I INTRODUCTION

China is one of the most popular destinations for inward investment by multinational corporations (MNCs).

Inward investment has long been subject to approvals, registrations and restrictions in China. Since 1 October 2016, a recordal system has been implemented nationwide for the establishment and the administration of corporate changes of foreign-invested enterprises (FIEs) in industries that are not subject to special administrative measures. For FIEs in industries that are subject to special administrative measures, namely restricted and prohibited industries as listed in the Catalogue for Guiding Foreign Investment in Industry (2017 version), an approval system continues to apply. In addition, effective from 30 July 2017, the recordal system has replaced the approval system for acquisitions of shares and assets of Chinese-invested companies by foreign investors in industries that are not subject to special administrative measures.

With regard to taxation, China provides tax incentives to promote both inward investment and domestic investment in high value-added sectors, including high-technology research and development, advanced manufacturing, clean energy technology and 'modern services'.

MNCs have faced growing challenges from the Chinese tax authorities in recent years, including the taxation of indirect transfers of Chinese-resident enterprises; transfer pricing adjustment to intra-group payments such as royalties and service fees; and the use of transfer pricing methodologies that favour higher levels of source-country taxation.

The Chinese tax authorities have become more and more aggressive in tax enforcement and collection against MNCs. At the same time, the tax environment is gradually becoming more transparent and rules-based.

II COMMON FORMS OF BUSINESS ORGANISATION AND THEIR TAX TREATMENT

i Corporate

Wholly foreign-owned enterprises (WFOEs) and Sino-foreign equity joint ventures (EJVs) are the corporate entities commonly used by foreign investors wishing to establish a business presence in China. WFOEs and EJVs are collectively known as FIEs.

A WFOE is a limited liability company wholly owned by one or more foreign investors. An EJV is a limited liability company established on the basis of a joint venture contract between Chinese and foreign parties. The WFOE is the most common form of inward investment to China, while the EJV has been the preferred form for foreign investors to enter industries with foreign ownership or control restrictions.

Since WFOEs and EJVs are Chinese-resident enterprises, they are subject to the same tax treatment as Chinese domestically owned corporate enterprises. In particular, they pay EIT. The taxation of resident enterprises is discussed in more detail in Section III.

ii Non-corporate

Partnerships and representative offices (ROs) are the two main types of non-corporate entities for inward investment into China.

China does not yet have laws or comprehensive rules regarding the taxation of partnerships. Some general guidance is available under a 2008 circular (Circular 159),2 which establishes that partnership profits are first allocated to the partners, who are subject to individual income tax (IIT) or EIT depending on whether they are individuals or enterprises. The Enterprise Income Tax Law (EITL) provides further confirmation of the pass-through nature of partnerships by stating that a partnership is not an enterprise that is subject to EIT.3 Circular 159 also provides that a partner is not permitted to deduct partnership losses against his or her other forms of income. Apart from these basic principles, partnership taxation is not well developed in China; this is one reason why foreign investors have not commonly used partnerships for inward investment.

An RO is the most common form of non-corporate entity used by foreign investors doing business in China. In general, ROs are not permitted to engage in profit-generating activities, and must confine themselves to, for example, liaison, market research and product promotion activities.4 An RO constitutes a permanent establishment (PE) in China of its non-resident head office unless the RO is confirmed by the Chinese tax authorities as not being a PE based on an applicable double taxation agreement (DTA). In principle, an RO of a non-resident enterprise is required to keep full accounting books and to pay EIT on its actual profits in the same manner as resident enterprises. In practice, however, the vast majority of ROs are taxed on deemed profits, which are determined using a statutory cost-plus or deemed profit formula.5

III DIRECT TAXATION OF BUSINESSES

i Tax on profits

Determination of taxable profit

A Chinese-resident enterprise is subject to EIT on its worldwide income. A PE of a non-resident enterprise is subject to EIT on its China-sourced income and on its non-China-sourced income that is effectively connected to the PE.

The taxable profits of an enterprise are equal to its total revenue for the tax year less its non-taxable revenue, tax-exempt revenue, deductions and prior-year losses. Enterprise taxpayers are required to use accrual accounting, and taxable net income is calculated on this basis, except where the tax authorities adopt a deeming method for determining taxable income, as is common for ROs and other types of PE. Taxpayers need to take into account certain differences between the general accounting standards for enterprises and the tax accounting requirements under the EITL when preparing EIT returns.

