Month: Mayo 2012
New Measures on Administration of Special Funds for the Development of Small and Medium-sized Enterprises
On May 25th, 2012, the Ministry of Finance (“MOF”) and the Ministry of Industry and Information Technology (“MIIT”) of the People's Republic of China (“PRC”) jointly issued the Measures on Administration of Special Funds for Development of Small and Medium-sized Enterprises (hereinafter referred to as the “New Measures”) which shall enter into force as of the date of its promulgation. The Interim Measures on Administration of Special Funds for Development of Small and Medium-sized Enterprises (hereinafter referred to as “Interim Measures”) that was issued in 2008 shall be simultaneously annulled.
By comparison with the Interim Measures, the key points of the New Measures are as follows:
1. A New Category of Enterprises
There were only two categories of Small and Medium-sized Enterprises (“SMEs”) in the Interim Measures, one of which is the category of small enterprises and the other is the category of medium sized enterprises. In the New Measures, a new category of ´micro-enterprises´ is included.
2. Key Industries
Major support will be granted to productive service industries, such as high-tech service industry, commercial service industry and modern logistics industry, in order to strengthen and improve the services for SMEs in entrepreneurship, innovation, quality, management consulting, information service, personnel training, market expansion and so on.
3. Application and Management of Special Funds
´Special Funds for Development of SMEs´ should be managed under the budget of the central government as allocated to SMEs (especially to micro-enterprises) for technological changes, structural adjustment, transformation of development patterns, increase of employment, improvement of service environment and so on.
MOF and MIIT emphasized that the application and management of special funds should be in accordance with the national macro-economic policies, as well as with the preferential policies for China’s central and western regions.
Furthermore, the allocation of special funds will be factor-based rather than item-based according to the New Measures.
4. Methods and Limits of Funding
Special funds will take two modalities of financial support and discount loans of which a SME can only choose one. A SME can only apply for one project in the same year. Besides, special funds are not applicable if the project has obtained financial support from central government otherwise.
Special funds for each project through financial support or discount loans should be, in general, no more than 2 million RMB. The limit of special funds through discount loans will be determined according to the loan limit and lending rate for the same period announced by the People’s Bank of China. Special funds for projects that focus on the improvement of service environment for SMEs, especially micro-enterprises, should normally be no more than 4 million RMB.
General Comment:
The New Measures clarified certain issues relevant for the management and utilization of special funds for the development of SMEs and provided preferential treatment to micro-enterprises and SMEs in China’s central and western regions. The New Measures also show the Chinese government’s determination to promote the productive service industries and enhance the competitiveness of SMEs.
Notice on Individual Income Tax on the Work-related Injury Insurance
The State Administration of Taxation has issued the Notice regarding the Policy of the Individual Income Tax on the Work-related Injury Insurance Treatment (the “Notice”) on May 3rd, 2012, which has retroactively become effective as of January 1st, 2011.
According to the Notice, the work-related injury insurance, which is obtained by the injured employee or his/her relatives according to the ´Regulations of the Work-related Injury Insurance´, is exempted from the individual income tax.
The above-mentioned work-related injury insurance, according to the Regulations of the Work-related Injury Insurance, includes the one-off pension, disability allowance, one-off work-related injury medical pension, one-off disability employment pension, work-related medical treatment, hospital food subsidy, out-of-town medical transportation and accommodation expenses, work-related recovery expenses and nursery expenses obtained by the injury employee, as well as the funeral pension, dependent relative pension and one-off work-related death pension obtained by the employee’s relatives due to the employee’s work-related death.
Due to the fact that the Notice has become retroactively effective as of January 1st, 2011, if the employee or his/her relatives have already paid the individual income tax of the work-related injury insurance, they can apply for the refund of the individual income tax at the competent tax authority.
Notice on the Matters regarding Double Taxation in Mainland China for Hong Kong (and Macao) Tax Resident Employees
The State Administration of Taxation (“SAT”) .of the People's Republic of China (“PRC”) issued Notice on the Matters regarding Individual Income Tax with respect to the Implementation of the Tax Arrangements between the Mainland China and Hong Kong (and Macao) (hereinafter referred to as the "Notice") on April 26th, 2012, which addresses the double taxation problems in favor of the Hong Kong (and Macao) tax residents. The Notice takes effect from June 1st, 2012 (“Effective Date”) and applies to the income obtained after the Effective Date.
The key points of the Notice are as follows:
1. Scope of Application
The Notice is only applicable to those Hong Kong (and Macao) tax residents who are employed by a Hong Kong (or Macao) company or who are concurrently employed by both a Hong Kong (or Macao) company and a Mainland China company. In other words, if a Hong Kong (or Macao) tax resident employee is employed by a Mainland China company and works full time in Mainland China, this Notice should not be applicable.
2. Methods of Calculation
In order to eliminate double taxation in Mainland China for Hong Kong (and Macao) tax resident employees, the SAT now accepts the time apportionment of the salary and bonus income on the “physical presence” basis. In other words, only the days on which the individual is physically present in Mainland China is to be counted when applying the prescribed time apportionment formulae used to calculate the Individual Income Tax (“IIT”) liability in Mainland China.
a. If a Hong Kong (or Macao) tax resident stays in Mainland China for no more than 183 days in any 12-month period, the following formula is applied:
IIT Payable = IIT on Total Income for the Period Concerned × (Number of Physical Presence Days in Mainland China for the Period Concerned ÷ Number of Calendar Days for the Period Concerned) × (Income Paid/Borne in Mainland China for the Period Concerned ÷ Total Income for the Period Concerned)
b. If a Hong Kong (or Macao) tax resident stays in Mainland China for more than 183 days in any 12-month period, the following formula is applied:
IIT payable = IIT on Total Income for the Period Concerned × (Number of Physical Presence Days in Mainland China for the Period Concerned ÷ Number of Calendar Days for the Period Concerned)
“The Period Concerned” in the above formulae refers to the periods over which the relevant salaries and wages, bonuses and similar payments are taxable for PRC tax purposes. The Notice also provides that in calculating the number of physical presence days, the day of arrival, the day of departure and the same day travel will be counted as half a day in Mainland China.
3. Record Filing
The Hong Kong (and Macau) residents bear the responsibility to report and file with the competent tax authorities when paying IIT according to the Notice.
Many Hong Kong (and Macao) tax residents currently suffer double taxation since their work requires extensive travel in Mainland China, that is, the same amount of income may be taxed both in Mainland China as well as in Hong Kong (or Macao) respectively.
The Notice attempts to minimize the impact of such double taxation by clarifying the calculation of IIT under such circumstance. Therefore, it brings great news to many Hong Kong and Macao tax resident employees working cross border in China and their employers.