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Recently, Company A, which registered in Barbados, transferred its holding equity, of which certain real estate company in Xuzhou, to Company B which registered in China at a premium. According to bilateral tax treaty between China and Barbados, income of the transfer should be levied by resident country. As a result, company A filed its applications to National Tax Bureau in Xuzhou on the purpose of enjoying the treatment of tax treaty. National Tax Bureau in Xuzhou considered company A was a conduit company through inspection, which was inconformity to the conditions of tax exemption by tax treaty. The tax bureau required company A to prove itself beneficial owner and having effective management according to circular 601 and Chinese new enterprise income tax law respectively. After rounds of negotiation, company A could not offer valid proof throughout, as a result, company B withheld non-resident enterprise income tax on the equity transfer for company A.