Withholding tax on consulting services

China has and will implement new tax policy reforms aimed at narrowing the gap between foreign and domestic enterprises, reducing the disparity between commodity and service taxation and encouraging technologically-advanced service enterprises. This article will review the tax implications for the provision of consulting services in China for non-resident enterprises.

Enterprise tax is governed by the PRC Enterprise Income Tax Law (中华人民共和国企业所得税法) that has been effective since January 1 2008. As a non-tax-resident, an enterprise that provides services and has income sourced in China will have to pay Enterprise Income Tax in accordance with the related tax laws and regulations. Enterprise tax for non-residents who do not have an establishment in China or, who have an establishment in China but their income is not actually connected to that establishment, are subject to enterprise income tax on income sourced in China at a rate of 20%.