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Criteria of Place of Actual Management to an Enterprise Registered Overseas

07.01.11 00:53 Age: 8 yrs
Criteria of Place of Actual Management to an Enterprise Registered Overseas

Beijing, China –December 27, 2010


Whether the actual management structure of a foreign enterprise is located within China pertains not only to the income tax situation of an enterprise but also to the taxation interests and taxation sovereignty of our country. It is obviously necessary to establish criteria of the “place of actual management” in actual taxation practice.


The State Administration of Taxation specifies four criteria for Chinese-controlled enterprises registered overseas to be determined as tax resident enterprises of in China in the Notice of the State Administration of Taxation on Issues Related to the Determination of Chinese-Controlled Enterprises Registered Overseas as Resident Enterprises on the Basis of Their Actual Management (Guoshuifa [2009] 82):


(1) senior management or managerial department responsible for the implementation of daily production and operation and organization perform their functions mainly in China;

(2) financial decisions (such as borrowing, lending, financing and financial risk management) and human resources decisions (such as appointment, removal from office and remuneration) are made or need to be approved by structures or personnel in China;

(3) main assets, accounting books, official seals and board meeting and shareholders' meeting minutes are located or kept in China; and

(4) Half or more of its directors or senior executives with voting rights regularly reside in China.


The four criteria above were provided by the State Administration of Taxation as supplements to the three requisites for the determination of “actual management structures” specified in the Interpretation of Regulations on the Implementation of the Enterprise Income Tax Law of the People's Republic of China. Chinese-controlled enterprises registered overseas that meet all the four above criteria simultaneously, even though registered overseas, should pay enterprise income taxes as tax resident enterprises of China on their incomes from sources within and outside China, where the actual management structures of such enterprises are determined by Chinese taxation authorities as located within China.


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