1China Tax & Investment Express

China Tax CenterChina Tax & Investment Express

China Tax & Investment Express (CTIE)* brings you the latest tax and business announcements on a weekly basis. CTIE provides a synopsis of each announcement including a link that leads you to the full content of the announcement (in Chinese). Please feel free to contact your EY client service professionals for further assistance if you find the announcements have an impact on your business operations.

CTIE does not replace our China Tax & Investment News* which will continue to be prepared and distributed to provide more in-depth analyses of tax and business developments in China.*If you wish to access the previous issues of CTIE and China Tax & Investment News, please contact us.

Tax circulars

► Public notice (PN) regarding matters related to tax identification number of natural persons (SAT PN [2018] No. 59)

► PN regarding the “Operational Measures on the Specific Additional Deductions for Individual Income Tax (IIT) (Trial)” (SAT PN [2018] No. 60)

► PN regarding the “Administrative Measures on the Withholding and Declaration of IIT (Trial)” (SAT PN [2018] No. 61)

► PN regarding issues related to taxpayers’ self-declaration of IIT (SAT PN [2018] No. 62)

► Notice regarding transitional matters related to preferential IIT policies after the revision of the IIT Law (Caishui [2018] No. 164)

Synopsis

Along with the promulgation of the Implementation Regulations of the IIT Law of the People’s Republic of China (PRC) (hereinafter referred to as the “Implementation Regulations”) and the Interim Measures of Specific Additional Tax Deductions (hereinafter referred to as the “Interim Measures”), the Ministry of Finance (MOF) and State Administration of Taxation (SAT) released a series of circulars to further address the details from implementation perspectives. (Please refer to CTIE2018050 for details of the Implementation Regulations and Interim Measures.)

Issue No. 20190014 January 2018

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Key features are as follows:

SAT PN [2018] No. 59 (“PN 59”)

On 17 December 2018, the SAT released PN 59 regarding matters related to tax identification number (i.e., Tax ID) of natural persons:

► Natural persons as taxpayers are required to provide their tax identification numbers to tax authorities or their withholding agents for tax filings, tax payments, tax refunds, issuance of tax invoices, making inquiries and other tax related matters.

► The tax identification numbers shall be the identity card (ID card) numbers for PRC citizens while the tax identification numbers for non-PRC citizens shall be granted by tax authorities.

► Taxpayers should show their valid tax IDs or ID cards for submission of their basic information to tax authorities or withholding agents for their first filing or application of tax related matters.

SAT PN [2018] No. 60 (“PN 60”)

On 21 December 2018, the SAT released the Operational Measures on the Specific Additional Deductions for IIT (Trial) via PN 60.

How to claim the relevant tax deductions?

How to claim the relevant tax deductions?

Items Arrangements for the tax deduction Information to be filed/ Documents to be maintained1

Children education

► Tax deduction for pre-school education should start to be claimed in the month the child turns three years old. It can continue to be claimed up until the child enters primary school.

► Tax deduction for academic education should start to be claimed in the month when the child becomes a full-time student until the month he/she graduates or ceases to be a full-time student .

Information to be filed includes:

► Names of the taxpayer’s spouse and child(ren)

► Their ID card numbers

► The child(ren)’s education stage and when it begins and ends

► The school(s) the child(ren) attends (attend)

► Proportion of the tax deduction to be taken by the spouses

Where the child(ren) is (are) studying overseas, the offer(s) from the school, and the student visa(s), etc. are required to be maintained for future reference.

Continued education

► Tax deduction for qualifying continued education (academic education) should start to be claimed in the month the taxpayer enters the school (within the territory of China) until the month the academic education ends. For one degree/diploma the tax deduction should not be taken for more than 48 months.

► Tax deductions for qualifying continued education for skilled personnel/professional and technical personnel can be claimed by the taxpayer in the year the relevant certification is obtained.

Information to be filed includes:

► For continued education (academic education), the period when the continued education begins and ends, plus the education stage is required.

► For qualifying continued education for skilled personnel/professional and technical personnel, the certificate obtained, its reference number, the authority and time of the issuance should be provided.

The taxpayers should maintain the relevant certificates, etc. for future reference.

