China Tre

(a) whether the PRC Subsidiary is liable to the corporate income tax in China in its first year of operation in 2010 and whether it is entitled to any tax breaks

From 1 January 2008, newly established enterprises are subject to new corporate income tax announced on 16 March 2007. The PRC subsidiary was established in January 2010, thus treated as a PRC tax resident enterprise. Under Article 3 Chapter 1 General Provisions of new corporate income tax, resident enterprise should pay CIT on both PRC source of income and non PRC sourced of income. The PRC subsidiary is subject to 25% CIT under Article 4 Chapter 1. No grandfather provisions are granted as the PRC subsidiary was established in January 2010.

Under the Corporate Income Tax (CIT) Law announced on 16 March 2007 that a non-resident company may be regarded as a PRC tax resident enterprise if "the place of effective management" is in PRC.

Criteria for PRC Tax Resident Enterprise

Guoshuifa [2009] No. 82 "Recognition of Chinese-controlled Overseas Incorporated Enterprises