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CHINA: "China Tax News (May 2016)" alert

CHINA: "China Tax News (May 2016)" alert. 5-page Tax Alert by PwC China.

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back to index backCHINAtalk March,  2005

Beijing Tax Bureau begins to process business tax refund applications for technology transfer transactions

Transfers of technology by foreign companies or individuals have been eligible for an exemption from business tax (BT) since 1999. However, taxpayers are required to submit an exemption application to the relevant authorities for approval, and until approval is obtained, taxpayers must pay the BT and then seek a refund. In June 2004, the central government repealed many of the administrative requirements, including the requirement for obtaining a government approval for BT exemption.

Although the repeal was to be effective from 1 July 2004, the Beijing Local Tax Bureau (BLTB) continued to require taxpayers to pay the BT, claiming that it has not yet issued guidance on how to implement the new rule.

Finally, the BLTB issued two Notices (Notices No. 571 and 605 of Jing Di Shui Ying [2004]) on 3 and 16 December 2004, respectively. The Notices essentially instruct the local tax bureaus in various districts in Beijing to begin to expeditiously process BT refunds to taxpayers provided the following conditions have been satisfied:

1. The taxpayer has paid BT on qualified technology transfers and research and development activities; and

2. The taxpayer has submitted a complete BT refund application by 31 December 2004.

Notwithstanding the issuance of the two Notices, the BLTB advised that, until further notice, it would continue to require taxpayers to pay the BT first and then apply for the refund.

Due to the uncertainty of the BT exemption process, taxpayers should draft the terms of their technology transfer contracts with great care and make sure that the contracts are properly registered with all appropriate authorities in order to ensure that the relevant payments for technology transfers and research and development activities qualify for BT exemption.

Source: Deloitte China Tax News - GAI

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