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Government Documents
Government Documents
UPDATED: October 13, 2009 NO. 36 SEPTEMBER 10, 2009
Interim Measures for Tax Administration On Contracted Engineering Operation and Provision of Labor Services of Non-residents
Promulgated by the State Administration of Taxation on January 20, 2009 and effective as of March 1, 2009
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Chapter I General Provisions

Article 1 In order to regulate the administration of levy of tax on contracted engineering operation and provision of labor service of non-residents in China, the measures are formulated in accordance with the relevant laws and regulations such as the Law of the People's Republic of China on the Administration of Tax Collection (hereinafter referred to as the Law of Tax Collection) and its Detailed Implementing Rules, the Enterprise Income Tax Law of the People's Republic of China (hereinafter referred to as the Enterprise Income Tax Law) and its Implementing Regulation, the Interim Regulation of the People's Republic of China on Business Tax and its Detailed Implementing Rules, the Interim Regulation of the People's Republic of China on Value Added Tax and its Detailed Implementing Rules and the agreements concluded by the Chinese Government and other countries on avoidance of double taxation (including the taxation arrangements concluded with Hong Kong and Macao special administrative regions, hereinafter referred to as taxation agreements).

Article 2 The "non-residents" mentioned in the measures consist of non-resident enterprises and non-resident individuals. Non-resident enterprises refer to enterprises that are established in accordance with foreign laws and their actual managing organs are not in China, but they have established organizations and offices in China, or have not established organizations and offices in China, but have incomes from China. Non-resident individuals refer to individuals that have no residences in China and do not live in China or live in China but have not reached one year.

Article 3 The "contracted engineering operation" mentioned in the measures refers to contracting construction, installation, assembling, repair, decoration, exploration and other engineering operations.

The "provision of labor services" mentioned in the measures refers to engaging in processing, repair and fitting, transportation, warehouse leasing, consultation agency, design, culture and sports, technology service, education and training, tourism, entertaining and other labor services in China.

Article 4 The tax administration on contracted engineering operation and provision of labor services of non-residents in China mentioned in the measures refers to the administration of taxation affairs on business tax, value added tax and enterprise income tax of non-residents. The administration that involves taxes such as individual income tax and stamp tax shall be implemented in accordance with relevant provisions.

Chapter II Administration on Tax Sources

Section I Administration on Registration and Archival Filing

Article 5 Where one non-resident enterprise contracts engineering operation or provides labor services in China, it shall, within 30 days upon the date when the project contract or agreement (hereinafter referred to as the contract) is concluded, go through the taxation registration formalities with the competent tax authority in the place where the project is located.

An organization or individual in China that is obliged to withhold tax in accordance with laws and administrative regulations shall, within 30 days as of occurrence of the withholding obligation, go through the tax withholding registration formalities with the competent tax authority in the place where the project is located.

Where an organization or individual in China contracts engineering operation or labor projects to non-residents, it shall, within 30 days upon the date when the project contract is concluded, submit the Form of Report on Contracted Engineering Operation and Provision of Labor Services of Organizations and Individuals (see Attachment 1), and attach with the tax registration certificates, contracts and photocopies of authorization letter of taxation agency of the non-residents, or written statements of the non-residents on relevant matters to the competent tax authority.

Article 6 Where one non-resident enterprise contracts engineering operation or provides labor services in China, it shall, within 15 days upon the completion of the project, submit relevant photocopies of the project completion certificate and verification certificate to the competent tax authority in the place where the project is located, and go through the taxation cancellation formalities in accordance with the relevant provisions of the Administrative Measures for Tax Registration.

Article 7 Where the contract regarding an organization or individual in China who contracts engineering operation or labor projects to non-residents is altered, the contractor or the labor assignee shall, within 10 days as of the date of alteration, submit the Form of Report on Alteration Status of Non-resident Project Contract (see Attachment 2) to the competent tax authority in the place where it is located.

Article 8 An organization or individual in China who contracts engineering operation or labor projects to non-residents shall, within 30 days upon acquisition of the invoices related to payments of projects and other payment vouchers, submit the Form of Report on Payments Status of Non-resident Projects Contract (see Attachment 3) and photocopies of payment vouchers to the competent tax authority in the place where it is located.

