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- Compliance with China's latest transfer pricing documentation requirements
- New documentation regulation for tax deductions on asset losses
- China to gradually cut social security contributions nationwide
- Beijing updates points-based household registration system
- China takes steps to reduce corporate burden for housing provident fund
| OUR INSIGHTS |
Highlights on General Data Protection Regulation compliance
The European Union’s (EU) General Data Protection Regulation (GDPR) took effect on 25 May 2018. An important milestone in personal information protection, the GDPR sets a very strict standard for enterprises to protect EU residents’ data privacy. Enterprises doing business in the EU or providing goods and services to EU residents should note the following key GDPR articles and ensure they are able to fully comply with the GDPR.
1. Extraterritorial applicability
Under Article 3, the GDPR extends its jurisdiction to apply to all enterprises processing personal data of data subjects residing in the EU, regardless of the enterprise’s location. The GDPR also applies to the processing of personal data of EU data subjects by a controller or processor not established in the EU, where the activities relate to: offering goods or services to EU citizens (irrespective of whether payment is required) and the monitoring of behaviour that takes place within the EU.
2. Consent
Article 8 stipulates that controllers must be able to demonstrate that the collection and processing of data is based on the explicit consent of EU data subjects. Such “consent” can be withdrawn at any time. Organisations are required to ensure that they communicate this clearly when asking for personal data and be clear with regard to its intended use.
3. Data subjects’ rights
Right to be informed
Article 12 (“Transparent information, communication and modalities for the exercise of the rights of the data subject”) and Article 13 (“Information to be provided where personal data are collected from the data subject”) impose on data controllers the obligation to inform data subjects.
Right to access
Article 15 (“Right of access by the data subject”) grants data subjects the right to obtain confirmation from the controller as to whether or not their personal data is being processed, and if so, where and for what purpose.
Right to be forgotten
Article 17 entitles data subjects to require data controllers to erase their data. Data subjects may request this erasure at any time even if the data has been transferred to a third party. It can be quite costly for data controllers to fulfil such requests.
Right to data portability
Article 20 grants the data subject the right to receive the personal data concerning him or her, which he or she has provided to a controller, in a structured, commonly used and machine-readable format and the right to transmit the data to another controller without hindrance from the controller to which the personal data has been provided.
4. Data protection by design
Controllers shall design and implement appropriate technical and organisational measures and procedures to ensure that data processing safeguards are in place. Article 23 requires controllers to hold and process only data that is absolutely necessary for the completion of their duties, as well as limit personal data access only to those required to perform the processing.
| TAX |
Compliance with China's latest transfer pricing documentation requirements
Businesses in China should comply with its latest transfer pricing documentation requirements to avoid penalties for non-compliance. Compared with the previous regime, key changes include:
- Annual Related Party Transactions Reporting Forms (the “New Forms”) replace the previous nine forms and increase the total number of forms from nine to 22. More detailed and transparent information disclosure is required. The New Forms also include the Country-by-Country reporting form (“CbC Form”).
- Bulletin on Improvements to Reporting of Related-party Transactions and Administration of Contemporaneous Documentation (SAT Bulletin [2016] No. 42 or “Bulletin 42”) introduces a three-layer documentation approach, including master, local, and special issue files, compared with the old transfer pricing regime that did not involve the master and special issue files. In addition, the local file must now include a value chain analysis as well as location-specific advantages (“LSAs”).
New documentation regulation for tax deductions on asset losses
China’s State Administration of Taxation released a circular on the maintenance of documentation relating to the deduction of asset losses for Corporate Income Tax (CIT) purposes (2018) (Circular 15) that is applicable for CIT filing from 2017 onwards.
Key areas covered by Circular 15 include:
1. Removal of requirement for asset loss report submission
Under the new regulation, an enterprise is only required to complete the schedule for tax deduction and adjustments relating to asset losses, i.e. schedule A105090 of the CIT return forms (Type A, 2017 version). There is no requirement to obtain and submit a separate asset loss report to the tax authority.
