PRC Enterprise Income Tax Law (2007 KPMG)

TAX
PRC Enterprise Income Tax Law

2007 KPMG Huazhen, a Sino-foreign joint venture in the People's Republic of China and a member firm of the KPMG network of
independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
1 Overview 2
2 Taxation of enterprises 4
2.1 Resident enterprises 4
2.2 Non-resident enterprises 5
2.3 Tax rates 6
2.4 Taxable income 6
2.5 Deductions 7
2.6 Tax depreciation / capital allowances 8
2.7 Amortisation of intangibles and capitalised expenditure 9
2.8 Tax losses 9
2.9 Grouping / consolidation 10
2.10 Capital gains tax 10
3 Tax incentives 11
4 International tax 13
4.1 Double tax relief 13
4.2 Withholding taxes 13
4.3 Double tax agreements 15
5 Anti-avoidance rules 16
5.1 Introduction 16
5.2 Transfer pricing 16
5.3 Controlled foreign corporation rules 17
5.4 Thin capitalisation 17
5.5 General anti-avoidance 17
6 Tax administration 18
7 Glossary 19
8 Legislation 20
9 Contact 32
Contents
1 PRC Enterprise Income Tax Law
1 Overview
Pursuant to the Enterprise Income Tax Law of the PRC (the EIT Law), resident
and non-resident enterprises deriving income from the PRC are subject to
Enterprise Income Tax (EIT). The EIT Law, promulgated by the National Peoples
Congress on 16 March 2007 (effective from 1 January 2008), introduced a new
uniform income taxation regime in the PRC, replacing the previous bifurcated
regime under which foreign-invested enterprises (FIEs) and domestic enterprises
were subject to two different sets of income tax laws. Under the EIT Law, EIT
applies to all enterprises, including FIEs and domestic enterprises.
Application and tax rate
The EIT Law sets out the scope of application of EIT to resident and non-resident
enterprises and provides the principles for determining an enterprises liability
to the tax, including the method of calculation of taxable income. Under the
law, except for certain qualifying small-scale/small-profit enterprises and hi-
tech enterprises (which are subject to EIT rates of 20 percent and 15 percent,
respectively), the general applicable EIT rate in the PRC is 25 percent.
Non-resident enterprises without an establishment or place of business in the
PRC are subject to withholding tax at the rate of 20 percent on various types
of passive income (e.g., dividends, interest, rentals, royalties and other income)
derived from the PRC. However, the EIT Law contains a specific provision
allowing for an exemption or reduction in the withholding tax rate for a particular
type of income should the State Council choose to do so.
Tax incentives
The EIT Law contains tax incentives which are targeted at enterprises engaged
in certain designated industries rather than on the basis of their geographical
location, which was the policy focus of previous tax incentives. The EIT Law
offers tax incentives ranging from reduction in taxable income, bonus and
accelerated deductions, to tax exemption or reduction for designated industries
such as energy and resource saving, environmental protection, and hi-tech
development.
As certain tax incentives applicable to FIEs prior to the introduction of the EIT
Law have been revoked, transitional grandfathering relief has been introduced
for qualifying FIEs. Transitional measures also apply to certain areas in the PRC
which previously offered a lower tax rate. For example, under the transitional
measures, the current EIT rate of 15 percent in special economic zones will be
gradually phased up to the 25 percent EIT rate over a five-year period.
Anti-avoidance measures
It is also noteworthy that, for the first time, a general anti-tax avoidance
provision has been introduced under PRC tax law to counteract tax avoidance
arrangements entered into by taxpayers. In addition, other specific anti-
avoidance measures, such as the controlled foreign corporation (CFC) rules,
designed to prevent PRC enterprises from deferring PRC tax on offshore profits
that are parked in comparatively low-tax jurisdictions; and thin capitalisation
rules, aimed at limiting interest deductions by enterprises, have also been
introduced to strengthen the EIT Law.
Implementation and administration
The EIT Law should be considered as more of a broad framework for the
application of the new tax regime. However, successful implementation of
the general provisions in the law would require detailed implementation rules,
which would further define and supplement the general EIT Law provisions. The
issuance of these detailed implementation rules falls under the authority of the
State Council, an executive body empowered (specifically under the EIT Law in
the present case) to promulgate tax regulations and provisions.
At the time of publication, the detailed implementation rules have not yet been
issued by the State Council.
In addition, the PRC tax regime also contains a large body of notices and
circulars which deal with the more detailed issues arising under tax law
administration and interpretation. Therefore, the State Administration of Taxation
(which deals with tax law administration) and Ministry of Finance (responsible for
the development of tax legislation and policies) would also need to ensure that
these notices and circulars are repealed, amended or rewritten as necessary in
order to ensure consistency with the EIT Law.
From 1 January 2008, the two sets of tax laws previously governing the taxation
of income of domestic enterprises and FIEs, will be repealed and cease to have
effect.
2 Taxation of enterprises
Under the EIT Law, an enterprise (including other forms of income-earning
business organisations) deriving income from the PRC is regarded as the
taxpayer for EIT purposes.
The extent of an enterprises exposure to EIT depends on whether it is a
resident enterprise or a non-resident enterprise. That is, the EIT liability of an
enterprise is governed by its residency status, which is in turn determined under
the EIT Law through the dual application of place of incorporation and the
place of effective management tests.
Where the provisions of the EIT Law conflict with those of a double tax
agreement signed between the PRC and a foreign country, the EIT Law
specifically states that the double tax agreement shall prevail with respect to the
determination of the PRC tax liability of the foreign treaty country resident.
Businesses conducted by private individuals and partnerships are specifically
excluded from the scope of EIT application.
2.1 Resident enterprises
The term resident enterprise refers to an enterprise which is established in the
PRC under PRC laws, or an enterprise established under the laws of a foreign
country or one of the Special Administrative Regions (Hong Kong and Macau) but
which has its place of effective management in mainland China.
Income liable to EIT
Under the EIT Law, resident enterprises are subject to EIT on income sourced
from both within the PRC and offshore; that is, resident enterprises will be
subject to EIT on their worldwide income.
Foreign companies with place of effective management in the PRC
Although the EIT Law does not specify how the place of effective management
of an enterprise is determined, foreign companies which do not have a
substantive presence outside of the PRC will need to consider whether their
place of effective management could be considered to be situated in the PRC
(therefore causing them to be considered as PRC resident enterprises).
Similarly, any domestic enterprises that have established offshore holding
companies to hold group companies within the PRC (often referred to as round-
tripping investments), will need to consider whether such offshore holding
companies place of effective management could be considered to be in the PRC
and therefore fall within the PRC tax net under the EIT Law (on the basis that
such companies are also resident enterprises).
Branches of domestic enterprises
Prior to the EIT Law becoming effective, branches of domestic enterprises would
generally pay tax to the tax bureau where the branch is located, effectively
making them subject to tax as a discrete taxable entity. In view of the definition
of resident enterprise under the EIT Law, as the branch of a domestic
enterprise does not have legal entity status, it will no longer be regarded as
a discrete taxpayer for EIT purposes (even if the branch prepares accounts
independently). Instead, the EIT liability of the branch would be borne by the
head office (which is the resident enterprise taxpayer) under a combined head
office and branch tax filing.