Where any organization or individual does not pay engineer charges or labor fees to non-residents, it shall, before the verification certificate is issued upon the completion of the project, report to the competent tax authority the relevant status of non-residents in the place where the project is located such as the progress of the project, name of the payer and the amounts and days of payments.

Article 9 Where there is inconsistency between an organization or individual in China who contracts engineering operation or labor projects to non-residents with the competent tax authority in charge of the non-residents, it shall, within 15 days as of the expiration of the declaration term for non-residents, submit the photocopies of tax declaration certificates of the non-residents to the competent tax authority in charge of the organization or individual in China.

Section II Administration of Information of Tax Sources

Article 10 One tax authority shall establish the tax sources supervision mechanism, acquire and utilize the relevant information on contracted engineering operation and provision of labor services of non-residents in China from departments of development and reform, construction, foreign exchange administration, finance, education, culture and sports, and feedback the utilization status of information to the relevant departments.

Article 11 Where one tax-related matter of a non-resident or domestic organization or individual concerns the state tax bureau and the local tax bureau at the same time, each tax authority in charge shall, after handling the tax-related matter, formulate the Table of Information Transfer on Contracted Engineering Operation and Provision of Labor Services of Non-residents (see Attachment 4), and monthly transfer such table to the other party for administration filing under the non-resident taxation administration.

Chapter III Declaration and Levy

Section I Enterprise Income Tax

Article 12 Where one non-resident enterprise contracts engineering operation or provides labor projects, its enterprise income tax shall be computed by each tax year and be paid in advance quarterly, be accounted and settled by the end of the year, and settle tax payment upon completion of the engineer project or after the labor contract is fulfilled.

Article 13 When declaring enterprise income tax, a non-resident enterprise shall submit the taxation declaration form truthfully, and attach with the following documents:

1. the final account (settlement) report of the engineering operation (labor) or other demonstration materials;

2. the report, in written form, on the names, nationalities, time of entry and exit, work time in China, location, contents, wage standards, payment method and relevant expenses of foreign personnel participating in the engineering operation or labor projects;

3. financial accounting report or financial status statement;

4. where the non-resident enterprise does not constitute as a permanent establishment in China in accordance with taxation agreement, and needs to enjoy the treatment of the taxation agreement, it shall submit the Form of Report on Enjoying Taxation Agreement Treatment of Non-resident Enterprises with Contracted Engineering Operation and Provision of Labor Services (hereinafter referred to as the Form of Report) (see Attachment 5), and attach with the identification proof of residents and other proving documents required by the tax authority.

Where the non-resident enterprise fails to submit the Form of Report and the relevant proving documents, or it does not meet the conditions for enjoying the treatment of the taxation agreement owing to change of project implementation, it shall not enjoy the treatment of the taxation agreement, and shall pay tax in accordance with the Enterprise Income Tax Law.

Article 14 Where the competent tax authority at the county (region) level or above in the place where the payer of engineering payments or labor fees is located, in accordance with the Attachment 1 and the proving documents on declaring and paying tax of a non-resident enterprise or other information, surely meet one of the three circumstances listed in Article 106 of the Implementing Regulation of the Enterprise Income Tax Law, it may designate the payer of engineering payments or labor fees as the withholding obligator, and deliver the Notification of Obligation of Withholding Enterprise Income Tax of Non-resident Enterprises with Contracted Engineering Operation and Provision of Labor Services (see Attachment 6) to the designated party.

Article 15 A designated withholding obligator shall, within the declaration term limit, submit the form of report on withholding enterprise income tax and other relevant documents to the competent tax authority.

Article 16 Where a designated withholding obligator fails to perform the withholding obligation according to the law or can not perform the withholding obligation, the non-resident enterprise concerned shall declare and pay tax in the place where the project is located. The tax authority shall, within 15 days as of confirming that the withholding obligation has not been fulfilled, inform the non-resident enterprise to declare and pay tax in the place where the project is located.

