Announcement of the State Administration of Taxation on Issuing the Measures for the Collection and Administration of Income Tax on Enterprises that Have Operations in Different Regions and Pay Taxes in a Consolidated Manner

Announcement of the State Administration of Taxation on Issuing the Measures for the Collection and Administration of Income Tax on Enterprises that Have Operations in Different Regions and Pay Taxes in a Consolidated Manner

Announcement of the State Administration of Taxation [2012] No.57

December 27, 2012

For the purpose of enhancing administration of the collection of consolidated payments of enterprise income tax by trans-regional enterprises and in accordance with the Enterprise Income Tax Law of the People's Republic of China and the Implementing Regulations thereof, Law of the People's Republic of China on the Administration of Tax Collection and the Implementing Rules thereof, the Circular of the Ministry of Finance, State Administration of Taxation and the People's Bank of China on Releasing the Administrative Measures for the Allocation and Budgeting of Enterprise Income Tax Payable by Head Offices and Non-local Branches of Enterprises (Cai Yu [2012] No. 40) and other relevant documents, the State Administration of Taxation has formulated the Measures for the Collection and Administration of Income Tax on Enterprises that Have Operations in Different Regions and Pay Taxes in a Consolidated Manner, which are hereby promulgated and shall take effect as of January 1, 2013.

It is hereby announced.

Measures for the Collection and Administration of Income Tax on Enterprises that Have Operations in Different Regions and Pay Taxes in a Consolidated Manner

Chapter I General Provisions

Article 1 These Measures are enacted in accordance with Enterprise Income Tax Law of the People's Republic of China and the Implementing Regulations thereof (hereinafter referred to as the "Enterprise Income Law"), Law of the People's Republic of China on the Administration of Tax Collection and the Implementing Rules thereof (hereinafter referred to as "Law on the Administration of Tax Collection"), Circular of the Ministry of Finance, State Administration of Taxation and the People's Bank of China on Releasing the Administrative Measures for the Allocation and Budgeting of Enterprise Income Tax Payable by Headquarters and Non-local Branches of Enterprises (Cai Yu [2012] No. 40) and other applicable laws and regulations and for the purpose of enhancing administration of the collection of consolidated payments of enterprise income tax by trans-regional enterprises.

Article 2 Where a resident enterprise based in one region within the territory of China (which refers to a province, autonomous region, municipality directly under the Central Government or a city specifically designated in the state plan; hereafter the same) establishes a non-legal-person branch in another region, the resident enterprise shall be deemed as an trans-regional enterprises making consolidated payments of enterprise income tax (hereinafter referred to as the "a TEMCPEIT"), and these Measures shall apply to the administration of the collection of consolidated payments of enterprise income tax by such resident enterprise, unless any other applicable law or administrative regulation provides otherwise.
These Measures do not apply to the administration of the collection of consolidated payments of enterprise income tax (including relevant overdue fines and penalties, if any) by the following enterprises, which are legally designated as central fiscal revenues and shall be transferred to central state treasury: state-owned postal service enterprises (including China Post Group and its holding companies and entities directly under the group), Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China Ltd., China Development Bank Co., Ltd., China Agricultural Development Bank, the Export-Import Bank of China, China Investment Co., Ltd., China Construction Bank Corporation, China Construction Bank Investment Co., Ltd., China Cinda Asset Management Corporation, China National Petroleum Corporation, China Petroleum & Chemical Corporation, marine oil and gas companies (including the China National Offshore Oil Corporation, CNOOC (China) Co., Ltd. China Oilfield Services Limited, Offshore Oil Engineering Co., Ltd.), and China Yangtze Power Co., Ltd.
These Measures do not apply to the administration of collection of income tax payable by railway transport enterprises.

Article 3 The administrative measures for the collection of consolidated payments of enterprise income tax on TEMCPEITs shall be based on the principles of "unified calculation, hierarchical management, local pre-payment, consolidated settlement, and allocation by the Finance Ministry":
1. Unified calculation means that the head office of a TEMCPEIT is responsible for the calculation of its total amount of taxable incomes of the enterprise, including all the non-legal-person branches thereof as well as the amounts of tax payable;
2. Hierarchical management means that both the competent taxation authority at the place where the head office of a TEMCPEIT is located and the taxation authorities at places where the eligible branches of the enterprises are located have the power to regulate the enterprise income tax payable by the enterprise, and the head office and local branches thereof shall be subject to the regulation of local taxation authorities in whose jurisdiction they are located;
3. Local prepayment means that the head office and eligible branches of a TEMCPEIT shall, in accordance with these Measures, file their enterprise income tax returns to and prepay enterprise income tax to the local taxation authorities in whose jurisdiction they are located on a monthly or quarterly basis;
4. Consolidated settlement means that after the end of a year, the head office of a TEMCPEIT calculates the amount of the taxable income of the enterprise and the amount of enterprise income tax payable for that year, with the prepaid amounts by the head office and branches thereof deducted, and depending on the balance after the deduction, either makes up for any deficiency or receives tax refunds; and
5. Allocation by the Ministry of Finance means that the Ministry of Finance periodically transfers to local state treasuries eligible revenues in the form of income tax paid by TEMCPEITs to the central state treasury.

Article 4 The enterprise income tax payable by a TEMCPEIT shall be allocated among and paid by the head office of the enterprise and secondary branches of the enterprises with a separate production and operation function on a local basis.
Secondary branches refer to branches that are established by a TEMCPEIT in accordance with law and issued with the non-legal-person business license (or registration certificate, as the case may be), whose financial, business and personnel matters are under the unified assessment and management of the head office.

Article 5 Enterprise income tax payable by a TEMCPEIT may not be locally allocated among the following types of secondary branches thereof:
1. Supporting secondary branches of after-sale services, internal research and development and warehousing TEMCPEITs, which do not have any independent production and operation function and do not pay value-added tax or business tax on a local basis;
2. Secondary branches of enterprises that have been certified as small low-profit enterprises in the previous year;
3. Local allocation of enterprise income tax does not apply to new secondary branches in the year when they are established;
4. After a secondary branch is closed, local allocation of enterprise income tax shall cease to apply to the secondary branch in the enterprise income tax prepayment period as of the day when the taxation registration of the branch is cancelled within the year when such branch office is closed; and
5. Secondary non-legal-person branches that TEMCPEITs establish outside the territory of China.

Chapter II Tax Prepayment and Consolidated Settlement and Payment

Article 6 A TEMCPEIT shall, in accordance with the Enterprise Income Tax Law, calculate the enterprise income tax payable by it, including the amount of enterprise income tax to be prepaid and the amount to be paid or refunded after the consolidated calculation. Of the enterprise income tax payable by the TEMCPEIT, 50% shall be allocated among its eligible branches, which shall pay the amount of enterprise income tax they are allocated with respectively to the local state treasuries, or, as the case may be, draw tax refunds from such local state treasuries; the remaining 50% shall be paid by the head office of the TEMCPEIT, of which 25% shall either be paid to the local state treasury, or as the case may be, drawn from the local state treasury, and the remaining 25% shall be paid to the central state treasury in full, or as the case may be, drawn therefrom as tax refund.
　　......