Accordingly revenue sharing arrangements are expected between the tax bureau
of the head office and the tax bureau of the branch, so that the latter can be
compensated for its likely loss of tax revenue.
2.2 Non-resident enterprises
The term non-resident enterprise refers to an enterprise which is established
under the laws of a foreign country or one of the Special Administrative Regions
(Hong Kong and Macau), and which has its place of effective management
outside mainland China and:
has set up an establishment or a place of business in the PRC; or
has not set up an establishment or a place of business in the PRC, but derives
income from sources in the PRC.
The term establishment or place of business is not defined under the EIT Law,
but will likely be laid out in the detailed implementation rules. As a reference, the
Detailed Implementation Rules to the Foreign Enterprise Income Tax Law (which
will be replaced by the EIT Law on 1 January 2008) adopts the same terminology.
These rules define the term to include management establishments, business
establishments, offices, factories, places where natural resources are exploited,
places where construction, installation, assembly, or exploration take place,
places where labour services are provided, and business agents
1
.
Income liable to taxation in the PRC
Non-resident enterprises that have an establishment or a place of business in the
PRC will be subject to EIT on income derived from the establishment or the place
of business in the PRC, and income earned outside of the PRC that is effectively
connected with the establishment or the place of business in the PRC.
Non-resident enterprises without an establishment or place of business in the
PRC or which have an establishment or place of business but the relevant income
is not effectively connected with the establishment or a place of business in the
PRC, will be subject to withholding tax on dividends, interest, rentals, royalties,
capital gains or other income derived from sources in the PRC.
1 Business agents is defined under the Detailed Implementation Rules to the Foreign Enterprise Income Tax Law as referring
to the operating companies, enterprises and other economic organizations or individuals that are engaged as agents of foreign
enterprises in any of the following manners:
Representing the principal on a regular basis in sourcing, signing purchase contracts and purchasing goods or commodities on
the principals behalf
Entering into an agency agreement or contract with the principal, storing the products or commodities owned by the principal
on a regular basis, and delivering such products or commodities to other parties on the principals behalf
Having the authority to represent the principal on a regular basis in signing sales contracts or accepting purchase orders
2.3 Tax rates
Under the EIT Law, the general EIT rate of 25 percent applies to all enterprises,
except for those which fall into the following categories:
Hi-tech enterprises eligible for key support from the State : 15 percent
Small-scale enterprises earning a small profit: 20 percent
The EIT Law does not currently detail the requirements for access to either
of the above categories. Further details will likely be included in the detailed
implementation rules to be issued by the State Council.
Withholding tax
For non-resident enterprises without an establishment or place of business in
the PRC, deriving PRC-sourced income, withholding tax at the rate of 20 percent
would apply on the relevant income on the following basis:
Gross amount of dividends, interest, rentals and royalties received from
sources in the PRC
Net capital gains computed based on the difference between the sales
proceeds and the net book value of the PRC asset disposed of
Other income, taxable with reference to the above two bases, where
appropriate
At the time of publication, it is unclear whether the withholding tax rate of 20
percent under the EIT Law would be lowered under the detailed implementation
rules. Although the law contains a specific provision allowing for an exemption
or reduction in withholding tax, it remains to be seen whether the PRC State
Council would adopt any such measures.
Withholding tax obligation
Under the EIT Law, the obligation to withhold EIT on the payment of income
to a non-resident enterprise falls upon the payer, which is deemed to be the
withholding agent. The withholding obligation is triggered upon payment, or
when the obligation to make the payment arises.
2.4 Taxable income
Under the EIT Law, the taxable income of an enterprise subject to EIT is
computed as the difference between an enterprises total income less deductible
items in the order of: non-taxable income, exempted income, deductible
expenses and any qualifying tax losses brought forward from prior years. In
calculating an enterprises taxable income, where there are differences or
inconsistencies between accounting standards and the tax law, the latter prevails.
Total income
The total income of an enterprise is defined to include income derived through
monetary or non-monetary means from all sources, including: sale of products
and services; proceeds from transfer of assets; dividends and profit distributions,
interest, rentals, royalties; donations received; and other income items.
Non-taxable income
The EIT Law states that funds allocated under public finance, government
administrative charges and contributions to government funds (charged in
accordance with the law and subject to the governments financial administration)
and other non-taxable revenue specified by the State Council constitute non-
taxable income.
Exempt income
The EIT Law also states that the following income will be exempt from income
tax:
Interest from treasury bonds
Inter-company dividends, profit distributions and other returns on equity
investment derived by a qualifying resident enterprise from another resident
enterprise
Dividends and profit distributions and other returns on equity investment
derived by a non-resident enterprise from a resident enterprise, and where
such dividends are effectively connected with the non-resident enterprises
establishment or place of business in the PRC
Income derived by qualifying non-profit organisations
In respect of the EIT exemption on inter-company dividends, the detailed
implementation rules would likely need to define the requirements of qualifying
resident enterprises and the criteria for the exemption to apply.
2.5 Deductions
The EIT Law provides that an enterprise can deduct expenses from its taxable
income which are reasonable and connected with the enterprises earning
of income, including items such as costs, expenses, taxes, losses and other
outgoings.
According to the EIT Law, the following expenses are specifically not deductible
for EIT purposes:
dividends and other distributions of profits to investor(s)
EIT paid
Tax-related late payment surcharges
penalties, fines and losses arising from the confiscation of property
donations (other than permitted charitable donations)
sponsorship expenses
provisions that have not been approved
other expenditures that are not related to the generation of revenue
Prior to the introduction of the EIT Law, domestic enterprises were generally
not allowed to deduct those portions of wages in excess of certain stipulated
limits, whereas FIEs could deduct wages actually paid. Under the EIT Law, all
enterprises will be allowed to deduct wages on an actual payment basis.
The previous tax laws also contained specific restrictions on the deduction for
entertainment expenses, and it is unclear whether the detailed implementation
rules will specify similar restrictions in this regard.
Charitable donations
The deductible amount in respect of charitable donations is limited to 12 percent
of an enterprises net income for tax purposes. The EIT Law does not, however,
define the term net income for these purposes. It is unclear as to whether
net income refers to the net income accounted for after tax adjustments but
before charitable donations, and the role of any tax losses brought forward from
prior years is unclear. Such uncertainties will likely be addressed under the
detailed implementation rules.
Cost of investment capital
Where an enterprise undertakes an investment (other than in the enterprise
itself), the cost of the investment would not be deductible against the
enterprises taxable profits during the period of investment.
2.6 Tax depreciation / capital allowances
Under the EIT Law, an enterprise is permitted to claim depreciation expenses
incurred on fixed assets against taxable income.
