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	CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON TAX ADMINISTRATION ISSUES CONCERNING PERMANENT REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES

	(No. 28 [2003] of the State Administration of Taxation promulgated on March 12, 2003, which shall come into force as of July 1, 2003)


SUBJECT : CIRCULAR OF THE STATE TAXATION ADMINISTRATION ON TAX ADMINISTRATION ISSUES CONCERNING PERMANENT REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES
ISSUING DEPARTMENT : STATE ADMINISTRATION OF TAXATION
ISSUE DATE : 03/12/2003
IMPLEMENT DATE : 07/01/2003
LENGTH : 776 words
TEXT :

In order to further regulate the tax administration of the permanent representative offices of foreign enterprises, and in light of the actual situation on the tax administration of the representative offices in recent years, we hereby give our notice as follows regarding some issues on the implementation of the Notice of the State Administration of Taxation concerning the Relevant Issues on Strengthening Tax Collection and Administration of Permanent Representative Offices of Foreign Enterprises (No. 165 [1996] of the State Administration of Taxation):

I. MAKING TAX REGISTRATION AND FILING TAX RETURNS BY THE REPRESENTATIVE OFFICES

The various permanent representative offices (hereinafter referred to representative offices) set up by foreign enterprises in China shall, when carrying out their activities in China, make tax registration in accordance with the relevant provisions in the tax laws of China, and report the information on their operations to the competent taxation department in time. For any of the representative offices exempted from tax prescribed in Paragraph 2 of Article 1 of No. 165 [1996] of the State Administration of Taxation and other provisions, it may, within one month after the end of the year, report the information on its annual business operation.

II. THE WAYS OF LEVYING TAX FROM THE REPRESENTATIVE OFFICES

All representative offices engaging in taxable business in accordance with Paragraph 1 of Article 1 of No. 165 [1996] of the State Taxation Administration shall calculate and pay the business tax and enterprise income tax in the following prescribed ways:

(1) The representative offices listed in Item 2 of Paragraph 1 of Article 1 of No. 165 [1996] of the State Administration of Taxation, engaging in consulting services in respect of commerce, law, tax, accounting or auditing, must set up and improve accounting books, correctly calculate the proceeds and the taxable income, and truthfully file tax returns;

(2) With respect to all the representative offices of service nature listed in Items 1, 4 and 5 of Paragraph 1 of Article 1 of No. 165 [1996] of the State Administration of Taxation, engaging in agency business or trade (including self-handled trade and agency trade), since their business is carried out upon the requirements of their head offices instead of directly concluding contracts or agreements with the served ones, their income from providing services is usually collected by their head offices. For such representative offices, their income shall be determined uniformly in a way of converting the expenses into income, upon which the tax shall be levied; and

(3) Any of the representative offices that engages in the taxable business other than the two types of representative offices provided for in Paragraph 1 of Article 1 of No. 165 [1996] of the State Administration of Taxation , may file regular tax returns to the local competent taxation organ on the basis of the business income actually obtained from its business activities (including the income collected by its head office); any office that has no business income in the present year may, within one month after the end of the year, report the information on its annual business operation.

III. TAX EXEMPTION FOR THE REPRESENTATIVE OFFICES OF FOREIGN GOVERNMENTS, INTERNATIONAL ORGANIZATIONS, NON-PROFIT INSTITUTIONS, AND NON-GOVERNMENT ORGANIZATIONS

For any representative office established by a foreign government, international organization, non-profit institution, non-government organization, etc. in China, it (or its head office, superior department, etc.) shall file the application for tax exemption to the local competent state taxation bureau or the local taxation bureau, and shall provide the proof on the nature of representative office, which is confirmed by the competent taxation bureau (including the local taxation administration at the locality of the head office) or government institution of its own country, and the application shall, after being approved by the local taxation organ, be submitted level by level to the State Administration of Taxation for approval.

IV. ADMINISTRATION AND INSPECTION OF REPRESENTATIVE OFFICES

(1) The relevant departments of all places shall strengthen the daily administration on the representative offices, set up contact relations with the department of industry and commerce and that of foreign trade and economic cooperation, and bring the representative offices into normal tax administration.

(2) The competent taxation organ shall carefully verify the tax return documents submitted by the representative offices, and shall, when necessary, carry out on-the-spot inspections. If the business operation of any representative office inspected is not in conformity with the information it has reported, it shall be punished in accordance with the relevant provisions in the Law of the People's Republic of China on the Administration of Tax Collection.

V. The present circular shall come into force on July 1, 2003. In case any previous provision is inconsistent with the present notice, the latter shall prevail.