China Tax Alert - Issue 5, March 2013
On 19 February 2013, the State Administration of Taxation of the People’s Republic of China issued Announcement 9. The new announcement clarifies that if a non-resident enterprise derives certain China-sourced passive income that falls within the scope of the value added tax reform pilot program, the VAT arising on such passive income is not to be included in the taxable base for calculating the corporate income tax that should be withheld for the non-resident recipient . As a result, the CIT burden for the non-resident enterprise is effectively reduced.