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Items(cont’d) Arrangements for the tax deduction(cont’d)

Information to be filed/ Documents to be maintained1 (cont’d)

Housing loan interest

The tax deductions should start to be claimed in the month the agreed repayment period begins until the month the mortgage is paid-up or the termination of the mortgage agreement. This type of tax deduction cannot be taken for more than 240 months.

Information to be filed includes:

► Information related to the ownership of the property, its address

► Type of mortgage chosen, the lending bank, the reference number of the loan agreement, terms of the loan agreement and first repayment date.

► Name, ID card number of the taxpayer’s spouse (if any)

The taxpayers should maintain the loan agreement and bank slips for repayment, etc. for future references.

Housing rental The tax deduction should start to be claimed in the month the lease agreement begins until the month the lease agreement is terminated.

Information to be filed includes:

► Taxpayer’s main working city, the address of its leased apartment

► Name and ID card number/tax ID number of the lessor

► The term of the lease

► Name, ID card number of the taxpayer’s spouse (if any)

The taxpayers should maintain the lease agreement, etc. for future reference.

Caring for elderly

The tax deduction should start to be claimed in the month the qualifying elderly person/people turns (turn) 60 until the month the obligation to support the elderly ceases.

Information to be filed includes:

► Whether the taxpayer has any siblings

► Applicable tax deduction amount

► Name(s) and ID card number(s) of the qualifying elderly person/people and the relationships between the elderly person/people and the taxpayer

► If a tax deduction is being shared between the taxpayer and his/her sibling(s), the name(s) and ID card number(s) of his/her siblings and the way of apportionment

The taxpayers should maintain written agreements documenting the agreed or appointed apportionment method, etc. for future reference.

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1 Taxpayers may transmit the relevant information via remote devices or do so by completing the Information Form (i.e., attachment of PN 60) for Tax Deduction and submit the same to the withholding agents. The required documents and the Information Form for Tax Deductions are to be maintained for five years after the annual IIT filing. The withholding agents are also required to maintain the Information Form for Tax Deductions for five years starting from the year following the relevant taxes are withheld.

When to claim the relevant tax deductions?

Where the taxpayers meet the criteria for claiming tax deductions for children’s education, continued education, housing loan interests, housing rent and caring for the elderly, the taxpayers may provide the relevant information to their withholding agents. The withholding agents shall claim the tax deductions for them while the taxes are withheld. Alternatively, the taxpayers may claim the relevant tax deductions during the annual IIT filing from 1 March to 30 June of the following year.

In case a taxpayer collects wages and salaries from two or more employers and would be like to have his/her withholding agents to claim the tax deductions on his/her behalf, for each single tax deduction, he/she may only choose one of the withholding agents to claim during a tax year.

Taxpayers that only received personal service fee, author’s remuneration or royalty during the year may claim tax deductions during the annual IIT filing to be filed within the period from 1 March to 30 June of the following year.

Taxpayers who are eligible to claim the medical expenses for serious illness should claim the deduction during the annual IIT filing from 1 March to 30 June of the following year.

Of note, the taxpayers themselves shall be responsible for the authenticity, accuracy, and completeness of the information/documentation regarding the tax deductions submitted by them.

SAT PN [2018] No. 61 (“PN 61”)

On 21 December 2018, the SAT released PN 61 (“PN 61”) regarding the Administrative Measures on the Withholding and Declaration of IIT (Trial). PN 61 mainly prescribes the provisional IIT withholding methods for PRC tax residents (居民个人预扣预缴方法) and IIT withholding methods for non-residents on income from wages and salaries, remuneration for personal services, authors’ remuneration and royalties received as PRC-sourced income that were also detailed in SAT PN [2018] No. 56 (“PN 56”, i.e., PN regarding clarifications on transitional matters concerning tax collection and administration for fully implementing the new IIT Law). (Please refer to CTIE2018050 for details of PN 56.)

Items(cont’d) Arrangements for the tax deduction(cont’d)

Information to be filed/ Documents to be maintained1 (cont’d)

Medical expenses for serious illness

This deduction shall be taken in the year the actual medical expenses are incurred (as recorded in the health care information system).

Information to be filed includes:

► The name and ID card number of the patient

► The relationship between the patient and the taxpayer

► The total amount of the medical expenses relevant to the basic medical insurance and the portion of medical expenses incurred within the National Medical Reimbursement List to be borne by the individual.

