China Taxation News: non-resident corporate tax roll in 2012 maintained moderate growth

Source: China Taxation News

The latest statistics from the State Administration of Taxation show that taxes paid in 2012 by non-resident enterprises in China continued to maintain moderate increase based on the sharp growth of the previous year, and the country’s total non-resident corporate tax roll reached 109.03 billion yuan, up 6.44 billion yuan from the previous year, an increase of 6.3%, among which, corporate income tax rose to 91.33 billion yuan, up 4.18 billion yuan, an increase of 4.8%.

In 2012, tax authorities at all levels continued to strengthen the post responsibility system construction of tax management on non-resident enterprises, perfect the classification management mechanism and further implement the non-resident-enterprise-related administrative documents on tax filing and payment, withholding tax at source, final settlement and payment, assessment and levy and the like. Meanwhile, tax authorities at all levels continued their efforts in taking practical measures to reinforce tax source monitoring, regulating routine management and enhancing the specialized and detailed management intensity in order to constantly improve the level of non-resident enterprise tax administration.

According to relevant sources from the State Administration of Taxation, in 2013, the work on tax administration of non-resident enterprises will further perfect the tax policy and management regulations, and study to refine the tax administration measures for all kinds of income tax collected from non-resident enterprises. The tax authorities will release the tax administration policies for non-resident enterprises related with partnership enterprises, international transportation and labor activities involved in specific areas as soon as possible, and will continue to implement the classification management mechanism, so as to continuously improve the skills on non-resident enterprise tax administration.

Statistics suggest that China’s 2012 tax revenue from non-resident enterprises has followed an upward momentum since 2008, but the growth rate slowed, 5.2 percentage points lower than the overall increase of the national tax revenue. According to analysis, it was attributed to a downturn in the growth rate of corporate income tax on dividends & bonuses and royalty which account for 70.2% of the total amount of non-resident Corporate income tax and respectively dropped 59.8 and 13.7 percentage points from the previous year. However, despite the macro background of constant depression and weak demand of global economy, the tax revenue from non-resident enterprises still achieved continuous growth.

Withholding tax at source remained the major measure for the levy of income tax on non-resident enterprises in China. Through the method of withholding tax at source, the income tax on non-resident enterprises was collected at 80.82 billion yuan in 2012, up 4.68 billion yuan from the previous year, an increase of 6.2%, which accounted for 88.5% of the total amount of non-resident corporate income tax. And a total of 10.51 billion yuan was collected by both truthful filing and assessment levy methods.

According to statistics, The corporate income tax levied on dividends and bonuses totaled 44.4 billion yuan in 2012, which was 48.6% of the total income tax on non-resident enterprises, up 1.66 billion yuan from the previous year, edging up by 3.9%, and it still remained to be the biggest tax source among non-resident corporate income taxes; royalty income tax totaled 19.7 billion yuan, up 7 percent from the previous year, accounting for 21.6% of total revenue; corporate income tax on interests totaled 4.93 billion yuan, up 79.5 percent, 5.4% of total revenue; corporate income tax on property transfers totaled 6.85 billion yuan, down 17.5%, 7.5% of total revenue.

Among the non-resident corporation income tax revenue classified by income nature, the corporate income tax on interests has the largest growth rate. This was due to influence by the continued RMB appreciation expectations and the generally more tight scale of domestic credit. Commercial Banks greatly developed the refinancing business and the refinancing amount displayed a continuously rising trend. With the increasing openness degree of domestic financial market, inter-bank lending market became active both at home and abroad, resulting in a substantial growth in the number and amount of external interest payment, which also led to a significant increase in the corporate income tax on interest income. Meanwhile, all regions strengthened management to prevent loopholes in tax collection and administration, and Jiangsu, Guangdong Provincial Office of State Administration of Taxation conducted the special investigations on refinancing and fortified the propaganda and guidance for the relevant tax policies, achieving remarkable results.

 The revenue of royalty corporate income tax kept steady growth, which had an inseparable relationship with the big context of “converting structure, adjusting measures” in which domestic enterprises enhanced their investment in research and development and constantly introduced the foreign advanced technology. In addition, sales growth led to the increase of royalty external payment amount and thus drove the growth of royalty income tax revenue.

 In terms of tax source distribution, the regional differences of non-resident corporate income tax were enormous, and tax sources were highly concentrated in the economically developed areas. There are three provinces and cities including Beijing, Shanghai and Jiangsu whose non-resident corporate income tax exceeded 10 billion yuan; nine provinces more than 2 billion yuan are mainly concentrated in the eastern coastal areas. The Top Ten provinces and cities in terms of non-resident corporate income tax contributed 78.04 billion yuan in total, accounting for 85.4% of the national total.