CHINA Trends and Developments Contributed by: Ying Ding, Shihui Partners
• China-sourced income that is derived by the “establishment or place”; and • foreign-sourced income that is effectively connect - ed with the “establishment or place”. In both scenarios, CIT is charged at the standard 25% rate, the same as for resident enterprises, together with compliance obligations such as tax registration, bookkeeping and tax filing. In practice, debate has continued for years as to whether a domestic partnership alone, or the invest - ment and business activities relating to the domestic partnership, constitutes an “establishment or place”, thereby exposing the foreign partner(s) to the 25% CIT rate and associated obligations. In the 2025 tax year, some investment funds (eg, Qualified Foreign Limited Partnerships) were notified by local tax authorities to complete tax registration and pay CIT at 25%. It remains unclear what criteria were applied by the tax authorities, and whether this approach will become a nationwide practice, or how it will interact with the concept of “permanent establish - ment” under tax treaties. Application of Tax Treaties Non-resident taxpayers: entitlement to treaty benefits Starting from the 2020 tax year, non-resident tax - payers are entitled to claim treaty benefits on a self- assessment basis. Taxpayers and withholding agents must retain relevant documentation, including a tax residency certificate issued by the competent author - ity of the other contracting party. Tax authorities may conduct follow-up administra - tion and request non-resident taxpayers or withhold - ing agents to submit the documentation and other relevant information. Misuse or abuse of tax treaties will result in retroactive payment of taxes plus late- payment surcharges. (See also previous section titled “Enhanced follow-up tax administration”.) Resident taxpayers: application of tax residency certificates As more Chinese companies expand their business - es globally, the STA released a new regulation on the
issuance of tax residency certificates in January 2025, effective on 1 April 2025. This aims to better support taxpayers’ cross-border transactions and claims for treaty benefits in overseas jurisdictions. Notably, branches, partnerships and sole proprietor - ships cannot apply for tax residency certificates in their own name. Instead, the head office, partners or owners must apply to the competent tax authorities for the certificates. Tax Controversy The administrative law system protects taxpayers’ rights to apply for administrative reviews and file administrative lawsuits regarding tax-related disputes In 2023, China revised the Administrative Review Law, effective on 1 January 2024. In August 2025, the Ministry of Justice published a public consultation on revision of the Implementation Regulations for the Administrative Review Law. The revised Administrative Review Law introduced new procedural rules. These rules apply to the tax authorities when reviewing administrative cases, and have brought significant changes to practice. The upcoming revised Implementation Regulations are expected to bring further changes. Tax administrative litigation In November 2023, a specialised tax collegial bench was established within the Primary People’s Court of Siming District of Xiamen City. The tax collegial bench was granted centralised jurisdiction over tax-related criminal, civil and administrative cases that were pre - viously heard by primary courts in Xiamen City. against the tax authorities. Tax administrative review In February 2024, two levels of specialised tax tribu - nals were established in Shanghai, within the Railway Transportation Primary Court of Shanghai and the Third Intermediate People’s Court of Shanghai Munici - pality respectively. The two tax tribunals exercise cen - tralised jurisdiction over administrative cases involving the Shanghai tax authorities as a party.
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