China introduces new rules on withholding tax for non-resident enterprises

Published: 11 December 2017


The State Administration of Taxation has issued new rules by way of a public notice concerning withholding of corporate income tax for non-resident enterprises (NRE). These rules are meant to be practical and taxpayer friendly for NREs. Amongst other changes, the withholding tax on dividends paid to an NRE would now be payable on the actual date of remittance instead of the date on which such dividends were declared. A requirement for filing of relevant contracts by the withholding agent has been abolished. In situations where consideration for a transfer of offshore equity interest is settled by instalments, the entire income accruing to the NRE was required to be recognised for tax purposes when the agreement became effective and the share transfer completed. This could lead to a withholding amount exceeding the initial instalment payment. The new rules treat the NRE as first receiving its original investment through the instalments and then apply withholding tax to the income received in subsequent instalments. The rules come into effect from 1 December 2017. For further information, please contact Paul Hale.