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Fees under technology licensing agreements, intellectual property (IP) right licensing agreement received from a source in the PRC by non-resident foreign corporations or individuals shall be subject to a 10% withholding income tax, a 5% business tax, and a stamp tax of 0.03% on the gross amount. The resident payer has the legal obligation to withhold the tax and pay it over to the tax office. Residents of non-PRC tax treaty countries will be subject to a 20% withholding income tax.

ASSIGMENT OF IP RIGHTS

Non-resident foreign investor receiving income for the Assignment of IP rights in the PRC will be subject to the following type of taxes: -

Type of tax Rate

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Rental income from properties owned by non-resident foreign investors are subject to the following taxes: -

Type of tax Rate

Income tax 20% on rental income
Business tax 5% on rental income
City property tax 18% on rental income

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Legal authority
The PRC Tax Levy and Administration Law and its Detailed Implementation Regulations
Tax registration
Every foreign investment enterprise (FIE) shall apply for a tax registration at both the national tax office and local tax office.
Types of tax registration:-

National income registration and local income tax registration. Both registrations are mandatory and the registration application must be submitted within 30 days of obtaining the business license from the local office of “State Administration of Industry and Commerce” at the city level or above;

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[1] The scope of the PRC Land Appreciation Tax includes the gains arising from the transfer of land use right and the buildings that are constructed on the land. Land appreciation tax is levied from 30% to 60% on gain on disposal of landed properties with reference to the percentage of appreciated value over the deductible amount. For completed properties, the deductible amount is the sum of purchased price and taxes paid. In the absence of tax invoice for the purchased properties, the land appreciation tax is imposed at 0.5% to 1% of the contract amount

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It has been a 13-year journey from the preliminary work in 1994 to the passing of thePRC Enterprise Income Tax Law (referred to as “the EIT Law” hereafter) on 16th March 2007, which marked the completion of the unification of two tax systems for  domestically funded and foreign funded enterprises in China. It is a system innovation in the process of building socialism and a harmonized society within the country. To reap the benefits of the new tax system depends very much on its implementation in an effective manner. A few days ago, the State Council announced the long-awaited  Implementation Regulations of the PRC EIT Law (referred to as “the Implementation Regulations” hereafter), which is to come into play with the implementation of the  EIT Law.

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Enterprise Income Tax Law of the People’s Republic of China

Order of the President of the People’s Republic of China
(No. 63)

The Enterprise Income Tax Law of the People’s Republic of China, which was adopted at the 5th Session of the 10th National People’s Congress of the People’s Republic of China on March 16, 2007, is hereby promulgated and shall come into force as of January 1, 2008.

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The first is to allow deduction of the input VAT for purchased fixed assets. Before the amendment, input VAT is not allowed to get deducted from the output VAT. The production type VAT system is adopted and that has increased the tax burden of the enterprise buying the machinery and equipment. To reduce the tax burden, the revised VAT regulations remove the practice of such non-deduction, and allow the taxpayer to deduct the input VAT for purchased fixed assets. That helps achieve the transformation of the production type VAT system to one of consumption type.

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China’s government launched a slew of measures Wednesday to revitalize the sluggish property market, including cuts in business taxes for real estate sales and loosened mortgage policies for second-home buyers.

The State Council, or cabinet, said a sales tax on properties sold will be waived two years after purchase, compared with the previous term of five years. The tax will also be levied based on the profit from the sale instead of the sale price, according to the statement.

“This move, which helps to ease buyer’s economic burden, is expected to boost market vibrancy and may drag down the price of new residential buildings,” said Qin Xiaomei, research chief at CB Richard Ellis’s Beijing branch.

“However, it could also be a double-edged sword, partly encouraging investment-oriented purchase,” she added.

The floor area of residential properties sold in the first 11 months of the year fell 18.8 percent from a year earlier, while real estate investment growth slowed to 22.7 percent in January to November, down from 24.6 percent in the first 10 months.

Dropping transactions are squeezing an economy already hurt by the global turmoil, as the property sector is one of the biggest drivers of China’s domestic expansion, contributing a quarter of fixed-asset investment and employing 77 million people.

Therefore, experts say reviving the property sector is vital to the government’s efforts to counter the current downturn, which has worsened in the past month, with factory output falling to the slowest pace on record.

“The latest package will definitely help to boost market confidence, but we should not expect an instant rebound since the detailed regulations are still in the pipeline,” said Gu Wei, spokesman of Longfor Property.

“Furthermore, it is not easy to make such a big move, showing the government’s determination to reactivate the ailing property market,” he added.

The State Council said it will allow people to buy second homes on the same preferential terms normally reserved for those buying their first homes, such as lower down payment requirements and interest rates, so long as the floor space per person is lower than the local average.

“This long-anticipated relaxation really makes us excited and could help speed up the recovery of the market,” said a sales manger of Beijng Capital Land.

However, Zheng Fei, a 30-year-old company executive, said he will still take a wait-and-see attitude, betting the property price will still fall and the government may offer more favorable policies afterward.

The government also said it would support developers’ “reasonable” financing needs, and would increase credit help for construction especially of low-priced and small units, vowing to provide housing for 9.9 million low-income families in the next three years.

The People’s Bank of China, the central bank, said Wednesday that developers building low-rent housing could enjoy a 10 percent discount on lending rates, effective from January.

And the National Development and Reform Commission Wednesday also announced a 10 billion yuan subsidy on affordable housing.