Question : Is there any change in the scope of income tax?

Answer :

The old PRC Tax Law for Foreign Investment Enterprise and Foreign Enterprise (the FIE tax law) set out two conditions for the determination of tax residence: (i) place of incorporation and (ii) place of management and control. Tax residence is subject to tax on worldwide income. Tax residents shall pay tax on worldwide income. The EIT Law retains the two conditions in the FIE tax law, but the place of incorporation and place of management and control is changed from “and” to “or”. Article 2 and Article 3of the EIT Law provide that the resident enterprise shall be the one that is incorporation in China OR if it is incorporated outside China, of which the effective place of management is located within China. All resident enterprises shall be taxed on worldwide income.

Other FAQs:

1. What is the implication of the change in tax rules?

2. What specific measures will be taken in this tax reform for the development of the small and medium size enterprise?

3. What major significance does the reform of VAT transformation will have on the perfection of the VAT system?

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