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23 October 2018 China expands scope of withholding tax deferral treatment on direct reinvestments from foreign investors China’s Ministry of Finance, State Administration of Taxation and National Development and Reform Commission and Ministry of Commerce jointly issued Caishui [2018] No. 102 (Circular 102)1 to expand the scope of withholding tax deferral treatment on direct reinvestment to all non-prohibited foreign investments. Circular 102 becomes retroactively effective on 1 January 2018. Prior to the issuance of Circular 102, the withholding tax deferral policy only applied to foreign investors who directly reinvested their attributable/distributable profits from their Chinese tax resident investees into one of the designated encouraged industries.2 Under Circular 102, the scope of the withholding tax deferral treatment on direct reinvestment is expanded to all foreign investments that are not prohibited for foreign investors. Circular 102 reflects China’s aim to further attract and facilitate foreign investments. Multinational Companies with excess cash in China from profits may consider redeploying the cash into their Chinese investments. 2. See EY Global Tax Alert, China announces withholding tax deferral treatment on direct reinvestment, dated 12 January 2018 and EY Global Tax Alert, China issues implementation rules on withholding tax deferral treatment on direct reinvestment, dated 5 February 2018. Ernst & Young Tax Services Limited, Hong Kong
Ernst & Young (China) Advisory Limited, Shanghai
Ernst & Young (China) Advisory Limited, Beijing
Ernst & Young (China) Advisory Limited, Shenzhen
Ernst & Young LLP, China Tax Desk, New York
Ernst & Young LLP, China Tax Desk, Chicago
Ernst & Young LLP, China Tax Desk, San Jose
Ernst & Young LLP, Asia Pacific Business Group, New York
Document ID: 2018-6231 |