The taxpayers should maintain the relevant original and photocopies of invoices that show the medical care charges and reimbursement paid by the social security system, or the list of annual medical care charges issued by the medical security authorities, etc.

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Apart from the above, PN 61 also specifies the following:

► Withholding agents should provide information to taxpayers regarding their IIT taxable income and IIT withheld within a prescribed time frame.

► Where withholding agents have found out that taxpayers provided incorrect information for tax deductions, the withholding agents should require the taxpayers to provide proper information or report to the tax authorities if the taxpayers failed to cooperate.

► The information regarding tax deductions provided by the taxpayers should be maintained properly by the withholding agents. The withholding agents should keep the Information Forms for Tax Deductions submitted by the taxpayers as confidential documents.

► Same as that of the prevailing regulations, withholding agents shall be rewarded with a 2% of handling fee of the IIT withheld (excluding any underpaid IIT amount clawed back or any order to be made up by tax authorities).

► The withholding agents should notify the tax authorities in a timely manner if the taxpayers obstruct the withholding agents from fulfilling their withholding obligations.

SAT PN [2018] No. 62 (“PN 62”)

On 21 December 2018, the SAT released PN 62 (“PN 62”) to specify the circumstances where the taxpayers shall be required to file IIT by themselves.

Tax filing for consolidated income

A taxpayer should perform annual IIT filing on his/her own if one of the following circumstances applies:

► The taxpayer receives consolidated income from two or more sources and the balance of his/her annual consolidated income after specific deductions exceed RMB60,000.

► The taxpayer receives one or more types of income from “labor services,” “author’s remuneration” and any “royalty” and the balance of his/her annual consolidated income after the 20% expenses and specific deductions exceed RMB60,000.

► The taxpayer’s IIT withheld during the year is lower than the IIT payable calculated by his/her annual consolidated income.

► The taxpayer applies for tax refunds.

The annual IIT filing for consolidated income should be completed in the period from 1 March to 30 June of the following year.

Tax filing for business income

A taxpayer should file IIT on his/her own for their business income if one of the following circumstances applies:

► The taxpayer is a self-employed industrial and commercial household deriving income from manufacturing and business activities, an investor of a sole proprietorship or an individual partner of a partnership deriving manufacturing and business income from a sole proprietorship or a partnership registered in China.

► The taxpayer has derived income from running a school, or provision of medical, consultation or other services.

► The taxpayer has derived income from contract operating, subcontracting, subleasing of enterprises or public institutions.

► The taxpayer has derived income from other manufacturing and business income.

For the abovementioned circumstances, the taxpayer should complete provisional IIT filing by submitting the IIT Return for Business Income (Form A) within 15 days after the end of a month or a quarter. In addition, the taxpayer should complete annual IIT filing by submitting the IIT Return for Business Income (Form B) on or before 31 March of the following year. In case the taxpayer derived business income from two or more locations, the taxpayer should choose a supervising tax authority at one of the locations to complete the annual IIT filing by submitting the IIT Return for Business Income (Form C).

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Tax filing for income derived overseas

According to PN 62, where a resident taxpayer derives income overseas, the taxpayer should complete the tax filing within the period from 1 March to 30 June of the following year with the supervising tax authority as prescribed in PN 61. The details of the tax filing for income derived overseas shall be further stipulated in a separate rule.

Tax filing for resident individuals who plan to de-register their PRC household registrations

Where a resident individual would like to migrate overseas and de-register his/her PRC household registration, the individual is required to complete a tax filing before departure:

► Where the taxpayer receives consolidated income and business income in the year he/she applies for the de-registration, the taxpayer shall be required to perform annual IIT filing on his/her consolidated income and business income and submit the relevant tax returns. The taxpayer would be required to complete the annual IIT filing for consolidated income and business income for the preceding year if it has not been done.

► Where the taxpayer receives interest, dividends, bonuses, income derived from leasing of property or incidental income in the year he/she applies for the de-registration, the taxpayer should submit the tax clearances for the abovementioned income.

► Where a taxpayer has any underpaid IIT or IIT to be paid on installments, he/she should settle the underpayment before the de-registration.

► Where a taxpayer would like to utilize the applicable specific additional deductions and other tax deductions that are available, he/she should submit the information form to the tax authority.