Article 17 Where a non-resident enterprise fails to pay tax within the prescribed term limit, the tax authority in the place where the project is located shall, within 15 days as of overdue, collect the information on other incomes acquired in China by the non-resident enterprise, including types of incomes, names and addresses of payers, amounts, ways and dates of payments, and issue the Notification of Recovering Overdue Tax of Non-resident Enterprises (see Attachment 7) to the payers of other income items (hereinafter referred to as other payers), and retrieve overdue tax and overdue fine.

The items of other incomes acquired in China by the non-resident enterprise shall include incomes of the non-resident enterprise from engaging in other engineering operation or labor projects, and other income items stipulated in items 2 and 3 of Article 3, the Law of Enterprise Income Tax. Where the non-resident enterprise has multiple payers, the tax authority in the place where the project is located shall confirm the order of tax recovery based on factors such as the accuracy of information, income amounts and costs of recovery.

Article 18 The tax authorities of other payers shall provide necessary information and assist with the tax authority in the place where the project is located to carry out tax recovery.

Section II Business Tax and Value Added Tax

Article 19 Where a non-resident has any business tax or value added tax taxable behavior, and has established an operation organization in China, it shall declare and pay any business tax or value added tax itself.

Article 20 Where a non-resident has any business tax or value added tax taxable behavior without setting up an operation organization in China, its agent shall be the withholding obligator of the business tax or value added tax, if it has no agent, the contractor, labor assignee or the buyer shall be the withholding obligator.

If the contractor, labor assignee or the buyer fails to provide the following proving documents to the tax authority in the place where it is located within 30 days as of the conclusion of project contract, it shall fulfill the business tax or value added tax withholding obligation:

1. Photocopies of certificates of industrial and commercial registration and taxation registration of domestic organization or individual and the proving documents of engaging in operation activity of the non-resident taxpayer.

2. The authorization letter for entrusting domestic organization or individual of the non-resident, and the confirmation proof of the entrusted party.

Article 21 A non-resident shall fill up and submit the tax declaration form based on facts and attach the following materials, when carrying out tax declaration of business tax or value added tax:

1. the final account (settlement) report of the engineering operation (labor) or other demonstration materials;

2. the names, nationalities, time of entry and exit, work time in China, location, contents, wage standards, payment method and relevant expenses of foreign personnel participating in the engineering operation or labor project or providing processing or repair and fitting; and

3. other relevant materials as required by the tax authority in accordance with the law.

Chapter IV Tracking Administration

Article 22 The tax authority shall, based on the principle of establishing and managing files by different projects, establish administrative accounts and taxation files for non-residents contracted engineering operation and provision of labor services, control timely the information on contract execution, construction progress, payments, paying foreign exchange overseas, payments of taxes of the engineering and labor projects.

Article 23 Where the tax authority has doubts on the payment vouchers acquired overseas by an organization or individual in China, it may require confirmation certificates issued by overseas certifying organs or registered accountants, only after they are ratified by the tax authority, may the said vouchers be used as vouchers for accounting.

Article 24 The tax authority shall carry out tracking administration for non-residents that enjoy agreement treatment, ratify the truthfulness and accuracy of the forms of report and proving documents submitted by them, and conduct confirmation on their not constituting permanent establishments. Where any non-resident that does not meet the conditions for enjoying agreement treatment and fails to fulfill its tax-paying obligation, the tax authority shall retrieve the overdue tax, delay charge, and fine.

Article 25 The tax authority shall utilize the information on sales and payments of foreign exchange, including historical record of payments of service trade made by the domestic organizations and individuals to non-residents and newly-added contracting projects payment plans of the current year, so as to carry our supervision over the contracted engineering operation and labor provision projects. Where there is any tax arrear before payments of foreign exchange, the tax authority shall notify timely the taxpayer or the withholding obligator to pay the tax, it may also, when necessary, notify the foreign exchange department concerned or the designated foreign exchange payment bank to suspend the payments of foreign exchange in accordance with the law.

Article 26 The tax authority shall implement key tax sources supervision and administration on key construction projects at state, provincial and prefecture levels, including civil basic facilities construction, energy construction, introducing enterprise technological equipment that are participated in by non-residents and involved contracted engineering operation and provision of labor services, and on other contracts that exceed 50 million yuan and are participated in by non-residents; and shall carry out key tracking inspections on matters such as whether there is affiliated relations between the contractor and the contract-issuing party, contract execution status, confirmation of permanent establishments and classification of domestic and oversea labor service incomes, if any problem is found, it may carry out information exchange, anti-avoidance of tax investigation or taxation inspection.