However, depreciation expenses in respect of the following fixed assets are not
tax-deductible:
Fixed assets (other than building and structures) that have not been put into
operational use
Fixed assets rented under an operating lease
Fixed assets leased out under a finance lease
Fully-depreciated fixed assets that remain in use
Fixed assets which are unconnected with an enterprises business operations
Other fixed assets on which depreciation expenses cannot be claimed
The EIT Law does not prescribe specific methods for calculating depreciation
expenses for each class of asset. Once again, it is expected that the detailed
implementation rules would provide further clarification in this respect, and set
out, amongst others, the principles for the basis on which different asset classes
are depreciated (e.g., a straight-line or accelerated depreciation basis), minimum
depreciable life, and guidelines on the calculation of residual value.
2.7 Amortisation of intangibles and capitalised
expenditure
Amortisation of intangibles
According to the EIT Law, amortisation expenses on intangible property
computed by an enterprise in accordance with the regulations are tax-deductible,
except for the following:
Self-developed intangible property where the related development expenses
have been previously claimed as tax-deductible
Self-generated goodwill
Intangible property unconnected with the enterprises business operations
Other intangible property in respect of which amortisation expenses are not
permitted to be claimed
As a reference, based on the previous income tax law with regard to amortisation
on intangible assets, amortisation is allowed for intangible assets such as
patents, proprietary technology, trademark rights, copyrights and site-usage
rights. The cost of intangible assets without a defined life must be amortised
over a period of at least 10 years. Intangible assets with a defined life will be
amortised over that period.
Amortisation of capitalised expenditure
According to the EIT Law, the following capitalised expenditure incurred by
an enterprise shall be regarded as long-term deferred expenditure subject to
amortisation, and the amortisation expenses are tax deductible in computing the
taxable profits of an enterprise:
Expenditure incurred in the alteration or improvement of a fully-depreciated
fixed asset
Expenditure incurred in the alteration or improvement of a leased fixed asset
Expenditure incurred in the overhaul of a fixed asset
Other qualifying expenditure subject to amortisation
2.8 Tax losses
Under the EIT Law, tax losses incurred by an enterprise can be carried forward
to be offset against future taxable profits for a maximum period of five years. No
carry-back of tax losses is permitted.
For the purposes of calculating the tax payable by a resident enterprise, the tax
losses incurred by overseas branches of a resident enterprise cannot be offset
against the profits of the PRC operations of the resident enterprise.
2.9 Grouping / consolidation
Unless specifically granted by the State Council, enterprises in the PRC are not
permitted to file tax returns on a consolidated basis.
Subject to the tax authorities approval, a non-resident enterprise with two or
more establishments in the PRC may elect its principal establishment to apply
for combined tax filing and payment. It is likely that the selected establishment
would need to be responsible for the management and supervision of other
establishments in the PRC and also keep a complete set of accounting books and
vouchers.
As the EIT Law provides for the possibility of consolidated tax filing within a PRC
corporate group subject to the State Councils approval, it remains to be seen
the extent and the ease in which such an approval would be granted after the EIT
Law becomes effective.
2.10 Capital gains tax
There are no specific capital gains tax provisions under the EIT Law. For either
a resident or non-resident enterprise with an establishment or place of business
in the PRC, the gain on disposal of assets is included as part of the enterprises
taxable income.
Non-resident enterprises which do not have an establishment or place of
business in the PRC would be subject to PRC withholding tax on their gains
derived from asset disposal.
The EIT Law contains tax incentives which are targeted at enterprises engaged
in certain designated industries rather than on the basis of their geographical
locations, which was the policy focus of previous tax incentives offered under
the tax law. In addition, the EIT Law also offers qualifying enterprises other
tax incentives in the form of exemption or reduction in EIT, reduction in taxable
income, EIT tax credits, as well as bonus or accelerated expense deductions.
Compared to the prior tax laws, the EIT Law does not contain any relief for
companies which are export-oriented as such tax incentives were perceived to
be in violation of WTO principles. In addition, the EIT Law does not contain any
reinvestment tax refund provisions.
Broadly, the EIT Law provides for the following categories of tax incentives:
Income earned by enterprises operating in the following industries can obtain
an EIT exemption or reduction:
_
Agriculture, forestry, animal husbandry and fishery industries
_
Public infrastructure projects which are eligible for key support from the
State
_
Qualifying environmental protection, energy and water saving projects
_
Qualifying technology transfers
Venture capital enterprises that are engaged in encouraged investments in
the PRC will be eligible for a reduction of their taxable income by an amount
equal to a certain percentage of the capital invested
Enterprises which manufacture products through integrated usage of
resources and which fulfil certain State policy requirements, can receive a
reduction in taxable income
Enterprises which purchase equipment specifically for the purposes of
protecting the environment, achieving energy or water savings, or improving
industrial safety will be eligible for a reduction of tax payable by an amount
proportional to the amount of investment
If an enterprise is required to adopt accelerated depreciation for its fixed
assets due to advancement in technology, an accelerated depreciation
method, or a depreciation method based on a shorter useful life of the fixed
asset could be adopted for tax purposes
Enterprises can claim super-deductions for research and development
expenses incurred in developing new technology, products and techniques;
and also salary expenses incurred for employing disabled workers and other
staff which the State encourages enterprises to employ
3 Tax incentives
For many of the tax incentives outlined above, the EIT Law does not detail the
qualification criteria, application procedures nor the extent of the tax incentive
offered. Such features need to be outlined in the detailed implementation rules.
Transitional period for prior tax incentives
The EIT Law has revoked the previous five-year tax holiday incentive offered
to production-oriented FIEs, This five-year tax holiday consisted of a two-year tax
exemption followed by a three-year 50 percent reduction of applicable tax rate.
For FIEs established
2
before the promulgation of the EIT Law and which qualify
for the five-year tax holiday, the following grandfathering treatment applies:
Companies that are subject to a reduced income tax rate under the existing
law will be eligible for a five-year transition period during which time the tax
rate will gradually increase to the unified rate of 25 percent
Production FIEs which have not fully utilised their five-year tax holiday will be
allowed to continue to receive the benefits of the tax holiday during the five-
year grandfathering period. For those FIEs which have not yet begun the tax
holiday period, it will forcibly commence from the effective date of the EIT
Law (i.e., 1 January 2008)
Phasing up of tax rate for FIEs
For those FIEs currently enjoying a reduced tax rate in certain areas in the PRC
in accordance with the existing tax laws and regulations, the EIT Law does not
specify how the reduced tax rate will be gradually increased to the standard rate
of 25 percent. As an illustration, there has been speculation that the 15 percent
rate in special economic zones may be increased evenly by two percent per year
over the five-year transition period, as follows:

2 The EIT Law states that the grandfathering treatment will apply only to those FIEs that have been allowed to establish in the
PRC before the promulgation of the EIT Law. The cut-off date is, however, unclear as this could be the date of approval of
the set-up by Ministry of Commerce, the date of issuance of business licence by the State Administration of Industry and
Commerce, or the date of capital contribution by the foreign investor. Further clarification on this would be necessary.
