Representative office income tax issues, how to calculate representative office income tax

State Administration of Taxation.

Guo Shui Fa [2010] No. 18 "Interim Measures for the Tax Administration of Resident Representative Offices of Foreign Enterprises".

Article 7 The tax authorities have the right to verify the taxable income of the representative institutions whose account books are not sound, cannot accurately account for income or costs, and cannot be declared in accordance with the provisions of Article 6 of these Measures:

1) Conversion of income according to expenditure: It is applicable to representative offices that can accurately reflect expenditures but cannot accurately reflect income or costs. 

1.Calculation formula:

Amount of income = amount of expenditure for the current period (1 - approved profit rate - business tax rate);

Enterprise income tax payable = income Approved profit rate Enterprise income tax rate. 

2.The amount of expenditure of the representative office includes: salaries, bonuses, allowances, welfare expenses, procurement expenses (including fixed assets such as automobiles and office equipment), communication expenses, travel expenses, rent, equipment rental expenses, transportation expenses, communication expenses, and other expenses paid to staff members within and outside China.

1) The expenses incurred in the purchase of fixed assets, as well as the decoration expenses incurred when the representative office is established or relocated, shall be converted into income and taxed as the amount of expenditure at one time. 

2) Interest income shall not be offset against the amount of expenditure; The social entertainment expenses incurred shall be included in the amount of funds and expenditures at the actual amount. 

3) Donations, late fees, fines in the form of money for public welfare and relief in China, as well as expenses advanced for its head office that do not belong to its own business activities, shall not be used as the amount of expenditure of the representative office; 

4) Other expenses include: sample fees and transportation costs paid for the purchase of samples from China by the head office; Storage costs and customs declaration costs incurred in China for foreign samples shipped to China; the cost of hiring interpreters for the visit of the head office personnel to China; The head office bids for a project in China, the cost paid by the representative office for the purchase of bids, etc.

2) Taxable income shall be assessed according to the total income: applicable to representative offices that can accurately reflect income but cannot accurately reflect costs and expenses. Calculation formula:

The amount of corporate income tax payable = total income Approved profit rate Enterprise income tax rate. 

Wherein: Approved profit margin = 15%.

Business tax rate = 5%.

Corporate income tax rate = 25%.

Notice of the State Administration of Taxation on Printing and Distributing the Measures for the Verification and Collection of Enterprise Income Tax (for Trial Implementation).

Guo Shui Fa [2008] No. 30.

If the enterprise income tax is assessed and levied by the taxable income rate, the formula for calculating the income tax payable is as follows: Income tax payable = taxable income Applicable tax rate

Taxable income = taxable income Taxable income rate

Or: Taxable Income = Amount of Costs (Expenses) Expenses (1 - Taxable Income Rate) Taxable Income Rate

The taxable income rate reconciled by your representative office is 15%. 25% is the corporate income tax rate.

If your representative office is a foreign enterprise, you can refer to the information downstairs

All the expenses of the representative office are added up and divided by 80%, and the income is reversed, and then the business tax and corporate income tax are paid according to the income.

Total expenses 80% = main business income.

Income from main business * 5% = business tax payable.

Main business income * 10% * 25% = enterprise income tax payable.