In general, reasonable expenditures actually incurred by an enterprise in connection with the deriving of revenue are deductible. The main types of non-deductible items include dividends, EIT payments, tax surcharges, penalties, non-qualified donations, sponsorship expenses, unapproved reserves and other expenses that are related to the generation of non-taxable income.

The straight-line method is used in computing both depreciation of fixed assets and amortisation of intangible assets. Certain fixed assets may be depreciated using an accelerated depreciation method as an incentive to encourage activities such as technological development.

Capital and income

The EITL does not distinguish between the tax treatment of capital income and ordinary income. A capital gain derived by a taxpayer is subject to EIT as ordinary business income.

Losses

Losses may be carried forward for five years after the tax year in which they are generated. Loss carry-backs are not allowed. Since a capital gain is taxed as ordinary business income, the offset of income losses against capital gains, and vice versa, is allowed. There are no specific provisions preventing loss relief in the case of an ownership change, although the general anti-avoidance rule may apply where the change is among related parties. The losses of a Chinese enterprise's foreign branches may not be set off against its domestic profits.

Rates

The general EIT rate is 25 per cent, but high and new technology enterprises (HNTEs) to which the state provides key support are subject to a reduced rate of 15 per cent, while qualified small-scale and low-profit enterprises are subject to a reduced rate of 20 per cent. Under several circulars, qualified technologically advanced service enterprises are also subject to a reduced rate of 15 per cent.

Administration

The tax year begins on 1 January and ends on 31 December. An enterprise must file a provisional monthly or quarterly tax return within 15 days of the end of each month or quarter and pre-pay provisional EIT at that time. The enterprise must file an annual tax return within five months after the end of the tax year, and the provisional tax already paid during the year will be credited to the annual tax payable.

The SAT is the central government tax authority in China. The SAT is responsible for the implementation of the tax laws and also has a role in creating tax policy, a role that it shares with the Ministry of Finance (MOF). From 1991 to mid-2018, there were two tax bureaus at each of the provincial, city and district levels in China. In August 2018, China completed a tax administration reform to merge the state and local tax bureaus. After the merger, the new local tax authority at each of the provincial, city and district levels has assumed all of the functions previously performed by the separate state and local tax bureaus at each level.

Tax authorities are required to carry out tax audits in accordance with an audit plan that is formulated annually.6

There is as yet no formal procedure for advance rulings in China. Chinese enterprises can consult the tax authorities on specific tax issues online7 or via a hotline.8 The responses of the tax authorities, however, are not binding on the tax authorities. Under Chinese law, a taxpayer may challenge a tax assessment issued by a Chinese tax authority through the administrative review procedure after paying the tax. If the taxpayer is not satisfied with the outcome of an administrative review, it may bring a lawsuit in the courts.

Tax grouping

Currently, there is no consolidated tax-grouping regime in China. Each Chinese company is a separate taxpayer under the EITL, and should pay tax and bear losses separately.

ii Other relevant taxes

VAT

The sale of goods, repair and replacement services and the provision of labour services in relation to the processing of goods in China are subject to VAT under administrative regulations that have been in place since 1994. The provision of other services and the transfer of immovable or intangible properties are also within the scope of VAT under a VAT pilot programme that was introduced in phases between 2012 and 2016. VAT is also levied on the import of goods into China, unless the imports are specifically exempted under special rules. The standard VAT rates for general VAT taxpayers are 16 per cent, 10 per cent or 6 per cent depending on the specific taxable activity.

General VAT taxpayers may utilise input VAT credits to offset against output VAT. The standard VAT rate for small-scale VAT taxpayers is 3 per cent and no-input credits are available to small-scale VAT taxpayers.

Stamp duty

Stamp duty is levied on the execution or receipt in China of certain documents, including contracts for the sale of goods, documentation effecting the transfer of property or shares, business account books, and certificates evidencing rights and licences. The rates of stamp duty vary. For the transfer of shares in a resident enterprise, the applicable stamp duty rate is 0.05 per cent of the contract value for each party.

Land appreciation tax

Land appreciation tax is levied on gains realised from real property transactions at progressive rates from 30 to 60 per cent, based on the land value appreciation amount, which is the excess of the consideration received from the transfer or disposition of real property over the total deductible amount, which mainly consists of the original cost of the land and the cost of improvements.

