(Approved by the State Council on April 11, 1985 and promulgated by the Ministry of Finance on May 15, 1985)
The following Provisions are formulated in accordance with the provisions of Articles 2 and 8 of the Regulations of the People's Republic of China on the Consolidated Industrial and Commercial Tax, Article 1 of the Income Tax Law of the People's Republic of China for Foreign Enterprises and Articles 2 and 4 of the Rules for the Implementation thereof , and Article 9 of the Interim Provisions of the State Council Concerning the Administration of Resident Representative Offices of Foreign Enterprises, and the relevant provisions of the tax treaties concluded between the Chinese Government and foreign governments in respect of issues concerning the imposition of tax on resident representative offices of foreign enterprises:
1. Resident representative offices that conduct market surveys, provide business information and perform other business liaison, consultation and services activities on behalf of their head offices and for which no business income or service income is received, shall not be subject to the consolidated industrial and commercial tax or enterprise income tax.
Resident representative offices, appointed by enterprises within China to act as agents outside China, and whose activities are performed principally outside China, shall not be subject to tax on the income derived therefore.
2. The following income of resident representative offices shall be subject to tax:
(1) the commissions, rebates and service fees received by resident representative offices on behalf of their bead offices in respect of the performance of agency assignments outside China for other enterprises and for liaison negotiations and intermediary services within China;
(2) remuneration paid by clients according to a fixed scale during a specified period or the amount for representative services in respect of the undertaking of market surveys, liaison work, receiving or collecting business information and rendering of consultancy services within China by resident representative offices for their clients (including clients of their head offices);
(3) commissions, rebates and service fees received by resident representative offices when engaging in business within China as agents for other enterprises or in respect of the performance of liaison, negotiation or intermediary services for economic and trade transactions between other enterprises.
3. Tax in respect of liaison, negotiation or intermediary, services rendered by a resident representative office shall, if the amount of the commission is specified clearly in the contract, be calculated and imposed on the amount specified in the contract; if the amount of commission is not specified clearly in the contract, be calculated and imposed on the amount specified in the contract; if the amount of commission is not specified clearly in the contract, and no accurate supporting documents or correct report of the amount of commission income can be provided, the local tax authorities may, by reference to a general level of commission and the amount of business realized from the intermediary services, determine an appropriate amount of commission as the basis upon which to calculate and impose taxes. In cases as mentioned in (1) of Article 2 of these Provisions, where part of the agency services is performed by its head office outside China, the resident representative office shall report and submit relevant certificates and documents to the local tax authorities for evaluation and determination of the amount of commission which shall be subject to the filing of tax returns and payment of tax in China.
4. Commission, rebates and service fees received by resident representative offices in respect of the performance of agency or intermediary services that fall into the categories of taxable items listed in the Schedule of Taxable Items and Tax Rates of the Consolidated Industrial and Commercial Tax, shall be subject to the consolidated industrial and commercial tax at a reduced rate of 5% . In cases where the enterprise income tax shall be levied, the tax shall be assessed on the taxable income calculated exactly from documents provided by the taxpayer as to costs and expenses; where no such documentation is available, the tax shall be assessed on the taxable income calculated on the basis of an appropriate rate of profit, provisionally determined at 15% of the business revenue in accordance with the provisions of Article 24 of the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Foreign Enterprises.
5. "Enterprise" as mentioned in these provisions encompasses "corporation", "company" and "economic organization".
6. The Ministry of Finance shall be responsible for the interpretation of these Provisions.
7. These Provision shall come into force as January 1, 1985
