Page 11 - The South China Business Journal
P. 11
July 2017
• Contract or board resolution or payment in relation to this application. Obtaining the certificate officially takes around 20 working days.
However, the exact documents required vary from one local tax However, in practice the application timeline may be shorter if
bureau to another. As such, it is important to inquire directly everything runs smoothly, or longer if the applicant does not
with the local tax bureau to confirm the documents required. provide all the documents required or if the Tax Authority re-
Any missing document could lead to a delay in granting the CTR. quests additional material.
It is fundamental for the foreign company to work closely with
the Chinese party in order to ensure the effective collection of Optimizing DTA benefits
the documentation given that the company needing the CTR is
located abroad and some documents can only be completed or As the CTR is often a mandatory document when filing for WHT
provided by the Chinese company. exemption, an overseas company making payments into China
The application will then go through two sets of screening pro- may be subject to double taxation until it has obtained the CTR.
cedures. However, CTR application must be filed in the name of the Chi-
First, the Tax Authority will check the documents and will either nese party. If it is not inclined to cooperate or is otherwise unable
(i) reject the application and explain the reasons; (ii) ask for ad- to effectively handle the procedures, any delays or rejections that
ditional supporting documents; or (iii) accept the application. result could mean an effective double taxation.
Then, once the Tax Authority has accepted the request, the ap-
plication will be subject to the standard Tax Authority approval The CTR application timeline might also impact the overseas
procedures. At this stage, the Authority can decide to either company’s cash flow while it is waiting for the neutralization of
grant the certificate or reject the application and explain the rea- the double taxation. Indeed, in some instances the company may
sons for this rejection. have to settle the tax bill first and then, once in possession of
Circular No. 40 states that an applicant may apply for a CTR “in the Chinese CTR, claim reimbursement. In this situation, and
any calendar year in which it qualifies as a Chines tax resident”, depending on the amounts involved, the temporary tax bill could
meaning that a certificate can only be granted for a specific year. be detrimental.
Graphic©Asia Briefing Ltd. Most problematic, should the Chinese party fail to provide the CTR
before the application submission deadline in the home country,
the overseas company could lose the withheld tax amount.
Furthermore, the wait for the CTR can interfere with routine fi-
nancial reporting and tax filing in the home country of the com-
pany needing the CTR. If the overseas company has to declare
its taxable income before a certain date, it can be difficult to
precisely determine this amount without assurance that the CTR
and subsequent tax credit will be granted.
Working with a competent advisor in China can be the key to en-
suring a smooth filing of the application and a timely issuance of
the CTR. Dezan Shira & Associates can help clients to obtain a
CTR by providing advice to the Chinese party, communicating
with the local Tax Bureau at various steps of the application, and,
if required, by filing the application on the Chinese party’s behalf.
9
• Contract or board resolution or payment in relation to this application. Obtaining the certificate officially takes around 20 working days.
However, the exact documents required vary from one local tax However, in practice the application timeline may be shorter if
bureau to another. As such, it is important to inquire directly everything runs smoothly, or longer if the applicant does not
with the local tax bureau to confirm the documents required. provide all the documents required or if the Tax Authority re-
Any missing document could lead to a delay in granting the CTR. quests additional material.
It is fundamental for the foreign company to work closely with
the Chinese party in order to ensure the effective collection of Optimizing DTA benefits
the documentation given that the company needing the CTR is
located abroad and some documents can only be completed or As the CTR is often a mandatory document when filing for WHT
provided by the Chinese company. exemption, an overseas company making payments into China
The application will then go through two sets of screening pro- may be subject to double taxation until it has obtained the CTR.
cedures. However, CTR application must be filed in the name of the Chi-
First, the Tax Authority will check the documents and will either nese party. If it is not inclined to cooperate or is otherwise unable
(i) reject the application and explain the reasons; (ii) ask for ad- to effectively handle the procedures, any delays or rejections that
ditional supporting documents; or (iii) accept the application. result could mean an effective double taxation.
Then, once the Tax Authority has accepted the request, the ap-
plication will be subject to the standard Tax Authority approval The CTR application timeline might also impact the overseas
procedures. At this stage, the Authority can decide to either company’s cash flow while it is waiting for the neutralization of
grant the certificate or reject the application and explain the rea- the double taxation. Indeed, in some instances the company may
sons for this rejection. have to settle the tax bill first and then, once in possession of
Circular No. 40 states that an applicant may apply for a CTR “in the Chinese CTR, claim reimbursement. In this situation, and
any calendar year in which it qualifies as a Chines tax resident”, depending on the amounts involved, the temporary tax bill could
meaning that a certificate can only be granted for a specific year. be detrimental.
Graphic©Asia Briefing Ltd. Most problematic, should the Chinese party fail to provide the CTR
before the application submission deadline in the home country,
the overseas company could lose the withheld tax amount.
Furthermore, the wait for the CTR can interfere with routine fi-
nancial reporting and tax filing in the home country of the com-
pany needing the CTR. If the overseas company has to declare
its taxable income before a certain date, it can be difficult to
precisely determine this amount without assurance that the CTR
and subsequent tax credit will be granted.
Working with a competent advisor in China can be the key to en-
suring a smooth filing of the application and a timely issuance of
the CTR. Dezan Shira & Associates can help clients to obtain a
CTR by providing advice to the Chinese party, communicating
with the local Tax Bureau at various steps of the application, and,
if required, by filing the application on the Chinese party’s behalf.
9