2007 2008 2009 2010 2011 2012 2013
15% 15% 17% 19% 21% 23% 25%
There should be no grandfathering to companies that are currently paying a low
rate of tax that is not stipulated in the current law.
Production FIEs established between 16 March 2007 and 31 December 2007
which will derive profits during that period, could still receive the preferential tax
treatment under the current law for the 2007 tax year.
4.1 Double tax relief
Double tax relief applies to resident enterprises which derive taxable income
from outside the PRC, and non-resident enterprises deriving income from outside
the PRC where the income is effectively connected with their establishment
or place of business in China. Such enterprises can deduct from their PRC EIT
payable, foreign taxes paid on the income derived from sources outside the PRC.
The foreign tax credit amount available for offset against EIT payable, may not
however, exceed the amount of tax payable on the net foreign income computed
in accordance with the EIT Law.
Any unused or "excess" foreign tax credits can be carried forward for a maximum
period of five years.
Underlying tax credits
Consider the case where resident enterprises derive dividends or profit
distributions from foreign enterprises which have already paid income tax on
these payouts in their own jurisdictions. Under the EIT Law, if these foreign
enterprises are controlled, directly or indirectly, by the resident enterprises, the
overseas income taxes paid by the foreign companies can be claimed as tax
credits in the PRC.
However, the maximum amount of foreign income tax credits that can be
claimed is subject to a foreign tax credit limit imposed under the EIT Law.
4.2 Withholding taxes
Under the EIT Law, withholding tax at the rate of 20 percent applies to the PRC-
sourced income derived by a non-resident enterprise without an establishment or
place of business in the PRC. This 20 percent rate may be exempted or reduced
by the State Council; however, such measures have not yet been introduced
at the time of publication. Withholding tax reduction and exemption may be
available under double tax agreements.
Prior to the enactment of the EIT Law, certain concessions and exemptions or
reductions in withholding tax were in force in the PRC. It is unclear whether
such exemptions and reductions will continue to apply under the EIT Law.
4 International tax
Interest
Withholding tax may be levied on interest derived from the PRC on deposits,
loans and bonds.
Prior to the EIT Law, the following interest income was exempt from withholding
tax:
Interest from loans to PRC state banks by foreign banks at the inter-bank
interest rates
Interest on deposits of foreign banks in PRC state banks, provided that the
interest rate is lower than the international interest rate
Interest paid to foreign state banks in connection with the importation of
technology, equipment and commodities to the PRC
Dividends
Dividends derived from enterprises in the PRC are subject to withholding tax at
20 percent, although reduction and exemption may be available under certain
double tax agreements. Prior to the EIT Law becoming effective, dividends
derived by foreign investors from FIEs were exempt from withholding tax.
It is currently unclear whether the State Council will introduce measures to
extend this dividend withholding tax exemption.
Royalties
Withholding tax of 20 percent may be levied on royalties received for the use
of patents, proprietary technologies, trademarks or copyrights in the PRC. Tax
reduction and exemption may be available under certain double tax agreements.
Apart from the 20 percent withholding tax, certain types of royalties may also be
subject to a 5 percent Business Tax.
Gains from disposal of properties
For a non-resident enterprise without any establishment or place of business
in the PRC, any gains derived on the sale of a PRC asset (calculated as the
difference between gross sale proceeds and the assets net book value) may be
subject to a 20 percent withholding tax. Such gains include those arising from
the disposal of buildings, land-use rights and equity interests in PRC enterprises.
Certain tax treaties may exempt such gains from taxation in the PRC.
4.3 Double tax agreements
The PRC has entered into double tax agreements with the following countries:
In addition to the above agreements, China entered into avoidance of double tax
arrangement with the Macau Special Administrative Region in 2003 and a new
double tax arrangement with Hong Kong Special Administrative Region in 2006.
The agreements generally follow the model treaty developed by the Organisation
for Economic Co-operation and Development (OECD) in 1977. The source country
has the prior right to tax, and the country of residence provides tax relief in the
form of either an exemption or tax credit.
n Albania
n Armenia
n Australia
n Austria
n Azerbaijan
n Bahrain
n Bangladesh
n Barbados
n Belarus
n Belgium
n Brazil
n Bulgaria
n Canada
n Croatia
n Cuba
n Cyprus
n Czech Republic and
Slovak Republic
n Denmark
n Egypt
n Estonia
n Finland
n France
n Georgia
n Germany
n Greece*
n Hungary
n Iceland
n India
n Indonesia
n Iran
n Ireland
n Israel
n Italy
n Jamaica
n Japan
n Kazakhstan
n Korea (Rep. of)
n Kuwait
n Kyrgyzstan
n Laos
n Latvia
n Lithuania
n Luxembourg
n Macedonia
n Malaysia
n Malta
n Mauritius
n Mexico
n Moldova
n Mongolia
n Morocco
n Nepal*
n Netherlands
n New Zealand
n Nigeria*
n Norway
n Oman
n Pakistan
n Papua New Guinea
n Philippines
n Poland
n Portugal
n Qatar*
n Romania
n Russian Federation
n Saudi Arabia*
n Seychelles
n Singapore
n Slovenia
n South Africa
n Spain
n Sri Lanka
n Sudan
n Sweden
n Switzerland
n Thailand
n Trinidad and Tobago
n Tunisia
n Turkey
n Ukraine
n United Arab Emirates
n United Kingdom
n United States
n Uzbekistan
n Venezuela
n Vietnam
n Yugoslavia
* Not yet in force as at March 2007.
5.1 Introduction
In addition to existing transfer pricing rules, the EIT Law introduces several anti-
tax avoidance provisions that, in time, could prove to have a sweeping impact on
taxpayers in the PRC. These include:
CFC rules intended to compel PRC shareholders to bring to tax in the current
tax period their proportional interest in the undistributed profits of CFCs
established in comparatively low-tax jurisdictions (where there is no legitimate
business reason for the low or or lack of profit distribution)
Specific "thin-capitalisation" rules which apply to deny excessive interest
expense deductions
In addition, a general catch all anti-tax avoidance provision allows PRC tax
authorities to adjust the taxable income of taxpayers where business transactions
are undertaken without a reasonable business purpose.
However, the above anti-avoidance provisions under the EIT Law are stated in very
broad and general terms. In practice, as detailed implementation rules are still
being drafted, it is difficult to gauge the application scope of these provisions.
5.2 Transfer pricing
The transfer pricing related rules provided under the EIT Law contain several new
concepts, including the following:
Cost allocation for joint R&D cost incurred and the provision of services must
be conducted at arm's length
An annual related-party transactions report must be filed when the annual
income tax return is filed with the tax authorities
Any enterprises which have transacted with an enterprise under investigation
must provide related information on demand
Enterprises may enter into advance pricing agreements with the tax authorities
In addition to transfer pricing adjustments, interest will also be imposed
Another significant change to the transfer pricing regime is that the new EIT Law
will apply to both domestic and foreign-owned enterprises. However, the new law
does not lay out any penalties for transfer pricing infringement.