Caishui [2018] No. 164 (“Circular 164”)

On 27 December 2018, the MOF and SAT jointly released Circular 164 to clarify certain transition matters related to preferential IIT policies after the revision of the IIT Law.

Policies for the annual bonus, deferred income from annual performance salary and tenure award for responsible persons of central enterprises

Annual bonus

► Where a resident taxpayer receives an annual bonus that meets the criteria as prescribed in Guoshuifa[2005] No. 9 (“Circular 9”, i.e., Notice regarding the adjustment of IIT treatments for annual bonus), the relevant amount would not need to be consolidated into salaries and wages by 31 December 2021. Instead, the current method of dividing the amount by 12 to determine the applicable tax rates (by referencing to the monthly tax table for consolidated income as attached in Circular 164) still applies. As an alternative, the resident individual could also choose to combine his/her annual bonus into the consolidated income for IIT purposes.

► Annual bonuses received by any resident individual on and after 1 January 2022 (i.e., after the transition period) shall be combined into his/her consolidated income for IIT purposes.

Deferred income from annual performance salary and tenure award for responsible persons of central enterprises

► Where a responsible person of a central enterprise receives deferred income from annual performance salary and any tenure award that meets the criteria as prescribed in Guoshuifa [2007] No. 118 (“Circular 118”) by 31 December 2021, the relevant income may be referenced to the treatment for annual bonuses as described above. The IIT treatment for such income derived after 1 January 2022 shall be stipulated in a separate rule.

Stock options for listed companies

► Where a resident individual receives equity income such as stock options, stock appreciation rights, restricted stocks, stock awards, etc. that meet the criteria as prescribed in existing circulars, such as Caishui [2005] No. 35 (“Circular 35”, i.e., Notice regarding the IIT treatments for income derived from stock options) etc., the IIT payable for such income received by 31 December 2021 shall be calculated as follows instead of being combined into the consolidated income:

IIT payable = Equity income x Applicable tax rate – Quick reckoning deduction

The applicable tax rates shall be referenced to the tax table for consolidated income.

Where a resident individual receives two or more sources of equity income during a tax year, such income shall be combined for the calculation of IIT payable using the formula above. The IIT treatment for such income derived after January 2022 shall be stipulated in a separate rule.

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Commission income derived by insurance agents and securities brokers

► Commission income derived by insurance agents and securities brokers shall be categorized as remuneration for personal service. Taxable income shall be the balance of commission income excluding value-added tax after 20% deductible expenses, business expenses and additional taxes. The taxable income shall be combined into the consolidated income for IIT purposes. Business expenses incurred by insurance agents and securities are computed at 25% of the balance of commission income excluding VAT minus 20% deductible expenses.

► Where withholding agents pay commission to insurance agents and securities brokers, the provisional withholding method shall be adopted according to PN 61.

Enterprise annuity and occupational annuity

Enterprise annuity and occupational annuity received by an individual who reaches his/her statutory retirement age shall not be combined with consolidated income for IIT purposes, instead, the IIT payable will be calculated separately:

► Where such income is withdrawn per month, the monthly tax table shall be adopted for IIT calculation.

► Where such income is withdrawn per quarter, the quarterly income should be apportioned to each month and IIT should be calculated according to the monthly tax table.

► Where such income is withdrawn per annum, IIT should be calculated by using the annual tax table for consolidated income.

Severance payment upon termination of employment, early retirement and internal retirement

► Severance payment for termination of employment within three times of the local average annual salary of the preceding year is exempt from IIT. The excess amount shall be subject to IIT by applying to the tax table for consolidated income instead of being combined to the consolidated income for IIT purposes.

► Severance payment for early retirement shall be apportioned according to the actual number of early retirement years between the year of early retirement and the year of statutory retirement to determine the applicable tax rates by referencing to the tax table for consolidated income. The formula is as follows:

Tax liability = {[(Severance payment ÷ Actual number of early retirement years) – Standard deduction] ×Applicable tax rate – Quick reckoning deduction} × Actual number of early retirement years

► The IIT treatment for severance payment for early retirement due to internal arrangements (内部退养) shall still be referenced to existing regulations.

