China Certificate of Tax Residency – New Modification
Recently, the State Administration of Taxation (SAT) issued an Announcement on the adjustment of matters related to the China Certificate of Tax Residency. The new policy will come into effect from April 1, 2025, onwards. This adjustment will directly affect the compliance operation of enterprises in the field of international taxation.
- What is a Certificate of Tax Residency?
The Certificate of Tax Residency is a document issued by the tax authorities to certify that an enterprise or individual has fulfilled its tax obligations in China in accordance with the law, which can be commonly understood as a “tax passport” for Chinese residents.
The certificate is mainly used for enterprises to enjoy tax treaty treatment outside China to avoid double taxation, or to prove their tax resident status in China. At present, China has signed a network of tax treaties covering 114 countries and regions, and with this certificate, taxpayers can enjoy corresponding tax benefits in cross-border economic activities, which have a high value.
- Who may need this certificate?
Enterprises or individuals (collectively referred to as applicants) may apply to the competent tax authorities for issuance as long as they constitute tax residents of China in any calendar year.
Enterprises: Enterprises registered in China and paying taxes in accordance with the law may need to apply for the certificate if they invest, operate, or have transactions with overseas enterprises.
Individuals: Individuals who are domiciled or non-domiciled in China but have resided in the country for 183 days or more may also need to apply if they receive income from abroad.
However, the domestic and overseas branches of Chinese resident enterprises, as well as individual industrial and commercial households, sole proprietorships, and partnerships registered in China, cannot apply directly, but there is a special way to handle the application:
- Domestic and overseas branches of Chinese resident enterprises are to be applied for by their head office in China to the competent tax authorities of the head office.
- Domestic individually owned stores are to be applied for by their Chinese resident owners to the tax authorities in charge of the place where they operate and manage their business.
- Domestic sole proprietorships are applied for by their Chinese resident investors to the competent tax authorities in the place of operation and management.
- For domestic partnership enterprises, the Chinese resident partners shall apply to the competent tax authorities of the Chinese resident partners.
- What are the main adjustments?
Expanding application scenarios:
Applicants can choose to enjoy agreement [1]treatment or non-agreement treatment for the purpose of the application according to the actual situation, the latter covering a variety of new scenarios encountered by taxpayers outside China.
Realization of full-process online handling:
Relying on the website of the e-Tax Bureau and the website of the e-Tax Bureau for Natural Persons, applicants applying for the issuance of the Certificate of Tax Residency can realize full-process online handling, which makes the handling procedure more convenient.
Adjusting the content of the certificate:
Displaying more information such as the taxpayer identification number, canceling the signature of the person in charge of the competent tax authority, and making remarks on partnership and other relevant information according to the applicant’s needs, so as to meet the personalized needs.
Compressing the processing time limit:
If the competent tax authority can determine the tax resident status by itself, the processing time limit will be shortened from the current 10 working days to 7 working days.
- Overview
The adjustment of the SAT to the matters related to the China Certificate of Tax Residency is an important measure to adapt to the development of a cross-border economy, which provides stronger support and more convenient services for enterprises and individuals to carry out cross-border business. Whether in enjoying tax treaty treatment or in other cross-border economic activities, this adjustment will bring real convenience to taxpayers. Relevant enterprises and individuals are requested to pay close attention to the policy changes and apply for the Certificate of Tax Residency in a timely manner in accordance with the new regulations, to fully enjoy the policy benefits.
Should you have any questions, please contact us.
[1] Agreements refer to intergovernmental agreements such as double taxation avoidance agreements (hereinafter referred to as tax agreements) and international transportation agreements signed by the Government of the People’s Republic of China. International transport agreements include aviation agreements, maritime transport agreements, road transport agreements, automobile transport agreements, agreements on mutual exemption from taxation of international transport revenues or exchange of letters, and other agreements on international transport signed by the Government of the People’s Republic of China.
Enjoying the treatment of agreements means enjoying the treatment of tax provisions of intergovernmental agreements such as tax agreements and international transportation agreements.
Those enjoying treatment under the arrangements for the avoidance of double taxation signed between the Mainland and the Hong Kong and Macao Special Administrative Regions shall refer to the above provisions.