IV TAX RESIDENCE AND FISCAL DOMICILE

i Corporate residence

A company is a resident enterprise in China if it has been incorporated under Chinese law or if it has been incorporated outside China but has a place of effective management in China. A place of effective management refers to a place where overall management and control over business operations, staffing, finance and assets are exercised in substance.9 A tax notice issued in 200910 provides that a Chinese-controlled foreign company should be regarded as a Chinese-resident enterprise if all of the following factors exist:

  1. the enterprise's senior management personnel and the senior management bodies carry out the day-to-day management of the enterprise mainly in China;
  2. finance-related decisions and HR-related decisions are decided or approved by bodies or personnel in China;
  3. the major assets, accounting books, meeting records for shareholders' meetings and directors' meetings, etc., are located or kept in China; and
  4. at least half of the directors with voting powers or the senior management personnel are habitually resident in China.

ii Branch or permanent establishment

A non-resident enterprise with a place or establishment in China is subject to EIT on its China-sourced income and on its non-China-sourced income that is effectively connected to the PE. A 'place or establishment' is a domestic concept similar to that of a PE under DTAs.

The distinctive feature of the domestic concept of place or establishment is that the following are deemed taxable places or establishments:

  1. places of management or business organisation;
  2. places of business;
  3. branches;
  4. ROs;
  5. factories and workshops;
  6. places where natural resources are extracted or exploited;
  7. farms;
  8. places where projects such as construction, installation, assembly, repair and exploration are undertaken;
  9. places where labour services are provided;
  10. business agents; and
  11. other places or establishments where production and business activities are undertaken.

The PE definition under China's tax treaties may override and serve to limit this broad definition of place or establishment under domestic law.

China has very limited domestic guidance on the attribution of profits to PEs. A non-resident enterprise with a place or establishment in China is required to keep complete accounting books and records to accurately calculate its taxable income in accordance with the principles of matching the functions performed and the risks borne.11 If a non-resident enterprise fails to accurately calculate its taxable income, the non-resident enterprise will be taxed using a deemed profit method. In practice, the deemed profit method is widely used, with profit rates ranging from 15 to 50 per cent.

A non-resident company may open a branch in China after obtaining approvals from the competent authorities, although in practice this has been limited mainly to the financial services sector. The EITL does not provide for a branch profits tax.

V TAX INCENTIVES, SPECIAL REGIMES AND RELIEF THAT MAY ENCOURAGE INWARD INVESTMENT

i Holding company regimes

A foreign investor may establish a Chinese holding company. Dividends received by a resident enterprise from another resident enterprise are exempt from EIT; however, there is no special tax regime for holding companies in China.

ii IP regimes

There are no special regimes for IP-derived income. Instead, there are several tax incentives related to R&D and other IP-related activities. The income derived by a resident enterprise from qualified technology transfer may be granted a tax exemption or a 50 per cent tax reduction.12 There is a 50 per cent 'super' deduction for R&D expenditures incurred on the development of new technology, new products and new processes. In addition, as noted above, qualified HNTEs to which the state provides key support are subject to a reduced EIT rate of 15 per cent instead of the headline 25 per cent rate.

iii State aid

The EITL provides specific tax incentives for a number of sectors. For instance, enterprises investing in the operation of infrastructure construction projects, environmental protection, energy-saving or water conservation projects may enjoy a three-year tax exemption followed by another three years with a 50 per cent reduction in the EIT rate starting from the tax year when production revenue is generated.13 In addition, the income generated from agriculture, forestry, husbandry and fishery is granted an EIT reduction or exemption.14

iv General

FIEs and domestically invested enterprises are treated equally under the EITL. The pre-2008 tax incentives that specifically targeted FIEs were phased out following the effective date of the EITL on 1 January 2008.

VI WITHHOLDING AND TAXATION OF NON-LOCAL SOURCE INCOME STREAMS

i Withholding on outward-bound payments (domestic law)

Dividends, interest and royalties paid by a Chinese-resident enterprise to a non-resident enterprise are subject to withholding tax at a statutory rate of 20 per cent on the gross amount.15

ii Domestic law exclusions or exemptions from withholding on outward-bound payments

The withholding tax rate on dividends, interest and royalties is reduced to 10 per cent under Article 91 of the Implementing Regulations. In addition, the following items of interest are exempt from withholding tax:

  1. interest income from state treasury bonds;
  2. interest income on loans made by foreign governments to the Chinese government;
  3. interest income on preferential loans made by international financial organisations to the Chinese government and to resident enterprises; and
  4. interest income on municipal bonds issued in and after 2009.16

iii Double tax treaties

As of October 2018, China is party to DTAs with 109 jurisdictions. An updated list of tax treaties that China has signed may be found online.17

China's DTAs are based on the OECD and UN Model Conventions. Most of the DTAs that China has concluded provide a 10 per cent withholding tax rate, which is the same as the Chinese domestic rate. However, the dividend withholding tax rate is reduced to 5 per cent under certain DTAs, including those that China has signed with the following countries or regions: Barbados, Belgium, Denmark, France, Germany, Hong Kong, Ireland, Luxembourg, Malta, Mauritius, the Netherlands, Singapore, Sweden, Switzerland and the United Kingdom.

