Circular on Printing and Distributing the Administrative Measures for the Assessment and Collection of Income Tax against Non-resident Enterprises

Circular on Printing and Distributing the Administrative Measures for the Assessment and Collection of Income Tax against Non-resident Enterprises

Guo Shui Fa [2010] No. 19

February 20, 2010

The national taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the central government and cities specifically designated in the State plan:

For the purpose of regulating the assessment and collection of income tax of non-resident enterprises, the State Administration of Taxation has formulated the Administrative Measures for the Assessment and Collection of Income Tax against Non-resident Enterprises, which is hereby printed and distributed to you and you are required to comply with and implement the same. For any problem found in the course of implementation, please timely feedback the same to the (International Taxation Department) of the State Administration of Taxation.

Administrative Measures for the Assessment and Collection of Income Tax against Non-resident Enterprises

Article 1 These Measures are formulated in accordance with the Law of the People's Republic of China on Enterprise Income Tax (hereinafter referred to as "Enterprise Income Tax Law") and its implementing rules and the Law of the People's Republic of China on the Administration of Tax Levying (hereinafter referred to as "Tax Leving Administration Law") and its implementing rules and for the purpose of regulating the assessment and collection of income tax of non-resident enterprises.

Article 2 These Measures shall be applicable to the non-resident enterprises defined in Item 2, Article 3 of the Enterprise Income Tax Law; and the measures for the assessment of enterprise income tax of resident representative office of foreign enterprises shall be handled in accordance with relevant regulations.

Article 3 Non-resident enterprises shall set up accounting books in accordance with the Tax Collection Administration Law and other pertinent laws and regulations and keep accounts on the basis of legitimate and valid vouchers, account the same and accurately calculate the taxable income in accordance with the principle of matching the functions it actually performed and the risks it borne as well as declare and pay enterprise income tax on an actual basis.

Article 4 Where non-resident enterprises fail to accurately calculate and declare its taxable income on an actual basis due to unsound accounting books, difficulties in auditing owing to incomplete material or other reasons, the taxation authority may adopt the following measures to assess the taxable income of the non-resident enterprise concerned.
1.Taxable income assessment made on the basis of total revenue: applicable to the non-resident enterprises that are able to correctly audit the revenues or presume the total revenues by way of reasonable measures but unable to correctly audit the cost and expenses.
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