Tax-exempt benefits for foreign nationals, and citizens of Hong Kong, Macau and Taiwan (hereinafter referred to “overseas nationals”)

From 1 January 2019 to 31 December 2021, overseas nationals who qualify as PRC tax residents may choose to enjoy applicable specific additional deductions (i.e., children education, continued education, etc.) or the existing tax-exempt benefits including subsidies of housing, language training and children’s education. However, the applicable specific additional deductions and the existing tax-exempt benefits should not be duplicated. An overseas national may select either specific additional deductions or tax-exempt benefits. Once selected, it cannot be changed within a tax year. From 1 January 2022, overseas nationals shall no longer be applicable to the tax-exempt benefits.

Selling houses to employees at lower prices

If a company sells residential properties to its employee at a price lower than the actual purchase price or actual construction costs, the difference shall be considered as income of the employee and should be divided by 12 to determine the applicable tax rates (by referencing to the monthly tax table for consolidated income as attached in Circular 164) instead of being combined with the consolidated income.

IIT payable = The difference × Applicable tax rate – Quick reckoning deduction

Except for the above transition arrangement as mentioned in Circular 164, other preferential IIT treatments shall continue to be valid. Circular 164 also lists certain provisions of previous issued tax circulars to be revoked by the effectiveness of Circular 164.

PNs 59, 60, 61, 62 and Circular 164 all became effective on 1 January 2019 along with the effectiveness of the new PRC IIT Law and its implementation regulations.

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We have issued a series of Human Resource & Tax Alerts regarding the new PRC IIT Law, its implementation regulations and the relevant IIT circulars; please click the following links for details:

You can click this link to access the full content of PN 59:http://www.chinatax.gov.cn/n810341/n810755/c3960494/content.html

You can click this link to access the full content of PN 60:http://www.chinatax.gov.cn/n810341/n810755/c3961713/content.html

You can click this link to access the full content of PN 61:http://www.chinatax.gov.cn/n810341/n810755/c3960540/content.html

You can click this link to access the full content of PN 62:http://www.chinatax.gov.cn/n810341/n810755/c3962204/content.html

You can click this link to access the full content of Circular 164:http://www.chinatax.gov.cn/n810341/n810755/c3978994/content.html

You can click this link to access the full content of the Implementation Regulations:http://www.chinatax.gov.cn/n810341/n810755/c3960202/content.html

You can click this link to access the full content of the Measures:http://www.chinatax.gov.cn/n810341/n810755/c3960435/content.html

You can click this link to access the full content of the PRC IIT Law:http://www.gov.cn/xinwen/2018-09/01/content_5318233.htm

You can click this link to access the full content of Circular 9:http://www.chinatax.gov.cn/n810341/n810765/n812188/n812950/c1201370/content.html

You can click this link to access the full content of Circular 118:http://www.waizi.org.cn/tax/51734.html

You can click this link to access the full content of Circular 35:http://www.mof.gov.cn/zhengwuxinxi/caizhengwengao/caizhengbuwengao2005/caizhengbuwengao20056/200805/t20080525_42773.html

You can click this link to access the recently released HR & Tax Alert (English version):https://www.ey.com/cn/en/services/people-advisory-services/human-resource-and-tax-alert

► PN regarding the amendments to annual Corporate Income Tax (CIT) return forms (Type A, 2017 Version) and the instructions (SAT PN [2018] No. 57)

► PN regarding measures for simplifying the annual CIT filing of qualified small and micro-sized enterprises (SMEs) (SAT PN [2018] No. 58)

Synopsis

On 17 December 2018, the SAT released SAT PN [2018] No. 57 (“PN 57”) to amend the 2017 version of annual CIT returns for type A enterprises (i.e., PRC resident enterprises that are subject to CIT on an actual basis) which was released via SAT PN [2017] No. 54 (“PN 54”, i.e., PN regarding the issuance of annual CIT return forms).

The summary of the schedules to be completed (i.e., 企业所得税年度纳税申报表填报表单) as well as 16 schedules and explanatory notes are updated. Among these, the following four schedules are revised significantly:

► Schedule A000000 is renamed as “enterprise’ basic information form for annual CIT filing” instead of the previous “enterprise’ basic information form.” The updated Schedule A000000 incorporated certain information that previously was to be filed in other schedules to further integrate information.

► Schedule A105090 (i.e., the schedule for tax deduction and adjustments related to asset losses) is updated according to SAT PN [2018] No. 15 (“PN 15”, i.e., PN regarding the maintenance of documentations related to deduction of asset losses for CIT purpose). (Please refer to CTIE2018016 for details of PN 15.)