A non-resident enterprise must comply with a tax bureau recordal procedure to enjoy DTA benefits. A taxpayer that has enjoyed treaty benefits remains subject to challenge in a tax investigation or audit.18 The main focus with respect to dividends, interest and royalties is on whether the recipient of the income is the beneficial owner of the income.19 The review by the tax authority focuses heavily on whether the recipient has economic substance and is a conduit.

iv Taxation on receipt

Dividends, capital gains and other income derived by a resident enterprise outside China are subject to the general EIT rate of 25 per cent. The EITL allows resident enterprises to use foreign tax credits, including indirect tax credits, to avoid double taxation of income.

Foreign income taxes, including withholding taxes, actually paid by resident enterprises on non-China sourced income may be deducted from the total amount of EIT payable by the enterprise. A resident enterprise receiving dividends from a controlled foreign enterprise is also entitled to indirect foreign tax credits for the underlying taxes actually paid by the controlled foreign enterprise on the profits out of which dividends are distributed. A controlled foreign enterprise refers to a foreign enterprise in which the resident enterprise directly or indirectly holds at least 20 per cent share and that is within three tiers immediately below the resident enterprise.

The foreign tax credit is limited to the amount of tax payable on the non-China sourced income under the EITL. This limitation is calculated on a country-by-country basis. Excess foreign tax credits may be carried forward for five years.

VII TAXATION OF FUNDING STRUCTURES

i Thin capitalisation

Chinese thin capitalisation rules apply in respect of direct and indirect borrowings from related parties. The limit on the debt-to-equity ratio for financial enterprises is 5:1, while the limit for non-financial enterprises is 2:1.20 Excess interest expenses may not be deductible, but there is an exception that permits deduction if a borrower is able to prove that borrowings from a related lender are on arm's-length terms or that the actual tax burden of the domestic borrower is no higher than its domestic related lender.21

ii Deduction of finance costs

Reasonable financing costs incurred by an enterprise during its production and business operation activities may be deductible as interest expense; however, financing costs incurred by an enterprise for the acquisition, construction or creation of fixed assets and intangible assets or of inventories with a production cycle of more than 12 months, will be treated as capital expenditure and recorded as part of the cost of assets.22 Similarly, acquisition finance costs incurred in M&A transactions must be capitalised rather than deducted as interest expense.

iii Restrictions on payments

A resident enterprise can pay dividends only from accounting profits and cannot distribute excess cash arising, for example, from depreciation of fixed assets. Under applicable corporate rules, a WFOE must allocate at least 10 per cent of after-tax profits to its statutory reserve fund until the reserve fund reaches 50 per cent of the WFOE's registered capital. In the case of an EJV, its board of directors can decide the proportion to be allocated to the reserve fund.

iv Return of capital

Equity capital may be returned by means of reduction of registered capital. An FIE, however, can reduce capital only where it is necessary owing to a significant change in the scale of its production or operations. Regulatory approval used to be required for a capital reduction, and such approval was rarely granted in practice. Starting 1 October 2016, the regulatory approval for a capital reduction has been replaced by a recordal system for industries that are not subject to special administrative measures.

VIII ACQUISITION STRUCTURES, RESTRUCTURING AND EXIT CHARGES

i Acquisition

A foreign investor may directly acquire a Chinese company through a share acquisition or an asset acquisition, both of which are subject to government administration (either recordal or approval depending on the industry).

The seller in a share acquisition will be subject to EIT on capital gains at the applicable domestic rate. Each party is also subject to stamp duty at 0.05 per cent of the contract value of the acquisition agreement.

The taxation of an asset acquisition is more complicated. The foreign investor needs to establish a WFOE or an EJV as the buyer of the assets from the Chinese seller (or use an existing WFOE or EJV). The seller is subject to EIT on capital gains at its applicable rate, and may be subject to VAT, deed tax or land appreciation tax (or all of these) depending on the nature of the assets to be transferred.. Both parties must pay stamp duty at a rate of either 0.03 or 0.05 per cent, depending on the type of assets.