5 Anti-avoidance rules
5.3 CFC rules
Under the EIT Law, where an enterprise controlled by PRC resident enterprises
and / or PRC residents is established in a jurisdiction that has an effective tax rate
that is significantly lower than 25 percent, and the enterprise fails to distribute or
under-distributes its profits without reasonable business reason, that part of the
enterprises profits attributable to PRC shareholders must be brought to tax by
the PRC shareholder in the current tax period.
The law provides only a broad framework for the operation of the above
CFC rules. Significant uncertainties therefore remain regarding their scope
of application, as well as the interpretation of several key defining terms
and concepts. Such terms include for example, the definition of control in
determining a CFC, effective tax rate in the evaluation of a jurisdiction of
establishment (i.e. whether it is significantly lower taxed as compared to the
PRC), and reasonable business reasons in determination of the rationale for
any non-distribution. It is likely that the forthcoming detailed implementation
rules will address these uncertainties.
5.4 Thin capitalisation
The EIT Law has introduced a specific "thin-capitalisation" rule which seeks to
deny interest deductions when the associated borrowings of a company exceed a
prescribed debt/equity ratio.
In order for this provision to operate effectively, the detailed implementation rules
will need to clarify, amongst other things, the prescribed debt/equity ratio, the
definition of debt and equity for the purposes of the EIT Law, and the way in
which the debt/equity ratio is measured.
5.5 General anti-avoidance
The general anti-avoidance provision in the EIT Law states that where enterprises
have entered into transactions that do not have any reasonable business
objectives and such transactions result in a reduction in the enterprises taxable
profits or revenue, the tax authorities have the power to make reasonable
adjustments to the enterprises taxable profits or revenue.
The provision appears designed to have a wide application to attack tax-motivated
transactions. However, the determination of what amounts to reasonable
business objectives to displace the presumption of tax motivation and what are
reasonable adjustments available to tax authorities in the event of adjustment
require further clarification under the detailed implementation rules.
Income tax returns and payment of income tax
The tax year is from 1 January to 31 December.
Resident enterprises are obliged to file with the tax authorities:
Provisional income tax returns within 15 days of the end of a month or quarter
Final income tax returns within five months of year-end, together with the
financial statements and any other documents required by the authorities
Income tax must paid by monthly or quarterly within 15 days of the end of the
month or quarter.
6 Tax administration
EIT Enterprise Income Tax
EIT Law Enterprise Income Tax Law of the PRC
FIE Foreign-invested enterprise
OECD Organisation for Economic Co-operation and
PRC Peoples Republic of China
WTO World Trade Organization
7 Glossary
CFC Controlled foreign corporation
Detailed
implementation rules
Detailed rules for the implementation of the EIT Law
Development
The following text is an unofficial English translation of the EIT Law and is
intended for reference purposes only.
Decree No. 63 of Chairman of the Peoples Republic of China
The Enterprise Income Tax Law of the Peoples Republic of China was passed
at the 5th Full Session of the 10th National Peoples Congress of the PRC on 16
March 2007 and is hereby promulgated. It will come into effect on 1 January
2008.
Hu Jintao, Chairman of the Peoples Republic of China
16 March 2007
Enterprise Income Tax Law of the Peoples Republic of China
(Passed at the 5th Full Session of the 10th National Peoples Congress of the PRC
on 16 March 2007)
Chapter 1 General Provisions
Chapter 2 Taxable Income
Chapter 3 Tax Payable
Chapter 4 Tax Incentives
Chapter 5 Withholding of Tax at Source
Chapter 6 Special Tax Adjustments
Chapter 7 Tax Collection and Administration
Chapter 8 Supplementary Provisions
Chapter 1 General Provisions
Article 1 In the Peoples Republic of China (PRC), enterprises and other
organizations that derive income (hereinafter referred to as
enterprises) shall be the taxpayers of the enterprise income tax and
shall pay the enterprise income tax in accordance with the provisions
of this Law.
This Law shall not apply to individually-owned sole proprietor
enterprises or partnership enterprises.
Article 2 Enterprises are classified as resident enterprises and non-resident
enterprises.
A resident enterprise as referred to in this Law is an enterprise
that is established in the PRC under the PRC laws, or an enterprise
incorporated under the laws of other countries or regions but whose
place of effective management is located in the PRC.
8 Legislation
A non-resident enterprise as referred to in this Law is an enterprise that
is incorporated under the laws of other countries or regions with the
place of effective management located outside of the PRC, but which
has an establishment or place of business in the PRC, or an enterprise
that does not have an establishment or place of business in the PRC, but
derives income from sources within the PRC.
Article 3 A resident enterprise shall pay enterprise income tax on its income
sourced both from within and outside the PRC.
A non-resident enterprise with an establishment or place of business
in the PRC shall pay enterprise income tax on its PRC-sourced income
derived by such establishment or place of business and on its foreign-
sourced income which is effectively connected with such establishment
or place of business.
A non-resident enterprise, that does not have any establishment or place
of business in the PRC, or that has an establishment or place of business
in the PRC but whose revenues are not effectively connected with such
establishment or place of business, shall pay enterprise income tax on its
PRC-sourced income.
Article 4 The enterprise income tax rate shall be 25 percent.
The tax rate applicable to non-resident enterprises deriving income
as specified in the third paragraph of Article 3 of this Law shall be 20
percent.
Chapter 2 Taxable income
Article 5 The taxable income of an enterprise in a tax year shall be its total revenue
for the tax year less its non-taxable revenue, tax-exempt revenue, various
deductions and allowable losses brought forward from prior years.
Article 6 The total revenue of an enterprise refers to both the monetary revenues
and non-monetary revenues derived from various sources, which shall
include:
1. Revenue from sales of goods
2. Revenue from provision of labour services
3. Revenue from transfer of property
4. Dividends, profit distributions and other returns on equity investments
5. Interest
6. Rentals
7. Royalties
8. Donations
9. Other revenue
Article 7 The following revenues out of the total revenue shall be non-taxable:
1. Fund allocated under public finance
2. Government administrative charges and contributions to
government reserve funds collected according to the relevant laws
and subject to government's financial administration
3. Other non-taxable revenue stipulated by the State Council
Article 8 Reasonable expenses actually incurred by an enterprise in connection
with the earning of revenue, including costs, expenses, taxes, losses
and other expenses, are deductible in arriving at taxable income for
enterprise income tax purposes.
Article 9 Donations made by an enterprise for public welfare are deductible in
calculating taxable income for enterprise income tax purposes subject
to the limit of no more than 12 percent of total profit in the current
year.
