Companies in China need to file the last year’s annual settlement of enterprise income tax (EIT) before 31th, May of each year. Meanwhile, a company who pays EIT on the basis of its financial result shall be required to submit the annual reporting form for related party transaction.
In this article, we will introduce the below important issues regarding related-party. We hope it can help you to well understand the related party in China and not to fail to file the necessary report to tax office .
01
Related-party Transaction
Related-party is stipulated by the State Administration of Taxation. Apparent related party relationship in foreign companies as below.
|
1.One directly or indirectly holds 25% or more of other one’s shares or 25% or more of both sides’ shares are held by a same party directly or indirectly.
2.Both sides are mutual shareholding or have a same shareholder, the percentage of share holding is less than 25%., if a company meets one of the below conditions, the relationship is related-party.
-
Mutual debts amount account for 50% or more of one’s paid-in capital or 10% of one’s total debts amount is guaranteed by other one.
-
One’s business operations depend on the patent right, non-patent technology, trademark right, copyright and other concessions granted by other one.
-
One’s purchase& sale, service purchase& sale or other important business transactions are controlled by other one.
3. Half of the directors or senior management are appointed or assigned by other one or by a same third company. The director or senior management is other one’s director or senior management.
4. Both parties substantial have same interests in other ways.
|
02
Related-party Transactions
-
Transfer of using right or ownership of tangible assets /non-tangible assets
-
Transfer of financial assets
-
Debits and guarantees.
-
Service providing or receiving
|
