Chinese Tax Regulation, What's New in 2022?

Chinese Tax Regulation, What's New in 2022?

Adjustment of the "Zero Tariff" positive list of raw and auxiliary materials imported into the Hainan Free Trade Port

Effective Date: 2021-12-21

According to Announcement No. 49 jointly released by the State Administration of Taxation (“SAT”), the Ministry of Finance (“MOF”) and the General Administration of Customs, 187 more items have been added to the “Zero Tariff” positive list of the raw and auxiliary materials imported into Hainan Free Trade Port (“FTP”). 

Improvement of the VAT policy on comprehensive utilization of resources

Effective Date: 2022-03-01

Announcement [2021] No. 40 jointly released by the SAT and the MOF stipulates specific VAT policies for taxpayers which are engaged in the field of comprehensive utilization of resources. The key points that are worth attention of the Announcement mainly includes the following:  

General VAT payers selling the recycled renewable resources may choose either the simplified taxation method based on a VAT levy rate of 3% or the general taxation method. Taxpayers which choose the simplified taxation method shall get the relevant permits and complete the corresponding recordal or registration as required.    

Employees’ recycling renewable resources for the taxpayers is not subject to VAT, but the taxpayers’ selling the recycled renewable resources shall either be subject to VAT or be exempt from VAT according to the relevant VAT policies.

General VAT payers selling self-produced products from comprehensive utilization of resources or providing services from comprehensive utilization of resources can enjoy the VAT policy of Refund-upon-Levy. The criteria of the qualified resources for comprehensive utilization and the VAT amounts for Refund-upon-Levy are stipulated in the Catalogue of Products and Services from Comprehensive Utilization of Resources Qualified for Preferential VAT Policies (2022 Edition) (“the Catalogue”). The taxpayers shall also meet certain conditions, such as the requirements of the relevant invoices or vouchers that justify the purchase of renewable resources, tax credit rankings of the taxpayers, etc., in order to apply for the Refund-upon-Levy policy.    

Administration of Individual Income Tax levied on the business profits resulting from equity investments

Effective Date: 2022-01-01

According to Announcement [2021] No. 41 jointly released by the SAT and the MOF, taxpayers undertaking the projects listed in Section 2.15, 5.1 and 5.2 of the Catalogue can choose to apply for the Refund-upon-Levy policy or VAT exemption and keep the relevant information for inspection. Once either of the taxation method is selected, no change is allowed for 36 months.

The Announcement stipulates that individuals holding shares, stocks, partnership units and other equity investments through sole proprietorships or partnerships shall be subject to Individual Income Tax (“IIT”) calculation based on actual profits. In the past, the individuals earning business profits through sole partnerships and partnerships could be taxed based on deemed profit methods which might give rise to lower effective tax results. The sole proprietorships and the partnerships through which the equity investments are held by individuals shall, within 30 days from the date of holding the above-mentioned equity investments, proactively report to the competent tax authorities the equity investments they hold. If a vehicle already holds equity investments before the implementation of this Announcement, it shall report to the tax authorities the equity investments it holds before 30 January 2022. The tax authorities shall adjust for such vehicles the IIT taxation method accordingly after receiving the reports.

Source: Lexology

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