China tax: unveiling the International Secondment Arrangement
By Tony Dong, Daisy Duan and Jiang Junlu
Over the years, it has been common practice for a multinational company (Home Entity) to dispatch expatriate employees (Secondees) to its affiliated enterprise in China (Host Entity) to hold senior management or other technical positions. Usually, the Home Entity and the Secondee will retain the employment relationship. The Home Entity will pay the salary and social security contribution for the Secondee in the home country, and will be reimbursed by the Host Entity. A Chinese tax clearance certificate is usually required when the Host Entity makes the reimbursement payment, so the Chinese tax authority needs to determine whether the
Home Entity constitutes an establishment/place of business (taxable presence) or a permanent establishment (PE) under the relevant tax treaty and thus be liable to Enterprise Income Tax (EIT) consequence in China.
The tax authorities and the Host Entity may have different views due to the ambiguity of tax regulations in the assessment of taxable presence or PE for cross-border secondment arrangements. As a result, the Host Entity often has difficulty in obtaining the tax clearance certificate and cannot remit the payment to its overseas Home Entity. The situation is likely to change from 1 June 2013.
On April 19, 2013, the State Administration of Taxation(SAT) issued the Announcement on Issues Concerning Enterprise Income Tax on Services Provided by Non-resident Enterprises through Seconding Personnel to China (Announcement 19)…
If you are registered and logged in to the site, click on the link below to read the rest of the King & Wood Mallesons briefing. If not, please register or sign in with your details below.
News from King & Wood Mallesons
News from The Lawyer
Briefings from King & Wood Mallesons
The assistant treasurer was quizzed recently about the timetable for his Future of Financial Advice changes.
High Court decides: liquidators of insolvent landlords can disclaim leases with the effect of extinguishing the tenant’s leasehold interest
In Willmott Growers Group Inc v Willmott Forests Limited, the majority of the High Court upheld the Victorian Court of Appeal’s conclusion that the liquidators of an insolvent landlord can disclaim a lease.
Analysis from The Lawyer
All-encompassing change is now a reality for the UK’s top 200 firms. How are they coping with the unprecedented upheaval? The Lawyer finds out