If a foreign investor acquires a Chinese company, assets owned by a Chinese 'place or establishment' or real properties located in China through an indirect share acquisition (i.e., by buying the shares of the target company's overseas holding company), the seller of the shares may be subject to EIT in China on capital gains based on China's indirect share transfer rules.23 An indirect transfer generally will be 'recharacterised' as a direct transfer if it lacks reasonable commercial purpose and does not fall within any safe harbours, and the buyer should be the withholding agent.

ii Reorganisation

The income tax treatment of corporate reorganisations is governed by a tax notice that was jointly issued by the MOF and the SAT on 30 April 2009 (Notice 59).24 There are six types of corporate reorganisation under Notice 59: change of legal form, debt restructuring, share acquisition, asset acquisition, merger and demerger.

To qualify for tax-free reorganisation, the transaction must satisfy a number of baseline requirements:

  1. a bona fide business purpose;
  2. transfer of at least 50 per cent of assets or shares;
  3. 12 months' continuity of business operations and ownership post-reorganisation; and
  4. at least 85 per cent equity consideration (no more than 15 per cent cash).

For cross-border share or asset acquisitions, the transferor must also have 100 per cent direct share control over the transferee, and the continuity of ownership post-reorganisation is extended to three years.

iii Exit

If a foreign investor exits an investment in China by selling its equity interest in a WFOE or an EJV, it will be subject to tax in China as the seller in an acquisition (see Section VIII.i).

The foreign investor may instead apply to the government authorities to dissolve and liquidate the Chinese company. The company will be subject to tax on the sale of its assets in liquidation as described above. The foreign investor will be subject to withholding tax at the rate applicable to dividends on liquidating distributions up to the amount of the company's distributable profits, and at the rate applicable to capital gains on the remainder of the liquidating distributions.

IX ANTI-AVOIDANCE AND OTHER RELEVANT LEGISLATION

i General anti-avoidance

General anti-avoidance rules (GAAR) were first introduced in Article 47 of the EITL, under which the Chinese tax authorities may recharacterise an arrangement that lacks reasonable commercial purpose, which means that a main purpose of the arrangement is to reduce, exempt or defer taxation. The Chinese tax authorities have been increasingly aggressive in using the GAAR to tax non-resident enterprises. On 12 December 2014, the SAT issued the GAAR procedural rules25 to provide procedural guidance on GAAR investigations.

ii Controlled foreign corporations (CFCs)

The profits of a CFC established in a low-tax jurisdiction will be included in the Chinese corporate shareholder's taxable income in the current year if the CFC does not distribute profits without reasonable commercial need. A low-tax jurisdiction refers to a jurisdiction where the effective income tax rate is lower than 12.5 per cent. An overseas company is treated as a CFC if each shareholder that is a Chinese resident enterprise or an individual that directly or indirectly holds at least 10 per cent of the voting shares of the foreign company, and those shareholders with 10 per cent or more of the voting shares jointly own more than 50 per cent of the shares; or the Chinese-resident enterprise or individual has actual control over the foreign company by virtue of shares, capital, business operations, or purchases and sales in any other situation.

iii Transfer pricing

The tax authorities may adjust the taxable income of an enterprise or its related party where the transactions between the related parties are not in accordance with the arm's-length principle. All enterprises in China that are taxed on an actual-profits basis have an obligation to report related-party transactions as part of their annual EIT filings each year. In addition, all enterprises in China must prepare contemporaneous documentation for related-party transactions, unless specifically exempted.

China's transfer pricing rules generally follow the OECD guidelines, but some departures from these guidelines are reflected in the China chapter of the United Nations Practical Manual on Transfer Pricing for Developing Countries.

iv Tax clearances and rulings

There is no general advance ruling procedure in China. Although one exists on paper for certain very large enterprises, it has not been implemented. In practice, however, certain companies, such as large state-owned enterprises and giant MNCs, occasionally may be able to obtain written replies from tax authorities confirming the tax treatment and tax consequences of a specific transaction.

X YEAR IN REVIEW

During the past year, there have been a number of significant tax developments in China.

i New anti-treaty shopping rules

On 3 February 2018, the SAT issued the Bulletin on Issues Relating to Beneficial Ownership in Tax Treaties (Bulletin 9). Bulletin 9 took effect on 1 April 2018 and replaced China's prior anti-treaty shopping rules under Circular 60126 and SAT Bulletin [2012] No. 30.

