Resident representative offices of foreign enterprises when translated revenue expenditure, it is governed by some specific provisions of EIT: -
Firstly, income tax expenditures conversion formulas
"Regarding the strengthening of Representative Offices of Foreign Enterprises Tax Management Issues Related Notice" (GSF [ 2002 ] No. 396) on Income Tax Expenditures Conversion Formula to provide for:
"Income tax = Current Expenditures / 1 - deemed profit rate of 10% - business tax rate of 5%;
Corporate income tax payable = income margin 10% × approved enterprise income tax rate of 15%. "
Secondly, the conversion of the revenue expenditure: the general provisions of "Ministry of Finance State Administration of Taxation on Representative Offices of Permanent Foreign Enterprises method of Taxation Issues Notice" ( ( 85 ) Cai Shui Wai Zi No. 200 ) states: "The resident representative office expenditures includes: In China, outside the wages paid to staff, salaries, bonuses, allowances, benefits, procurement expenses (including automobiles, office equipment and other fixed assets), communications, travel, rent, equipment rental fees, transportation fees, entertainment expenses, and other expenses, the amount of these expenditures regarding the above, must be truthfully declared to the local tax authorities, and to provide relevant information and it shall not refuse or concealment of which belongs to the Chinese portion of expenditures outside, but also to provide the total to the institutions and CPA signed documents, a report to the tax authorities for examination. "
Thirdly, the conversion of revenue expenditure special provisions:
( A ) The need to include the conversion amount of revenue expenditure, the "State Administration of Taxation on the Amount for Use by Foreign Income Conversion Representative Offices Entertainment Expenses Charged to Deal with the Problem of the Notice " ( ( 88 ) Guo Shui Wai Zi No. 338 ) provides that:-
" Expenditures for adoption of the income amount for conversion by resident representative offices of foreign enterprises, it should be the actual communicative amount of fees that is paid for inclusion in revenue, conversion income, and no longer be in accordance with the "Foreign Enterprise Income Tax Act.”
Then for the provisions of s.13, calculated based on its limitations on entertainment expenses incurred. "The State Administration of Taxation on Use by Fee Income Conversion Expenditure Resident Representative Offices of Foreign Enterprises Income Occurred Expenditure of its Funds, it Shall Not Be Deducted" ( Guo Shui Fa [ 1991 ] No. 1303 ) states: "The Resident Representative Offices of Foreign Enterprises Expenditures Translated by Taxation, it should has its actual income conversion expenditure amount, the interest shall not be offset by funding support out the year. "
The "State Administration of Taxation on Representative Offices of Foreign Enterprises Deal with Certain Tax Issues Notice" ( Guo Shui Fa [ 1998 ] No. 63 ) provides: "The representative body of the purchased fixed assets ( such as houses, cars , computers, etc. ), it provides that support out as well as the establishment of representative offices and other reasons, or when the relocation expenses incurred decoration, you can make a one-time occurrence translated as the representative organization income tax expense. If the representative body of the expenses incurred large amounts, on behalf of agency, disposable income taxes to translates that has difficulties as an expenses, such as the representative body of the ability to set and save the complete books, certificates can be accurately accounted for and record the amortization of the cost of the tax authorities to prepare for the case of verification on the purchase of fixed assets production expenditures incurred or it can press the "PRC Foreign Investment Enterprise and Foreign Enterprise Income Tax Law Implementation Regulations”, provisions of s. 35 of the shortest similar fixed assets depreciation, no residual value, the average apportioned by representative bodies conversion fee income taxes; on renovation expenses, according to the 5-year average conversion apportioned funds on behalf of institutional revenue Carolina tax. "
( B ) It may be included in the expenditure of the "State Administration of Taxation on Foreign Enterprises Permanent Office in Advance of its Total Body Portion Minutes from time as a Resident Representative Office Expenses, the Cost of Conversion Income Tax Notice" ( ( 88 ) Guo Shui Wai Zi No. 333 ) states: The resident representative office of its head office advance their own business activities, it do not belong to the following expenses incurred, and from time to time to act as a resident representative office expenses :-
- The total organization invited to visit by the resident representative office for advance ticketing costs that is relating to personnel;
- Institutions and organizations of the delegation's visit to China by the advance of the resident representative office in China. Delegated staff’s accommodation costs, transportation cost and social costs, but exclude China that engages in business negotiations, contracts, etc. The delegation advances the above fees;
- Head office launches large-scale exhibitions in China, if advanced by the permanent representative body, the agency costs and its related move, the sample tariffs, border internal transport costs and other related expenses. "
"State Administration of Taxation on the Resident Representative Offices of Foreign Enterprises Fines, Penalties are not included in the Expenditure of its Funds Income Conversion of Approval" ( Guo Shui Fa [ 1991 ] No. 726 ), it provides that: "the resident representative offices of foreign enterprises overdue taxes and fines in the amount for conversion by revenue, it may as expenditures, be calculated and paid as income tax. "The "State Administration of Taxation on Representative Offices of Foreign Enterprises Deal with Certain Tax Issues Notice" ( Guo Shui Fa [ 1998 ] 63 ) it states: "The representative office in China, in the form of money for charity and relief donations, it may not be counted for the translation of income tax on behalf of institutional funding of expenditure."