| For the purpose of improving tax collection and administration as well as examination management of the authenticity of foreign exchange payments under the services trade, income and current transfers, etc., the State Administration of Foreign Exchange (SAFE) and the State Administration of Taxation (SAT) recently jointly distributed the Circular on Issues Concerning the Submission of Tax Certificates for External Payments under the Services Trade and Other Accounts (hereinafter referred to as the Circular") to further regulate the requirements for submitting tax certificates for external payments under the services trade and other accounts.
Since 1999, the SAFE and the SAT have carried out joint supervision over external payments under the services trade and other accounts and have stipulated that domestic institutions and individuals shall submit relevant tax payment certificates when making external payments under the services trade and other accounts. This not only enhanced the effectiveness of the examination of the authenticity of transactions, but also greatly facilitated national foreign-related tax collection and administration work. As a result, over the years tax revenue arising therefrom amounted to tens of billions of yuan.
In recent years, due to the rapid development of China's trade in services, the corresponding foreign exchange payments have experienced a year-by-year expansion, the services trade and other types of transactions have continued to increase, and tax collection and administration have witnessed an ever-increasing complexity, causing certain difficulties for the banks to conduct examinations and to a certain extent also affecting the external payments by enterprises. To facilitate the banksexamination of foreign exchange receipts and payments under the services trade and other accounts and to provide more conveniences for enterprises to make external payments, the SAFE and the SAT jointly released the Circular.
The Circular mainly includes the following contents: the first is to unify the format of the tax certificates and a variety of the original tax certificates into the Tax Certification for External Payments under the Services Trade, Income, Current Transfers, and Partial Capital Account" (hereinafter referred to as the Tax Certification); the second is to further clarify the accounts under which no tax certification is required for external payments, and to specify that domestic institutions or individuals do not need to handle and submit the Tax Certification when paying for travel expenses, meetings, office expenses, as well as individual study and tours abroad; the third is to unify the standard rate below which there is an exemption for the Tax Certification for external payments. With respect to the designated services trade, income, current transfers, and some transactions under the capital account, domestic institutions and individuals need not apply for a Tax Certification when a single outbound payment does not exceed the equivalent of USD 30,000.
The Circular will come into effect as of January 1, 2009(End).
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