Under the new policy, it was explicitly abolished a number of documents or articles regarding the tax-exempted or those non-taxable items of tax authorities, it is no longer entertained under the respective tax authority the corporate income tax exemption, approval is also required for those, which in the past, has obtained approval under the exemption office for cleanence. That is, Guo Shui Fa  No. 18, where the documents already approved in prior through press release the tax representative office, should re-evaluate whether it continues to comply with the tax exemption conditions stipulated in the agreements. If it is the case, it should submit as soon as possible to the tax authorities for tax exemption. Otherwise, the representative must honestly declare the actual profit or declaration in accordance with the approved method the levying corporate income tax.
Tax experts said that it does not mean that the new policy cancelled the duty-free treatment of all foreign representative offices , but to further standardize the management of tax relief offices. It is because the new policy also stipulates that office needs to enjoy tax treaty benefits that should be handled in accordance with the relevant tax treaty, or in the event of declaration, related to the taxpayer before the press of the relevant provisions by the relevant tax authorities.
Under the existing policy, the resident representative office (office) under the treaty benefits from two main types:-
- The first category is: permanent representative offices (office) under the agreement shall not constitute a permanent establishment, may declare and pay enterprise income tax in China.
According to the China signed bilateral tax agreements (arrangements) and "State Administration of Taxation on whether the Resident Representative Offices of Foreign Enterprises Constitute a Permanent Establishment of the Tax Treaty Issues of Interpretation of the Notice" ( Guo Shui Han  No. 607 ) under the regulations, If foreign companies set up , in China, a one which is specialized in the following six representative business natures / services, it does not constitute a permanent establishment.
These services include : Designed for storage, display or delivery of goods or merchandise that belonging to the enterprise for the purpose of use of facilities , designed for storage, display or delivery for the purpose of goods or merchandise that belonging to the enterprise inventory, specifically for the purpose of processing by another enterprise , the preservation of the corporate stock of goods or merchandise , specifically for corporate purchasing goods or merchandise or of collecting information for the purpose of a fixed place of business that solely for any enterprise, any other activity of a preparatory or auxiliary purpose of a fixed place of business and so on.
Experts said that the proposed tax-exemption under a tax treaty, the representatives or institutions must provide sufficient evidence and information to prove that they are engaged in the business that are "preparatory, auxiliary activities." This is the actual conduct of operations for the existence of representative offices concerned, it may be very difficult.
- The second category involves international transportation revenues, representative may apply for tax treaty relief from taxation.
In China's, foreign tax treaty provides that for maritime and air transport, or in our country and other countries, the sea or air exchange letters signed specifically provides that the provisions of a Contracting State in the other Contracting State to obtain tax-exemption for income , then the residents of that State, those sea and air transport companies, can apply for tax exemption. Exemption generally involves the mutual exemption of income tax, if not expressly provided, free from a turnover of tax that cannot be exempted from sales tax treatment.
For example, according to the Chinese government and the Singapore government who signed agreements to avoid double taxation on Singapore Airlines in the country, for those engaged in international transport operations to obtain revenue and profits, China is exempted from business tax and enterprise income tax. In other words, for Singapore Airlines, the one which establish representative offices in China or if has its head office in China to carry out all aspects of transportation business for providing services to customers, it may apply for exemption under the business tax and the enterprise income tax treatment.