its website. Notice 2 reversed its position in SAT Notice No. 26 ("Notice 26"), which was the basis of our last article, and revoked the flow-through treatment of foreign-invested venture capital investment enterprises ("FIVCIEs").

The flow-through treatment of a FIVCIE was provided for in the Notice on Certain Questions Regarding Payment of Income Tax by Foreign Invested Venture Capital Companies (GuoShuiFa [2003] No. 61, "Circular 61"). Notice 26 included Circular 61 as one of the SAT documents that were still valid. However, shortly after the publication of Notice 26, Notice 2 listed Circular 61 as one of the SAT documents that were completely