► Schedules A106000 and A108020 (i.e., the schedule for utilization of tax losses and schedule for utilization of tax losses incurred by overseas branches) are updated according to Caishui [2018] No. 76 (“Circular 76”, i.e., Notice regarding extension of the loss carry-forward period of High-and-New Technology Enterprises (HNTEs) and Technology-based Small and Medium-sized Enterprises (TSME)) which allows HNTEs and TSMEs to carry forward their tax losses up to 10 years from 1 January 2018. (Please refer to CTIE2018028 for details of Circular 76.)

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On the same day of the promulgation of PN 57, the SAT also released SAT PN [2018] No. 58 (“PN 58”) to simplify the annual CIT filing for qualified SMEs that meet the criteria as prescribed in Caishui [2018] No. 77 (“Circular 77”, i.e., Notice regarding the expansion of the scope of qualified SMEs eligible for preferential CIT treatments) as well as the CIT Law and its implementation rules. PN 58 clarifies the required fields, optional fields as well as certain fields and schedules of the annual CIT filing package that are not required to be completed by qualified SMEs. (Please refer to CTIE2017023 for details of Circular 77.)

Both PN 57 and PN 58 shall apply to the 2018 annual CIT filing and onwards. Any tax-related matters of the previous years shall be referenced to the relevant regulations valid for that period instead of making adjustments according to PN 57 or PN 58. Taxpayers should be aware of the new changes to the 2018 annual CIT filing and stay alert to further notice to be released by the local supervising tax authorities.

You can click this link to access the full content of PN 57:http://www.chinatax.gov.cn/n810341/n810755/c3956717/content.html

You can click this link to access the full content of SAT’s official interpretation regarding PN 57:http://www.chinatax.gov.cn/n810341/n810760/c3955911/content.html

You can click this link to access the full content of PN 58:http://www.chinatax.gov.cn/n810341/n810755/c3956705/content.html

You can click this link to access the full content of SAT’s official interpretation regarding PN 58:http://www.chinatax.gov.cn/n810341/n810760/c3955965/content.html

You can click this link to access the full content of PN 54:http://www.chinatax.gov.cn/n810341/n810755/c3029401/content.html

You can click this link to access the full content of PN 15:http://www.chinatax.gov.cn/n810341/n810755/c3398321/content.html

You can click this link to access the full content of Circular 76:http://www.mof.gov.cn/mofhome/shuizhengsi/zhengwuxinxi/zhengcefabu/201807/t20180713_2960452.html

You can click this link to access the full content of Circular 77:http://szs.mof.gov.cn/zhengwuxinxi/zhengcefabu/201807/t20180713_2960459.html

► Notice regarding the plan of adjusting provisional tariff rates for import & export of 2019 (Shuiweihui[2018] No. 65)

Synopsis

To promote the high-quality economic development and steady growth of import and export trading, the Customs Tariff Commission of the State Council released Shuiweihui [2018] No. 65 (“Circular 65”) on 22 December 2018.

According to Circular 65, from 1 January 2019, 706 import commodities shall be subject to temporary Customs Duty (CD) rates. From 1 July 2019, temporary CD rates for 14 import information technology products shall be removed, and the application scope of one item subject to temporary CD rates shall be narrowed down (details are shown in attachment I of Circular 65). Eight items, including wheat, shall still be under the administration of tariff quota. Importation of cotton outside quota shall be subject to Sliding Scale Duty.

In addition, 108 export commodities shall continue to be subject to export tariff or temporary CD rates, and the temporary CD rates for 94 export items shall be removed.

Circular 65 became effective on 1 January 2019.

You can click this link to access the full content of Circular 65:http://www.gov.cn/xinwen/2018-12/24/content_5351532.htm

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► Notice regarding matters related to the implementation of tax policies for technology business incubators, university science parks and maker spaces (Guokehuozi [2018] No. 140)

Synopsis

In order to implement relevant requirements of Caishui [2018] No. 120 (“Circular 120”, i.e., Notice regarding tax policies for technology business incubators, university science parks and maker spaces) and ensure that preferential policies are implemented in place, the Torch High-and-New Technology Industry Development Center (“Torch Center”), Ministry of Science and Technology released Guokehuozi [2018] No. 140 (“Circular 140”, i.e., Notice regarding matters related to the implementation of tax policies for technology business incubators, university science parks and maker spaces) on 14 December 2018.

