The curtain will soon rise on the KPMG China Annual Tax Update Conference. As 2014 was a year of considerable change, there will be much to discuss during the event:
A nationwide inspection of hi-tech enterprises was launched in January to identify ineligible enterprises that have been mistakenly classified as High-New Technology Enterprises (HNTEs) in order to ensure that only qualified HNTEs receive the preferential CIT rate of 15 percent. This process has raised expectations for HNTEs regarding their R&D capabilities and the systems they use for managing R&D activities.
The State Administration of Taxation issued Shuizonghan  No.165 in April, which confirmed that a “totality of facts” approach will be adopted in assessing the beneficial owner status of a non-resident enterprise in relation to dividends derived from China under the PRC-HK double taxation arrangement. As a result, effective communication between taxpayers and tax authorities will be of vital importance.
New guidance on when cross-border secondment of expatriates by foreign enterprises into China may create a PRC taxable presence was issued on 1 June. Multinational companies should consider the tax risk of creating a PRC taxable presence when conducting secondment activities.
On 1 August, the VAT pilot program (7+1) was expanded nationwide and the long awaited administrative measures on tax incentives for cross-border services were subsequently released. Taxpayers will need to assess their businesses in order to take full advantage of the incentives provided under the pilot scheme.
On 1 September, new tax registration requirements came into effect for Chinese residents with regards to making certain payments overseas, eliminating the existing requirement that tax clearance must be secured before outbound remittance can be carried out. This will significantly expedite cash transfers from China to overseas destinations for items covered by the circular. However, the new rule will not lead to a relaxation of control over cross-border transactions. Many local tax authorities have issued local implementation rules on remittance.
To better help our clients understand the latest tax developments and other important regulatory changes, KPMG China will adopt a fresh approach for the 2013 Annual Tax Update Conference: in addition to updates on significant new regulations, there will also be breakout sessions in which we will introduce a number of case studies, put the spotlight on new tax risk management and tax planning ideas designed to help companies adapt to the changing circumstances.