Article10 The following items are not deductible in calculating taxable income:
1. Dividends, profit distributions and other returns on equity
investments paid to investors
2. Enterprise income tax
3. Late payment interest charged on tax underpayment
4. Fines, penalties, and losses resulting from confiscation of property
5. Donations other than those stipulated in Article 9 of this Law
6. Sponsorship
7. Unapproved provisions
8. Other expenditures incurred that are unrelated to the earning of
revenues
Article 11 In calculating its taxable income, an enterprise may deduct
depreciation charges on its fixed assets where the charges are
calculated in accordance with the relevant provisions.
Depreciation charges on the following fixed assets are not deductible:
1. Fixed assets not in use other than houses and buildings
2. Fixed assets leased from another party under an operating lease
3. Fixed assets leased to another party under a finance lease
4. Fixed assets fully depreciated but still in use
5. Fixed assets that are unrelated to business activities
6. Land appraised independently and booked as fixed assets
7. Other non-depreciable fixed assets
Article 12 In calculating its taxable income, an enterprise can deduct the
amortisation charges on its intangible assets where such charges are
calculated in accordance with the relevant stipulations.
Amortisation charges on the following intangible assets are not
deductible:
1. Expenses incurred by an enterprise in the development of its own
intangible assets that have already been deducted in calculating the
taxable income of the enterprise
2. Self-generated goodwill
3. Intangible assets unrelated to the business activities
4. Other intangible assets on which amortization charges are not
allowed to be deducted
Article 13 In calculating its taxable income, an enterprise can deduct the
following expenses where such expenses are treated as long-term
deferred expenses and amortised in accordance with the relevant
stipulations:
1. Expenses incurred for the alteration of fully depreciated fixed
assets
2. Expenses incurred for the alteration of fixed assets leased from
another party
3. Expenses incurred for overhaul of fixed assets
4. Other expenses that shall be treated as long-term deferred
expenses
Article 14 The cost of external investment of an enterprise shall not be deducted
in calculating the taxable income of an enterprise during the period of
investment.
Article 15 In calculating its taxable income, the cost of inventory used or sold
by an enterprise, which is computed in accordance with the relevant
provisions, is allowed to be deducted.
Article 16 Where an enterprise transfers its assets, the net book value of such
assets is allowed to be deducted in calculating its taxable income.
Article 17 Where an enterprise calculates its enterprise income tax on a
consolidated basis, losses incurred by its overseas business
establishment shall not be offset against the profits from its business
establishments in the PRC.
Article 18 Losses incurred by an enterprise in a tax year are allowed to be
carried forward and utilized against the income of subsequent years.
The loss carrying forward period shall not exceed five years.
Article 19 The taxable income of a non-resident enterprise as described in the
third paragraph of Article 3 of this Law shall be calculated according to
the following methods:
1. In the case of dividends, profit distributions and other returns on
equity investments, interest, rentals and royalties, the taxable
income shall be the entire amount of revenue
2. In the case of capital gains from transfer of assets, the taxable
income shall be the entire amount of revenue less net book value
of such assets
3. In the case of other income, the taxable income shall be calculated
with reference to the two methods mentioned above
Article 20 Detailed measures regarding the specific scope of, and the standards
for, revenue and deductible expenses, and detailed measures on the
tax treatment of assets as stipulated in this Chapter, shall be issued
by the finance and taxation departments under the State Council.
Article 21 In calculating its taxable income, if there is inconsistency between
the financial and accounting treatment adopted by an enterprise and
provisions of the tax laws and regulations, the taxable income shall be
calculated in accordance with the tax laws and regulations.
Chapter 3 Tax payable
Article 22 The amount of tax payable by an enterprise shall be equal to the
enterprises taxable income times its applicable enterprise income tax
rate, less the amount of its allowable reductions, exemption and tax
credits pursuant to the provisions of this Law on tax incentives.
Article 23 Foreign income tax paid on the following income may be credited
against the enterprise income tax payable by an enterprise in the
current period, provided that the amount of such tax credit shall
not exceed the enterprise income tax otherwise payable on such
income calculated in accordance with the provisions of this Law; the
amount of foreign tax paid in excess of the allowable tax credit limit
in the current period may be carried forward and credited against the
enterprise income tax payable in any of the subsequent five years to
the extent that in each of those years there remains unused credit
limit for that year after the utilisation of the foreign tax credit arising in
that year:
1. Taxable income from sources outside PRC derived by a resident
enterprise
2. Taxable income derived from sources outside PRC by a non-
resident enterprise, which is effectively connected with the
establishment or place of business of such non-resident enterprise
within the PRC
Article 24 For foreign-sourced dividends and profit distributions or other returns
on equity investments that are distributed to a resident enterprise by
a foreign enterprise directly or indirectly controlled by the resident
enterprise, the portion of the income tax actually paid outside the PRC
by a foreign enterprise that is attributable to such dividends, profit
distributions or other returns on equity investments may be used by
the resident enterprise as a foreign income tax credit and credited up
to the limit specified in Article 23 of this Law.
Chapter 4 Tax Incentives
Article 25 Enterprise income tax incentives are available to industries and
projects that are eligible for key support of the State or whose
development is encouraged by the State.
Article 26 The following revenues derived by an enterprise shall be exempt from
enterprise income tax:
1. Interest income from state treasury debts
2. Qualified dividends, profit distributions and other returns on equity
investments derived by a resident enterprise from another resident
enterprise
3. Dividends, profit distributions and other returns on equity
investments derived by a non-resident enterprise from another
resident enterprise, to the extent that the dividends, profit
distributions and other returns are effectively connected with the
establishment or place of business in the PRC of the non-resident
enterprise
4. Revenue of a qualified non-profit making organisation
Article 27 The following incomes derived by an enterprise may be eligible for
exemption from or reduction of enterprise income tax:
1. Income derived from projects in the agriculture, forestry, animal
husbandry or fishery industries
2. Income derived from investment in or operation of public
infrastructure projects eligible for key support from the State
3. Income derived from environment protection, energy or water
conservation projects that meet certain conditions
4. Income derived from technology transfer that meets certain
conditions
5. Income described in the third paragraph of Article 3 of this Law
Article 28 The enterprise income tax rate applicable to small-scale enterprises
with low profitability that meet certain conditions shall be reduced to
20 percent.
The enterprise income tax rate applicable to Advanced and New
Technology Enterprises eligible for key support from the State shall be
reduced to 15 percent.
Article 29 The autonomous government authorities of ethnic autonomous
regions may resolve to grant a reduction or exemption of the
enterprise income tax to the enterprises located within their
jurisdictions for such part of enterprise income tax as retained
by ethnic autonomous regions. Tax reductions or exemptions
that autonomous prefectures and counties resolve to grant to
such enterprises shall be subject to approval from the People's
Governments of the relevant provinces, autonomous regions and
municipalities.
Article 30 In calculating its taxable income for enterprise income tax purposes,
an enterprise may claim additional deduction on the following
expenses:
1. R&D expenses incurred for the development of new technologies,
new products and new technological processes
2. Salary expenses paid to disabled personnel employed by the
enterprise and other personnel whose employment is encouraged
by the State
Article 31 A venture capital enterprise, that makes venture capital investment
in the areas eligible for key support and encouragement from the
State, shall be eligible to set off a certain percentage of its investment
against its taxable income for enterprise income tax purposes.