2. Maintenance of documents
The enterprise must ensure that its records are complete, authentic and legally valid.
3. Repeal of certain articles on asset loss filing
With the new regulation, Articles 4, 7, 8 and 13 of the previous State Administration of Taxation Public Notice (2011) No. 25 relating to submission of proof as well as accounting and tax-related materials for asset loss filing have been repealed and these items are no longer required.
Conclusion
By reducing the procedures and processes for claiming an asset loss, the new regulation has achieved its goal of reducing enterprises’ tax filing burden.
However, enterprises should not misunderstand that the changes indicate a more relaxed stance by tax authorities towards tax filing in general. They may still be subject to tax audits where failure could result in hefty penalties.
Firms should therefore establish a strong internal system to review and maintain relevant supporting documents for record purposes. They may also consider engaging tax professionals for assistance in complicated cases and reviewing the completeness of documents during tax filing.
| CORPORATE ADVISORY |
Shanghai streamlines enterprise registration, launches integrated service system for businesses
Shanghai announced regulations to streamline enterprise registration and launched an integrated registration service system for new local businesses.
Shanghai Administration for Industry and Commerce (SHAIC) as well as local public security and tax authorities shall oversee the establishment of new enterprises in the city. The regulations state that the business licence should be issued within 3 working days of the new enterprise’s registration and business may start within 5 days if all required application documents have been submitted and approved.
SHAIC and the local public security and tax authorities will share enterprise registration data collected among themselves to facilitate the process.
Named “One Window for All”, the integrated registration service system for new enterprises allows online applications for business licences and filing of official seals and taxation-related items. It also provides services for making appointments to open bank accounts and registering for social insurance contributions.
HUMAN RESOURCES |
China to gradually cut social security contributions nationwide
On 20 April 2018, the Ministry of Human Resources and Social Security and Ministry of Finance issued a circular announcing a gradual reduction of social security contribution rates in China.
Since 1 May 2018, locations with a social security balance that is enough to pay for at least nine months of pension benefits and a corporate contribution rate for endowment insurance higher than 19% previously can cap the rate at 19% until 30 April 2019.
Beijing updates points-based household registration system
Beijing Municipal Bureau of Human Resources and Social Security and other local authorities announced regulatory updates to the city’s points-based household registration system.
According to the new regulation, applicants must meet four conditions to be eligible for household registration in Beijing:
1. Hold a Beijing residential permit;
2. Under the statutory retirement age;
3. Have paid social insurance in Beijing for at least seven consecutive years; and
4. Have no criminal record
In addition, the eligibility of applicants who fabricate documents to become eligible for household registration would be nullified in the current year and next five years. This also applies to employers who submit fake documents for their staff to apply for household registration.
China takes steps to reduce corporate burden for housing provident fund
China has taken steps to reduce the corporate burden for the housing provident fund. These include:
- Extending the expiry date for the policy of reducing housing provident fund contributions by two years to 30 April 2020
- Standardising the upper limit of such contributions
- Expanding the floating band of the contribution ratio
- Expediting the approval process for corporate applications to reduce or postpone such contributions
The Ministry of Housing and Urban-Rural Development estimates that reductions to housing provident fund contributions will lower corporate cost by about RMB30 billion in 2018.
| ABOUT US |
Serving growing businesses since 1985, RSM in Singapore is the largest accounting, business advisory and solutions group outside the Big 4, with a total staff strength of over 950 in Singapore and 320 in China.
Our China Practice is dedicated to helping you venture into China smoothly and supporting you in navigating its complex regulatory and business environment.
| CONTACT US |
Website: https://www.rsm.global/singapore/
Email: [email protected]
Chan Weng Keen, Partner & Industry Lead, China Practice
T +65 6594 7864
[email protected]
Ng Thiam Soon, Partner & Deputy Industry Lead, China Practice
T +65 6594 7809
[email protected]
Tan Lee Lee (Ms), Director, China Practice
T +86 21 6186 7602
[email protected]
Yeo Lee Soon, Director, China Practice
T +86 10 8591 1900
[email protected]