SAT bulletin addresses income tax issues for branches


The State Administration of Taxation (SAT) issued a new notice, bulletin [2012] No. 57, on 27 December 2012 to address enterprise income tax (EIT) local settlement and allocation issues for companies with branches in different provinces or cities from their headquarters. Bulletin 57 has made several revisions to the prior rules under Guo Shui Fa [2008] No. 28.

Quarterly filing

Under notice 28, the headquarters of a company only had to file its own EIT quarterly filing form, financial data form and EIT allocation form. Bulletin 57 now requires the headquarters also to submit the prior year’s financial statements, or annual financial data, for each of its branches in its first quarterly filing.

Allocation calculation

Like notice 28, bulletin 57 says that EIT should be allocated among the headquarters and its branches, either in the provisional quarterly filing or in the annual settlement. Although the calculation formulae for EIT is the same as under notice 28, bulletin 57 provides a different rule on the time period governing which financial data are used to calculate the EIT allocation.

bld4taxEssentially, notice 28 had two different rules on the time periods for which financial information should be included in the EIT allocation calculations, depending on whether the EIT allocation was for January to June, or for July to December. Bulletin 57 has streamlined those two rules into the following: financial data for EIT allocation calculations should always be from the prior year and should be the same for all filings during the year, even if later audits revise the financial data in the initial filing.

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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai)