Corporate Income Tax for Trans- Regional Companies in China Subject to New Rules
1. What tax rules shall the companies with headquarters and branches established in different provinces in China follow according to Bulletin No.57 and Circular 40?
They shall calculate the CIT on a consolidated basis, allocating the tax liabilities based on certain methods for both provisional filing and final settlement.In particular, they must adhere to the following:(1) Headquarters must calculate the taxable income and tax payable of the company (including all its branches) on combined basis;(2) Headquarters and branches will be allocated with CIT liability, and must file and make provisional CIT filings on a monthly or quarterly basis to the relevant tax authorities at the place of registration;(3) After the end of a tax year, the final settlement will be handled by the corporate headquarters upon unified computation of the annual taxable income and tax payable, while refund of excess Cit prepaid or retrospective payment of underpaid CIT will be made to or paid by the headquarters and its branches in their place of registration.
2. What kind of companies shall obey the consolidated filing according the Bulletin No.57?
Consolidated filing is applicable for company headquarters and any of its branches considered to perform substantial functions of production and operation in a different province. For tax purposes, the lower level branches which should be regarded as part of its upper level branch, will not be required to make any CIT local filings.
3. How to calculate under CIT consolidated filing measure?
For each provisional CIT filing, 50% of the CIT liability remains with the headquarters, with the remaining 50% to be allocated to the branch offices. The 50% of provisional CIT allocated to the branch offices is further allocated among the branches based on three factors: operating revenue, employee remuneration and total assets, and each factor is given certain weight.