Bulletin 9 provides a three-step beneficial ownership analysis:

  1. Step 1 – safe harbour. Under the pre-existing rules, an income recipient that is both a tax resident and publicly listed in the treaty partner jurisdiction is treated as a per se beneficial owner. Bulletin 9 significantly expands the scope of per se beneficial owners.
  2. Step 2 – standard 'negative-factor' analysis. Bulletin 9 consolidated the seven negative factors listed by Circular 601 into five factors for determining whether an income recipient met the beneficial ownership test. The key change is the tightening of the anti-conduit factor.
  3. Step 3 – beneficial ownership attribution rule. The new beneficial ownership attribution rule will increase access to treaty-based dividend withholding tax rates for MNCs where the income recipient itself does not qualify for the safe harbour and does not possess enough local economic substance to pass the more general 'negative-factor' test. The beneficial ownership attribution test contains both a same-country scenario and a non-same country scenario.

ii New tax incentive for dividends reinvested into China

On 26 September 2018, China issued Notice 10227 to allow a non-resident enterprise to defer payment of withholding tax on dividends derived from a Chinese company if the non-resident enterprise directly reinvests the dividends into industries 'not prohibited' by the Chinese government. Notice 102 applies to dividend distributions on or after 1 January 2018. This incentive is a deferral, not an exemption, as the non-resident enterprise must pay the deferred withholding tax after it has recovered the reinvestment.

Direct reinvestment refers to equity investments in the form of a capital increase to an existing resident enterprise, the contribution of capital to a newly formed resident enterprise, and a share acquisition of a resident enterprise from an unrelated party. Aside from the requirement that the reinvestment must be in an industry not prohibited by the state, stringent fund flow requirements also apply. The cash dividends must be transferred directly from the distributing enterprise's bank account to the bank account of the invested enterprise (in the case of a capital contribution) or the transferor (in the case of acquiring a Chinese target enterprise).

XI OUTLOOK AND CONCLUSIONS

The Chinese tax authorities have become increasingly aggressive about tax enforcement and collection, particularly with regard to non-resident enterprises.

At the same time, it has been our experience in recent years that the Chinese tax authorities have become more open to discussing technical issues with taxpayers, and have taken measures to promote transparency and uniformity in tax administration and enforcement. Meanwhile, China is now encouraging foreign investment by providing a tax incentive for dividends reinvested into China.


Footnotes

1 Jon Eichelberger is a senior counsel and co-head of the China tax practice at Baker McKenzie.

2 Cai Shui [2008] No. 159.

3 Article 1 of the Enterprise Income Tax Law of the People's Republic of China, adopted by the National People's Congress on 16 March 2007 and effective from 1 January 2008.

4 Article 14 of Order of the State Council No. 584.

5 Article 7 of Guo Shui Fa [2010] No. 18.

6 Article 15 of Guo Shui Fa [2009] No. 157.

7 See hd.chinatax.gov.cn/consult.

8 The national hotline number is 12366.

9 Article 4 of the Implementing Regulations for the Enterprise Income Tax Law of the People's Republic of China, promulgated by the State Council on 6 December 2007 and effective from 1 January 2008 (Implementing Regulations).

10 Guo Shui Fa [2009] No. 82.

11 Article 3 of Guo Shui Fa [2010] No. 19.

12 Article 90 of the Implementing Regulations.

13 Articles 87 and 88 of the Implementing Regulations.

14 Article 27 of the EITL.

15 Article 4 of the EITL.

16 Cai Shui [2011] No. 76 and Cai Shui [2013] No. 5.

17 See www.chinatax.gov.cn/n810341/n810770/index.html, accessed on 14 November 2018.

18 SAT Bulletin [2015] No. 60.

19 SAT Bulletin [2018] No. 9.

20 Cai Shui [2008] No. 121.

21 Cai Shui [2008] No. 121.

22 Article 37 of the Implementing Regulations.

23 State Administration of Taxation's Bulletin on Several Issues of Enterprise Income Tax on Income Arising from Indirect Transfers of Property by Non-resident Enterprises, SAT Bulletin [2015] No. 7, dated 3 February 2015, effective as of the same date.

24 Notice on Certain Questions Regarding the Enterprise Income Tax Treatment of Enterprise Reorganisations, Cai Shui [2009] No. 59, effective from 1 January 2008.

25 SAT Decree No. 32.

26 Guo Shui Han [2009] No. 601.

27 Cai Shui [2018] No. 102.