Article 27 Tax authorities of all provinces ( and autonomous regions, municipalities directly under the Central Government and separately planning cities) shall, within 45 days after the end of the year, submit the Statistical Table of Key Construction Projects of Non-residents with Contracted Engineering Operation and Provision of Labor Services (see Attachment 8), and analysis report on the gains of taxes and changes of tax sources of enterprise income tax, value added tax, business tax, stamp tax and individual income tax that are involved in the projects to the State Administration of Taxation (department of international taxation).

Article 28 The tax authority may, based on its need, carry out taxation audit on the tax-paying status of non-residents contracted engineering operation and provision of labor services, and when necessary, transmit timely the audit results to the state tax bureau or local tax bureau at the same level. The taxation audit may adopt the way of audit conducted jointly by the state tax bureau or the local tax bureau.

Article 29 Where it is difficult for the tax authority to acquire tax-related information within the country, it may produce special information, and then the State Administration of Taxation (department of international taxation) may submit a request for special information to the country having signed the taxation agreement; where a non-resident fails to fulfill its tax-paying obligation, the tax authority may produce automatic or spontaneous information, and submit it to the State Administration of Taxation, and then the State Administration of Taxation may inform the tax authority of the other country having signed the taxation agreement of the illegal taxation behavior in China of such non-resident; where it is necessary to carry out overseas audit on non-residents contracted engineering operation and provision of labor services, the tax authority may organize and carry out the audit based on the relevant provisions of taxation information exchange and upon the approval of the State Administration of Taxation.

Article 30 Where the legal representative of a non-resident enterprise or non-resident individual that owes tax fails to settle the overdue tax and delay charge and fails to provide tax payment guarantee, the tax authority may inform the exit and entry administrative organ to stop him from exiting the country.

Article 31 Where a non-resident fails to settle tax within the prescribed term and has left the country after completion of an engineering or labor project, the tax authority may produce the Notification on Taxation Matters (see Attachment 9), notify the said non-resident to fulfill his tax-paying obligation through letters, e-mails and fax, and inform the party issuing the contract or labor assignee in China to assist with recovering the tax payments.

Chapter V Legal Liability

Article 32 Where any non-resident, withholding obligator or agent has any illegal taxation behavior when carrying out contracted engineering operation and provision of labor services, the tax authority shall handle the case in accordance with the relevant provisions of the Law of Tax Collection and its Detailed Implementing Rules.

Article 33 Where any organization or individual with contracted engineering operation or provision of labor service projects fails to report the relevant matters to the tax authority as prescribed in Articles 5, 7, 8 and 9, the tax authority shall order it to make corrections within a prescribed time limit, and may impose a fine no more than 2,000 yuan; if the circumstance is serious, a fine of between 2,000 yuan to 10,000 yuan may be imposed.

Chapter VI Supplementary Provisions

Article 34 State tax bureaus and local tax bureaus of provinces, autonomous regions, municipalities directly under the Central Government and separately planning cities may formulate specific implementation measures in accordance with the present measures.

Attachments:

1. Form of Report on Contracted Engineering Operation and Provision of Labor Services of Organizations and Individuals (omitted)

2. Form of Report on Alteration Status of Non-resident Project Contract (omitted)

3. Form of Report on Payments Status of Non-resident Project Contract (omitted)

4. Table of Information Transfer on Contracted Engineering Operation and Provision of Labor Services of Non-residents (omitted)

5. Form of Report on Enjoying Taxation Agreement Treatment of Non-resident Enterprises with Contracted Engineering Operation and Provision of Labor Services (omitted)

6. Notification of Obligation of Withholding Enterprise Income Tax of Non-resident Enterprises with Contracted Engineering Operation and Provision of Labor Services (omitted)

7. Notification of Recovering Overdue Tax of Non-resident Enterprises (omitted)

8. Statistical Table of Key Construction Projects of Non-residents with Contracted Engineering Operation and Provision of Labor Services (omitted)

9. Notification on Taxation Matters (omitted)

Source: www.fdi.gov.cn



 
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