Have you enjoyed the tax deferral policy for reinvestment?
According to the Notice of Caishui No.102 of 2018 and the State Taxation Administration Public Notice No.53 of 2018,profits distributed to foreign-investors from residents of China,which are used for domestic direct investment,as long as the profits are not invested in prohibited projects or fields,can enjoy the deferral of withholding income tax policy for the time being.
Condition 1:Direct Investment
Foreign investors’direct investment with profit distribution specifically includes:
(1)Foreign investors use dividends to increase paid-in capital or capital reserves of resident enterprises of China;
(2)Foreign investors invest in new resident enterprises of China;
(3)Foreign investors make equity acquisitions and acquire equity of resident enterprises from unrelated parties;
(4)Other methods prescribed by the Ministry of Finance and the State Taxation Administration.
Condition 2:Actual Distribution
The profits distributed to foreign investors belong to equity investment income such as dividends and dividends formed by the actual distribution of the retained earnings realized by resident enterprises.
Condition 3:Direct Payment
If the profits of foreign investors for direct investment are paid in cash,the cash shall be transferred directly from the account of the profit distribution enterprises to the account of the invested enterprises,or the equity transferors,and shall not be transferred to other domestic or overseas accounts before the direct investment.
If the profits of foreign investors for direct investment are paid in the non-cash forms,such as physical objects or marketable securities,the ownership of the relevant assets shall be transferred directly from the profit distribution enterprises to the invested enterprises or the equity transferors and shall not be held on behalf of other enterprises or individuals or held temporarily before the direct investment
1、When the foreign investors apply for tax deferral policy for reinvestment treatment,the Information Report of Non-resident Enterprises on Deferred Payment of Withholding Income Tax should be submitted to the profit distribution enterprises.
2、When the foreign investors apply for retroactive enjoyment of tax deferral policy for reinvestment,the Information Report of Non-resident Enterprises on Deferred Payment of Withholding Income Tax and other materials for tax refund,such as relevant contracts and payment vouchers should be submitted to the competent tax authorities of the profit distribution enterprises.
3、When the foreign investors repay the tax,the Report on Withholding Enterprises Income Tax of the People’s Republic of China should be submitted to the competent tax authorities of the profit distribution enterprises.
The profit distribution enterprises should file the Report on Withholding Enterprise Income Tax of the People’s Republic of China,and the Information Report of Non-resident Enterprises on Deferred Payment of Withholding Income Tax to the competent tax authorities.
Retroactive Enjoyment of Tax Benefits
If the conditions are satisfied,the foreign investors may apply for refund within 3 years from the date of actual payment of tax.
If the foreign investors substantially take back the direct investment through equity transfer,repurchase or liquidation and enjoyed tax deferral policy for reinvestment,the foreign investors should declare and pay the deferred tax to the tax authorities according to the prescribed procedures within seven days after receiving the corresponding amount.
If the investors fail to report and pay the enterprise income tax in accordance with the relevant provisions due to the error in the information provided,the investors shall be held liable for deferred payment of tax.The deferred payment of tax shall be calculated from the date of payment of the relevant profits.