Leaders of the BRICS’ nations - Brazil, Russia, India, China and South Africa, have gathered on 3-5 September in the Chinese city in Xiamen for their ninth annual summit. In addition, as a part of “BRICS Plus” concept, leaders of Egypt, Guinea, Mexico, Tajikistan and Thailand have also attended the conference.
The summit’s discussions focused on renewable energy initiatives, security, as well as an alternative credit rating agency led by BRICS countries that would cater for the needs of emerging countries and may challenge the Western credit rating agencies.
Under the China Enterprise Income Tax (“EIT”) Law, a resident enterprise may enjoy Research & Development (“R&D”) super deduction incentive, i.e. deduct 150% of qualifying R&D expenses actually incurred in computing its tax liability, if the expenses do not result in the creation of an intangible asset. If intangible asset is developed, the qualifying R&D expenses should be capitalized and amortized based on 150% of the actual qualifying R&D costs. Recently, various Chinese authorities jointly issued a circular to further extend the foregoing super deduction percentage from 150% to 175%, which is available to Small- and Medium-sized Science & Technology Enterprises (“SMSTE”) when computing their EIT liabilities for the period from 1 January 2017 to 31 December 2019. The additional deduction effectively lowers the taxable income of the SMSTE. Self-evaluation and voluntary reporting requirements have to be complied with by the SMSTE in order to enjoy the tax incentive.
As from 1 July 2017, the 13% VAT rate was abolished in China and the rate for agricultural products, public utilities and cultural products was reduced to 11%. Prior to 1 July 2017, there were four VAT rates in China, namely 17%, 13%, 11% and 6%. A separate rate applies to taxpayers that are subject to the simplified VAT regime. This multiple rate system has created tax disputes and challenges for taxpayers, particularly in determining which VAT rate should be applicable. It has been the Chinese tax authority’s key focus in its VAT reform to streamline the VAT rate brackets and simplify the related tax compliance. The elimination of the 13% VAT rate will mainly affect the following categories of products:
The Chinese State Council has updated foreign investment negative list applicable to all 11 free-trade zones (FTZs). These special zones offer foreign companies tax concessions and simplified administrative procedures and are particularly attractive for high-end consumer goods, electronics, telecommunications and medical companies who want to expand their business to China.
The gross value of foreign trade to and from these FTZs is growing steadily. In the pilot Shanghai FTZ the proportion of foreign companies nowadays is over 27% and in 2016 the zone reported 73% increase in the number of company registrations.