Article 32 If it is necessary to accelerate depreciation of an enterprises
fixed assets due to such reasons as technology advancement, the
depreciation period may be shortened or an accelerated depreciation
method may be adopted.
Article 33 Revenue derived from the manufacture of products that are in line
with state industrial policy and involve the diversified utilisation of
resources may be reduced in calculating the taxable income of an
enterprise.
Article 34 A certain percentage of the investment made by an enterprise on
the purchase of special equipment for the purpose of environmental
protection, energy and water conversation or production safety, may
be credited against the enterprise income tax payable.
Article 35 Detailed measures on implementation of the tax incentives provided
for in this Law shall be stipulated by the State Council.
Article 36 To meet the needs of national economic and social development, or
in response to unexpected events that have substantial impacts on
enterprises' business operations, the State Council may issue policies
on special tax incentives and shall notify the Standing Committee of
the National People's Congress of such policies.
Chapter 5 Withholding of tax at source
Article 37 Enterprise income tax payable by a non-resident enterprise on the
income as described in the third paragraph of Article 3 of this Law
shall be withheld at source, and the payer shall be the withholding
agent. The withholding agent shall withhold the tax from the amount
paid or payable at the time the amount is paid or falls due.
Article 38 With respect to the income tax payable on the income derived by a
non-resident enterprise from performance of engineering work and
provision of labour services within the PRC, the tax authorities may
designate the payer of the contracted amount or labour service fee as
the withholding agent.
Article 39 Should the withholding agent fail to withhold the income tax payable
or be unable to perform its withholding obligation in respect of such
enterprise income tax payable as specified in Article 37 and Article
38 of this Law, the taxpayer shall pay the tax at the place where
such taxable income is derived. If the taxpayer fails to pay the tax as
required by law, the tax authorities are empowered to recover the tax
payable by the taxpayer from any other revenue due to the taxpayer
from another payer in the PRC.
Article 40 A withholding agent shall remit each amount of tax it withholds to the
state treasury within seven days of the date of withholding and shall
file withholding tax returns with the local tax authority at the place
where it is located.
Chapter 6 Special tax adjustments
Article 41 If a business transaction between an enterprise and its related parties
does not comply with the arm's length principle, thus reducing the
taxable income or revenue of the enterprise or the related parties,
the tax authorities shall be empowered to make adjustments using
reasonable methods.
When calculating the taxable income, the costs incurred by an
enterprise and its related parties for the joint development or transfer
of intangible assets, or for the joint provision or receipt of labour
services, shall be allocated based on the arm's length principle.
Article 42 An enterprise may submit the pricing principles and computational
methods applied in its related-party transactions to the tax authority.
Through negotiation and validation, the tax authority may conclude an
advance pricing arrangement with the enterprise.
Article 43 When an enterprise files its annual enterprise income tax return
with the tax authority, it shall submit, in respect of its business
transactions with related parties, a form for the annual reporting of
related-party transactions along with the annual enterprise income tax
return.
When the tax authority conducts an investigation on related party
transactions, the enterprise under investigation, its related parties as
well as other enterprises involved in the investigation shall provide
relevant documents according to the relevant stipulations.
Article 44 If an enterprise does not provide information on its related-party
transactions, or provides false and incomplete information that does
not truthfully reflect its related-party transactions, the tax authority
shall be empowered to assess its taxable income on a deemed basis
according to law.
Article 45 Where a resident enterprise by itself, or together with individual
China residents, controls an enterprise that is established in a country
(region) where the effective tax burden is distinctly lower than the tax
rate set forth in the first paragraph of Article 4 of this Law and that
enterprise does not distribute its profits or reduces the distribution
of its profits not on account of any reasonable operational needs,
the portion of the profits attributable to the resident enterprise shall
be included in the revenue of the resident enterprise in the current
period.
Article 46 Where an enterprise receives from its related parties debt investment
and equity investment in a ratio that exceeds the prescribed level,
the interest expenses incurred as a result shall not be deductible in
calculating the taxable income of such enterprise.
Article 47 If an enterprise carries out any other business arrangements without
reasonable business purposes resulting in reduction of its taxable
revenue or income, the tax authority shall be empowered to make
adjustments using reasonable methods.
Article 48 When additional tax is to be levied pursuant to a tax adjustment
made by the tax authority in accordance with the stipulations of this
Chapter, the additional tax shall be collected and additional interest
shall also be levied in accordance with the relevant stipulations by the
State Council.
Chapter 7 Tax Collection and Administration
Article 49 The collection and administration of enterprise income tax shall be
carried out in accordance with the provisions as stipulated in this
Law as well as Tax Collection and Administration Law of the Peoples
Republic of China.
Article 50 Except as otherwise specified by tax laws and regulations, a resident
enterprise shall pay tax at the place where it is registered, unless it is
registered outside the PRC, in which case it shall pay tax at the place
of its effective management.
Where a resident enterprise has business establishments that do
not have a legal person status in the PRC, the enterprise income tax
of such business establishments shall be calculated and paid on a
consolidated basis.
Article 51 A non-resident enterprise shall pay tax at the place where its PRC
establishment or place of business is located, if it derives income
as described in the second paragraph of Article 3 of this Law. If a
non-resident enterprise has two or more establishments or places of
business in the PRC, it may, upon approval of the tax authority, select
its principal establishment or place of business to pay enterprise
income tax on a combined basis.
A non-resident enterprise that derives income as described in the
third paragraph of Article 3 of this Law shall pay tax at the place
where its withholding agent is located.
Article 52 Unless otherwise specified by the State Council, enterprises shall not
be allowed to pay enterprise income tax on a consolidated basis.
Article 53 The enterprise income tax shall be calculated for a tax year, which
starts from 1 January and ends on 31 December of a calendar year.
If the actual operating period of an enterprise is less than 12 months
in a tax year because it commences or terminates its business after
the beginning of the year, its actual operating period in the current
year shall be treated as a tax year.
When an enterprise is liquidated according to law, the liquidation
period shall be treated as a tax year.
Article 54 Enterprise income tax shall be paid in advance on a monthly or
quarterly basis.
An enterprise shall, within 15 days after the end of each month or
quarter, file an enterprise income tax return with and make the tax
payment to the tax authority.
Within five months after the year end, an enterprise shall file an
annual enterprise income tax return with the tax authority, and
perform the annual reconciliation so as to settle the tax to be paid or
claim the tax to be refunded.
An enterprise shall file its financial and accounting reports and other
relevant information along with the annual enterprise income tax
return in accordance with the regulations.
Article 55 If an enterprise terminates its business operation in the middle of a
tax year, it shall perform reconciliation and settle the annual enterprise
income tax payment for the current period within 60 days of the date
of actual termination of business operation.
Prior to deregistration with tax authority, an enterprise shall file its
enterprise income tax return with and make the tax payment to the
tax authority on its liquidation income.
