China Strengthens Tax Administrations On Foreign Contractors

Recently, the China State Administration of Taxation has issued several circulars strengthening the administration of, and tax collection relating to, services provided by nonresident enterprises. Foreign service providers should be aware of new requirements and their implications.

Is a Foreign Service Provider Liable for Tax in China?

Corporate Income Tax ("CIT"). If a foreign company is a resident of a country or region that has a tax treaty (or tax arrangement) with China, the business profit of the foreign company will not be subject to CIT in China unless the foreign company has a permanent establishment in China and the business profit is derived from the permanent establishment. A "permanent establishment" in China under China tax treaties is a fixed place of business through which the business of an enterprise of a treaty country is wholly or partly carried on, including a place of management, a branch, an office, a factory, a workshop, and a mine, an oil