Key features of Circular 140 are as follow:

Work process

Organizations that apply for tax exemption may log in to the “Information Service System of Technology Business Incubators, University Science Parks and Maker Spaces” (“Information Service System”, i.e., http://www.chinatorch.gov.cn) to provide basic information for tax exemption purpose.

► A list of qualified national and provincial technology business incubators, university science parks and national documented maker spaces shall be confirmed by the Torch Center of the Ministry of Science and Technology before being uniformly imported into the information service system.

► National and provincial technology business incubators, university science parks and national documented maker spaces to apply for tax exemption shall log in to the information service system, enter relevant information and submit to the provincial science and technology authorities for review.

► Provincial science and technology authorities shall review and confirm the authenticity and completeness of the information submitted by the local applicant organizations for tax exemption.

► Applicant organizations that get reviewed and confirmed by local provincial science and technology authorities may go to the tax authorities for handling tax exemption.

Work arrangements

► National technology business incubators, national university science parks and national documented maker spaces:

► To enjoy the tax preferential policy from 1 January 2019, national technology business incubators, national university science parks and national documented maker spaces that have been recognized before 31 December 2018 and apply for tax exemption shall log in to the information service system to register and improve the relevant information, and get reviewed and confirmed by the provincial science and technology authorities by 31 December 2018.

► Upon the official publication, the Torch Center of the Ministry of Science and Technology will import the list of the national technology business incubators, national university science parks and national documented maker spaces that are recognized after 1 January 2019 into the information service system.

► Provincial technology business incubators and university science parks:

► For the list of provincial technology business incubators and university science parks recognized before 31 December 2018, the provincial science and technology authorities will re-approve and officially release the list based on the re-assessment results in the region (excluding those that were upgraded to national technology business incubators and university science parks), and submit to the Torch Center of the Ministry of Science and Technology. The Torch Center will enter the information service system after the review.

► For the provincial technology business incubators and university science parks recognized after 1 January 2019, the provincial science and technology authorities will submit the officially released paper and electronic versions to the Torch Center of the Ministry of Science and Technology in a timely manner. The Torch Center will enter the information service system after the review.

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Material to submit

► Administrative measures, assessment criteria and conditions for provincial technology business incubators and university science parks, including paper and electronic versions.

► Paper and electronic versions of the official documents and lists (including the operating entity’s name and organization code) of the re-approved provincial technology business incubators and university science parks.

Circular 140 also lists out the contacts and mailing address of the Torch Center for applicants references.

You can click this link to access the full content of Circular 140:http://www.chinatorch.gov.cn/fhq/gztz/201812/d06229baeb0b452785dab03ef2d81615.shtml

You can click this link to access the full content of Circular 120:http://www.chinatax.gov.cn/n810341/n810755/c3855604/content.html

► Notice regarding the “Negative List for Market Access (2018 Version)” (Fagaijingti [2016] No. 442)

Synopsis

On 2 March 2016, the National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) jointly released Fagaijingti [2016] No. 442 (“Circular 442”) to announce the Draft Negative List for Market Admission (Pilot Version) which was implemented in a few locations on a pilot basis. (Please refer to CTIE2016015 for details of Circular 442.)

On 25 December 2018, the NDRC and MOFCOM jointly released Negative List for Market Access (2018 Version) (hereinafter referred to as the “2018 Negative List”).

The 2018 Negative List consists of three parts:

► The explanatory notes for the Negative List which clarifies the boundaries of application.

► The contents of the Negative List which includes the category of prohibited items (four items) and category of permitted items (147 items).

► The four prohibited items refer to the prohibited items for market access according to the laws and regulations, prohibited items for market access according to the laws and regulations as prescribed in the Catalog of Industrial Structure Adjustments and Guidance, prohibited items for finance-related business activities, and prohibited items for internet-related business activities. For application for market access in these prohibited items shall be rejected by the relevant government authorities.

► There are 147 permitted items in total. For investments covered in the permitted items, the market participants shall lodge application and the relevant government authorities shall approve or deny the application according to the relevant laws and regulations, or the market participants shall access the market according to the relevant market access conditions and access way.