Article 56 Enterprise income tax paid in accordance with this Law shall be
calculated in renminbi. Income earned in other currencies shall be
converted into renminbi for the purpose of calculating and paying tax.
Chapter 8 Supplementary Provisions
Article 57 According to the stipulations of the State Council, enterprises that
have been approved to be established prior to the promulgation of
this Law and that are entitled to reduced tax rates in accordance
with the then prevailing tax laws and regulations, shall be eligible for
a five-year transition period after the implementation of this Law in
accordance with the stipulations of the State Council, during which
time the tax rate will be increased step by step to the tax rate as
set out in this Law; enterprises that are entitled to a tax holiday
can continue to enjoy the incentive after the implementation of this
Law until it expires. However, for enterprises that have not started
enjoying such tax holiday yet due to their losses, the tax holiday
period shall be deemed to commence from the year when this Law
comes into effect.
Transitional tax incentives shall be available to newly established
Advanced and New Technology Enterprises that require the key
support of the State provided that they are established in specially
designated areas that have been set up in accordance with national
laws with an aim to develop foreign economic cooperation and
technological exchange, or are established in specific areas that have
been permitted by the State Council to follow the special policies
available in abovementioned areas. The State Council shall issue
practical stipulations for such incentives.
Other enterprises that have already been recognised by the State
as encouraged-type enterprises may enjoy enterprise income tax
exemptions or reductions in accordance with the stipulations of the
State Council.
Article 58 Where the provisions of a tax treaty concluded between the
government of the PRC and a foreign government are different from
the provisions of this Law, the provisions of the treaty shall prevail.
Article 59 The State Council shall formulate implementation regulations on the
basis of this Law.
Article 60 This Law shall become effective on 1 January, 2008. Income Tax Law
of the Peoples Republic of China for foreign invested enterprises and
foreign enterprises passed on the 4th Session of the 7th National
People's Congress on 9 April 1991 and Provisional Regulations of the
Peoples Republic of China on Enterprise Income Tax promulgated
by the State Council on 13 December 1993 shall be annulled on the
same date.

Khoonming Ho
Partner
KPMG in Beijing
8th Floor
Tower E2
Oriental Plaza
1 East Chang An Avenue
Beijing 100738, China
Tel : +86 (10) 8518 5000
Fax : +86 (10) 8518 5111
J ohn Lee
Partner
KPMG in Shanghai
50th Floor
Plaza 66
1266 Nanjing West Road
Shanghai 200040, China
Tel : +86 (21) 2212 2888
Fax : +86 (21) 6288 1889
Peter Kung
Partner
KPMG in Hong Kong
8th Floor
Princes Building
10 Chater Road
Central, Hong Kong
Tel : +852 (-) 2522 6022
Fax : +852 (-) 2845 2588
David Ko
Partner
KPMG in Chengdu
18th Floor
Tower 1, Plaza Central
8 Shuncheng Avenue
Chengdu 610016, China
Tel : +86 (28) 8673 3888
Fax : +86 (28) 8673 3838
9 Contact
Bolivia Cheung
Partner
KPMG in Guangzhou
29th Floor, Guangzhou International
Electronics Tower
403 Huan Shi Dong Road
Guangzhou 510095, China
Tel : +86 (20) 8732 2832
Fax : +86 (20) 8732 2883

Peter Kung
Partner
KPMG in Shenzhen
9th Floor
China Resources Building
5001 Shennan East Road
Shenzhen 518001, China
Tel : +86 (755) 2547 1000
Fax : +86 (755) 8266 8930
Martin Ng
Partner
KPMG in Hangzhou
8th Floor
West Tower, Julong Building
9 Hangda Road
Hangzhou 310007, China
Tel : +86 (571) 2803 8000
Fax : +86 (571) 2803 8111
Khoonming Ho
Partner
KPMG in Qingdao
4th Floor
Inter Royal Building
15 Donghai West Road
Qingdao 266071, China
Tel : +86 (532) 8907 1688
Fax : +86 (532) 8907 1689
www.kpmg.com.cn
www.kpmg.com.hk
Qingdao
4th Floor, Inter Royal Building
15 Donghai West Road
Qingdao 266071, China
Tel :+86 (532) 8907 1688
Fax:+86 (532) 8907 1689
Beijing
8th Floor, Tower E2, Oriental Plaza
1 East Chang An Avenue
Beijing 100738, China
Tel :+86 (10) 8508 5000
Fax:+86 (10) 8518 5111
Northern China
Shanghai
50th Floor, Plaza 66
1266 Nanjing West Road
Shanghai 200040, China
Tel :+86 (21) 2212 2888
Fax:+86 (21) 6288 1889
Eastern and Western China
Chengdu
18th Floor, Tower 1, Plaza Central
8 Shuncheng Avenue
Chengdu 610016, China
Tel :+86 (28) 8673 3888
Fax:+86 (28) 8673 3838
Hangzhou
8th Floor, West Tower, Julong Building
9 Hangda Road
Hangzhou 310007, China
Tel :+86 (571) 2803 8000
Fax:+86 (571) 2803 8111
Guangzhou
29th Floor, Guangzhou International
Electronics Tower, 403 Huan Shi Dong Road
Guangzhou 510095, China
Tel :+86 (20) 8732 2832
Fax:+86 (20) 8732 2883
Southern China
Shenzhen
9th Floor, China Resources Building
5001 Shennan East Road
Shenzhen 518001, China
Tel :+86 (755) 2547 1000
Fax:+86 (755) 8266 8930
Hong Kong
8th Floor, Prince's Building
10 Chater Road
Central, Hong Kong
Tel :+852 2522 6022
Fax:+852 2845 2588
Special Administrative Regions
Macau
23rd Floor, D, Bank of China Building
Avenida Doutor Mario Soares, Macau
Tel :+853 2878 1092
Fax:+853 2878 1096
The information contained herein is of a general nature and is not intended to address the circumstances
of any particular individual or entity. Although we endeavour to provide accurate and timely information,
there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act upon such information without appropriate
professional advice after a thorough examination of the particular situation.
2007 KPMG, a Hong Kong partnership and a
member firm of the KPMG network of independent
member firms affiliated with KPMG International,
a Swiss cooperative. All rights reserved. Printed
in Hong Kong.
KPMG and the KPMG logo are registered
trademarks of KPMG International, a Swiss
cooperative.
Publication date: March 2007
2007 KPMG Huazhen, a Sino-foreign joint
venture in the People's Republic of China
and a member firm of the KPMG network
of independent member firms affiliated with
KPMG International, a Swiss cooperative.
All rights reserved. Printed in the People's
Republic of China.
KPMG and the KPMG logo are registered
trademarks of KPMG International, a Swiss
cooperative.
Publication date: April 2007
The information contained herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavour to provide accurate and
timely information, there can be no guarantee that such information is accurate as of the date it is
received or that it will continue to be accurate in the future. No one should act upon such
information without appropriate professional advice after a thorough examination of the particular
situation.

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