CHINA Law and Practice Contributed by: James Hu, Yingjie Kang, Huihui Li, Sherry Xu, Bivio Yu and Lisa Zhao, Fangda Partners
9.2 Withholding Taxes on Dividends, Interest, Etc Non-resident enterprises are subject to EIT on divi - dends, interest and royalties obtained from resident enterprises, and the resident enterprises are obligated to withhold such EIT at 10% (as well as VAT, if appli - cable) from the relevant payments made to the non- resident enterprises (withholding taxes). Preferential income tax rates may be provided by the DTAs concluded by China with other countries or regions, which may reduce tax rates to 5% or 7% depending on applicable DTAs. For dividends, DATs may provide for minimum level of stock ownership (usually 25%) and holding period. 9.3 Tax Mitigation Strategies Income Tax Deferral Restructuring transactions, including but not limited to debt-to-equity conversion, mergers and acquisitions, and spin-offs, conducted by enterprises, upon fulfil - ment of the prescribed conditions, may be eligible for tax deferral treatment. Reinvestments of dividends obtained by non-resident enterprises from resident enterprises may be eligible for tax credit and/or tax deferral. For this purpose, the scope of resident enterprises excludes public listed companies. Super-Deduction of R&D Expenses Expenses incurred by enterprises for R&D activities, upon fulfilment of the prescribed conditions, may be eligible for super-deduction at 200% of such expens - es; intangible assets generated by R&D activities undertaken by enterprises may be amortised at 200% of the costs and expenses capitalised. Accelerated Depreciation of Fixed Assets Newly purchased equipment and appliances (exclud - ing buildings and structures) with a unit value of no more than CNY5 million are allowed for quick deduc - tion in a lump sum during the current period. As to newly purchased equipment and appliances (excluding buildings and structures) with a unit value of more than CNY5 million, enterprises may opt for a
loss shall be calculated at the level of the partnership, while income tax shall be paid by the partners based on the respective conditions. Value-Added Tax Value-added tax (VAT), which is levied on the turnover of taxpayers, applies to sale or import of goods, provi - sion of processing, repair and replacement services, provision of services and transfer of intangible proper - ties and immovable properties in China. Taxpayers of VAT are divided into small-scale and general VAT payers based on annual turnover and the tax rates are different for each type of tax payer and the nature of goods/service, which varies from 3% to 13%. From 1 January 2026, the new VAT Law of the People’s Republic of China will become effective. While largely maintaining the policies and principles rendered under the existing VAT regime, there are certain changes that should be noted. For instance, one of the key changes pertains to the definition or determination of taxable activities, which are detailed as follows. • Sale of goods – the place of shipment or the loca - tion of the goods is within China. • Sale/Lease of immovable properties or transfer of the use right of natural resources – the property or natural resources are located within China. • Sale of financial products – the financial product is issued within China, or the seller is a domestic entity or individual. • Provision of services or transfer of intangible assets – the services or intangible assets are received or consumed within China, or the seller is a domestic entity or individual. Other Taxes Enterprises may also be subject to other taxes such as consumption tax, land appreciation tax, real estate tax, stamp duty, etc, depending on the goods manu - factured or sold, business activities or transactions carried out in China.
142 CHAMBERS.COM
Powered by FlippingBook