► Two attachments setting out all detailed rules related to the prohibited items and seven amendments made to the Catalog of Industrial Structure Adjustments and Guidance (2011 edition).

Compared to the Pilot Version, the total items and detailed administrative measures in the 2018 Negative List are reduced by 177 items and 288 measures.

It is worthy to note that the NDRC and MOFCOM jointly released the Scope of foreign investments subject to special access control (Negative List) (2018 version) via NDRC/MOFCOM [2018] No. 18 on 28 June 2018, i.e., the 2018 Negative List for Foreign investments. It is important to note that the 2018 Negative List for Foreign investments is solely for the market access of foreign investors while the 2018 Negative list shall be applicable for both domestic and foreign investors. In other words, for sectors not covered in the 2018 Negative List for Foreign investments, a unified market access principle shall be adopted for both domestic and foreign enterprises. (Please refer to CTIE2018026 for details of the 2018 Negative List for Foreign investments.)

Business circular

12China Tax & Investment Express

We are going to issue a newsletter to discuss the 2018 Negative List in detail. Please stay tune.

You can click this link to access the full content of the 2018 Negative List:http://tgs.ndrc.gov.cn/fmqd/qdsmjqw/

You can click this link to access the full content of Circular 442:http://www.ndrc.gov.cn/zcfb/zcfbtz/201604/t20160411_797874.html

You can click this link to access the full content of the 2018 Negative List for Foreign Investments:http://www.ndrc.gov.cn/zcfb/zcfbl/201806/t20180628_890730.html

► Notice regarding a catalog of energy saving & new energy vehicles eligible for the preferential Vehicle and Vessel Tax policies (the sixth batch (MIIT/SAT PN [2018] No. 70)http://www.miit.gov.cn/n1146295/n1652858/n1652930/n4509607/c6560360/content.html

► Notice regarding the launch of a new version of business license (Guoshijianzhu [2018] No. 253)http://www.gov.cn/xinwen/2018-12/25/content_5351889.htm

► Notice regarding matters related to strengthening the administration of deposit reserves (Yinfa [2018] No. 297）http://www.pbc.gov.cn/zhengwugongkai/127924/128038/128109/3721224/index.html

► Notice regarding the “Rules on the Conversion of Cultural Undertaking Institutions to Enterprises during the Course of Cultural System Reform” and the “Rules on further Supporting the Development of Cultural Enterprises” (Guobanfa [2018] No. 124)http://www.gov.cn/zhengce/content/2018-12/25/content_5352010.htm

► Notice regarding the “Memorandum of Understanding on Joint Disciplinary of Entities in the Accounting Field Engaging in Illegal Activities/Acting in Bad Faith” (Fagaicaijin [2018] No. 1777)http://www.ndrc.gov.cn/gzdt/201812/t20181225_923485.html

► Notice regarding the “Memorandum of Understanding on Joint Disciplinary of Personnel in the Field of Statistics Acting in Bad Faith (revised version)” (Fagaicaijin [2018] No. 1862)www.ndrc.gov.cn/gzdt/201812/t20181225_923477.html

► PN regarding matters related to the website change for checking exported goods’ certificates of origin (GAC PN [2018] No. 205)http://www.customs.gov.cn/customs/302249/302266/302269/2153131/index.html

Other tax, business and customs related circulars recently announced by central government authorities:

13China Tax & Investment Express

Contact usFor more information, please contact your usual EY contact or one of the following of EY’s China tax leaders.

• Martin Ngai (Beijing) +86 10 5815 3231 martin.ngai@cn.ey.com

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+86 10 5815 3226samuel.yan@cn.ey.com

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• Jesse Lv (Transaction Tax)+86 21 2228 2798Jesse.lv@cn.ey.com

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Author – China Tax Center

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• Lucy Wang (Qingdao) +86 10 5815 3809lucy-c.wang@cn.ey.com

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Sector Leaders

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• Vickie Tan (Life Science)+86 21 2228 2648vickie.tan@cn.ey.com

• Gary Chan (Real Estate) +86 10 5815 2816 gary.chan@cn.ey.com

• Audrie Xia (Consumer Products)+86 21 2228 2886audrie.xia@cn.ey.com

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• Andrew Choy (International Tax)+86 10 5815 3230andrew.choy@cn.ey.com

14China Tax & Investment Express

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