Big Good News for Representative Offices!

Those in charge of foreign representative offices, check it out：

Here comes A New Taxation Policy!

From May, 2016 in Guangzhou, the previous 5% Business Tax will be replaced with a 3% Value-added Tax. The tax rate changes because of the differences of the tax category levied by the Tax Office.

In fact, for representative offices, the new tax category, Value-added Tax，allows them to enjoy another favorable taxation policy, that is, corporations whose quarterly revenue is less than 90,000 RMB can be exempted from Value-added Tax.

A representative office′s revenue, however, will be converted from its expenditure with a formula by the Tax Office.

This means that after converted, for a representative office, if its quarterly expenditure is less than 105,880 RMB, then it would not have to pay Value-added Tax,  just pay the Corporate Income Tax is fine. 

A representative office′s expenditure usually consists of salary, office rental fees and communication expense etc.

For Example:

Let′s suppose that the salary is 8,000 RMB, the Rent & Utility Bill is altogether 6,000 RMB, and the Office Expense and Communication Expense is 1,000 RMB per month. Then the representative office′s quarterly expenditure is 45,000 RMB.

Before May, 2016, with quarterly expenditure of 45,000 RMB, its Business Tax and Corporate Income Tax is altogether 4,920 RMB.

But after May, 20016, with Quarterly Expenditure of 45,000 RMB, it only needs to pay Corporate Income Tax, which is 1,985 RMB.

We can see that its tax payment is 50% to 60% less than before, for it′s exempted from VAT with quarterly expenditure of less than 105,880 RMB.

If you want to know more,welcome to contact our consultants freely or leave a message.

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