Participants
Company
Name
Capital 8
Todd Gosserand
China Consultant
Josep Giro
Deloitte
Jeffery Kadet
Deloitte
Simon Tan
Diacron
Christian Cavazzuti
PWC
Claus Schuermann
PWC
Jane Wang
Hilti
Patrick Yip
Philips
KK Ho
Outotec
Johnson Zhang
LANXESS
Jason Zhang
Ernst & Young
Titus von dem Bongart
BASF
Anna Ding
Degussa
Jerry Tian
EU Delegation
Antoine Seillan (via teleconference)
European Chamber
Ioana Kraft (IK)
Agenda
1. Permanent Establishment (PE) in China
2. Lobbying Action Plan 2007/2008
4. Forward Agenda for the Finance & Taxation WG
Meeting Minutes
After an introduction of all participants including Antoine Sallier the new officer in charge of Finance & taxation in the trade section of the EU Delegation in Beijing.
1. Permanent Establishment (PE) in China
On 4th April 2007, the State Administration of Taxation of China released a notice to provide interpretation and implementation guidelines on the New DTA, including those on PE. Separately, the new PRC Income Tax Law which will take effect from 1. January 2008 includes the new concept of Tax Resident Enterprise ("TRE"). This caused the ever increased activities of foreign companies, through their employees or agents in China, to take advantage of the low costs or otherwise in China could now be caught by the China tax net. Please click here to download a copy of the presentation.
2. Lobbying Action Plan 2007/2008
The Group discussed the status of the Key Recommendations made in this years’ Position Paper and identified its lobbying priorities for the upcoming months.
1. Tax Administration:
As the implementation of tax rules and regulation still represents one of the main hurdle for European companies doing business in China it was decided that this Key Recommendation, although it has been in the Position Paper for several year, needs to be re-emphasised and the group should plan lobbying actions for each of the bullet points of the present Key Recommendation. Titus von dem Bongart volunteered to work with the Chamber’s secretariat on the follow up.
2. Dividend Withholding Tax
This topic has been identified as the top priority for the Working Group with regards to the Enterprise Income Tax Law. Actions need to be taken before the promulgation of the implementation rules for this law. As this point was already presented at meeting of the WG with SAT on 13th June, it was recommended to set up a meeting with MOFCOM to present the members’ concerns regarding the increase of the tax burden should a 10% dividend withholding tax be instituted for foreign invested enterprises when paying their dividends to their overseas shareholders.
KK Ho and Simon Tan will attend a potential meeting with MOFCOM. Chamber secretariat will contact MOFCOM asap. In the meantime it was recommended to set up a meeting with MOF at highest possible level.
3. Limitations on Expense Deductions
According to some members’ insights a full deductibility of salaries will be allowed according to the latest draft for the implementation rules, as long as the deduction is reasonable. The deduction of advertising expenses remains not allowed.
This topic shall be raised at a potential meeting with MOFCOM if time allows.
4. “New and High-Tech Enterprise Status and R & D activities”
Simon Tan and Ana Ding agreed to lead further lobbying activities with the purpose of clarifying the definition of activities that qualify for the R & D super-deduction.
5. General Anti-Avoidance Rule (Art. 47 of the New EIT Law)
Jeff Kadett agreed to lead further lobbying efforts to regarding the general anti-avoidance rule of Art. 47 New EIT Law.
3. Forward Agenda for the F & T WG
A seminar on Tax regulations for expatriates as well as a seminar dealing with the practical difficulties surrounding exchange controls, focusing on the situation that now exists for stock options.
Members were invited to suggest further topics of interest to be discussed in the group.