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TAX & FINANCE: New measures for Non-resident Taxpayers claiming treaty benefits
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New measures for Non-resident Taxpayers claiming treaty benefits

From “Record-filing Procedure” to “Retaining Documents for Inspection Mechanism”
By Kelvin Lee, PwC

BT 201912 FINANCE 05In October, 2019, the State Taxation Administration (STA) issued the Administrative Measures on Non-resident Taxpayers Claiming Tax Treaty Benefits1 (STA Public Notice [2019] No.35, PN 35) and its interpretation. PN 35 shall take effect from 1st of January, 2020, while STA Public Notice [2015] No.602 (PN 60) will be abolished at the same time. PN 35 stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism. Non-resident taxpayers, who have self-assessed that they are eligible for the treaty benefits, can claim such tax treaty benefits accordingly provided that they have collected and retained relevant supporting documents for inspection by the tax authorities in their post-filing administration process. With the introduction of PN 35, the record-filing procedure for non-resident taxpayers claiming treaty benefits has been replaced by the Retaining Documents for Inspection mechanism, which is another step forward for the China tax administration in moving to a post-filing administration mechanism.
 

As one of the measures to optimize the business environment and deepen the Reform of “Streamlined Administration, Delegated Powers, Improved Regulation and Services”, the Retaining Documents for Inspection mechanism reduces the responsibilities of withholding agents and facilitates the claiming of treaty benefits by non-resident taxpayers. However, the new mechanism has not mitigated the responsibilities of the non-resident taxpayers and the uncertainty of the treaty benefit claim. Non-resident taxpayers are required to have a good understanding of tax treaties and tax filing procedures, and maintain sufficient communication with the tax authorities to reduce the tax risks in the post-filing administration process.
 

国家税务总局于2019年10月14日发布了《非居民纳税人享受协定待遇管理办法》(国家税务总局公告[2019]35号,以下简称“35号公告”),并于10月30日发布了对35号公告的解读。35号公告将于2020年1月1日起施行,并同时废止国家税务总局公告 [2015]60号(以下简称“60号公告”)。35号公告规定非居民纳税人享受协定待遇将采取“自行判断、申报享受、相关资料留存备查”的方式办理。非居民纳税人判断符合协定待遇条件的,可自行享受协定待遇,同时归集和留存相关资料以接受税务机关的后续管理。这意味着非居民享受协定优惠的备案制将被备查制所取代,中国的税收征管方式向事后监管方向又迈进一步。
 

作为优化营商环境、深化“放管服”改革的措施之一,备查制减轻了扣缴义务人的负担,提高了非居民纳税人享受协定待遇的便捷性,但并未减少非居民纳税人的责任和税收不确定性。非居民纳税人需要对税收协定及纳税申报有一定的了解,并与税务机关保持充分沟通,以降低后续监管过程中的税务风险。


In detail

BT 201912 FINANCE 02From “Record-filing Procedure” to “Retaining Documents for Inspection Mechanism”


PN 60, which was issued in 2015, abolished the pre-approval process in claiming tax treaty benefits, but still required taxpayers to fulfil the record-filing procedure. In order to fulfil such procedure, non-resident taxpayers have to submit certain prescribed forms and supporting documents to justify their tax treaty eligibility. PN 35 has changed the “Record-filing Procedure” to “Retaining Documents for Inspection Mechanism”. PN35 stipulates that non-resident taxpayers can enjoy tax treaty benefits via the “self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection” mechanism and subject to post-filing administration. More specifically,


•Under the situation of self-filing by non-resident taxpayers: Non-resident taxpayers shall self-assess their eligibility to enjoy tax treaty, and if they qualify, they should submit the “Reporting Form for Non-resident Taxpayers Claiming Tax Treaty Benefits” (Reporting Form) on performing tax filing and collect and retain relevant supporting documents for post-filing inspection.


•Under the situation of withholding by withholding agents: Non-resident taxpayers shall self-assess their eligibility to enjoy tax treaty, and if they qualify, they should provide their withholding agents with the completed Reporting Form. Likewise, non-resident taxpayers should collect and retain relevant supporting documents for post-filing inspection.


从“备案制”到“备查制”


2015年发布的60号公告取消了非居民纳税人享受税收协定待遇的事前审批程序,但其仍然要求非居民纳税人履行相关备案程序。非居民纳税人履行备案程序需要在申报纳税或扣缴申报时提交一系列表格和相关资料,以证明其符合享受协定待遇的条件。此次发布的35号公告将享受协定待遇的“备案制”改为“备查制”。具体来说,35号公告规定非居民纳税人享受协定待遇将采取“自行判断、申报享受、相关资料留存备查”的方式,并接受税务机关的后续管理:


•非居民纳税人自行申报的情况下:非居民纳税人自行判断符合享受协定待遇条件,非居民纳税人在申报时报送《非居民纳税人享受协定待遇信息报告表》(以下简称“报告表”),并按规定归集和留存相关资料备查;


•在源泉扣缴和指定扣缴情况下:非居民纳税人自行判断符合享受协定待遇条件,非居民纳税人填写报告表并提交给扣缴义务人,同时非居民纳税人按规定归集和留存相关资料备查。

BT 201912 FINANCE 03Responsibilities of non-resident taxpayers and withholding agents


Under the Retaining Documents for Inspection Mechanism, non-resident taxpayers’ assessment on their eligibility of treaty benefits basically depends on their own taxation knowledge and experience, and uncertainty remains on whether tax authorities would agree with the taxpayers’ self-assessment in their post-filing administration process. Therefore, under the circumstances where tax has to be withheld by the withholding agents, it is particularly important to clarify the respective responsibilities of the withholding agents and non-resident taxpayers, which have significant impact on negotiating contract terms, clarifying issues related to the transaction and reducing associated tax risks.


•Withholding agents’ responsibility – responsible for the completeness of the Reporting Form and cooperation in follow-up investigation


According to PN 35, withholding agents only need to check whether the all fields of Reporting Forms are completed, without having to verify the non-resident taxpayer’s eligibility to the treaty benefits, before they withhold tax based on the preferential treatments. If the withholding agent fails to check the completeness of the Reporting Form, or has not obtained the Reporting Form, but still conduct withholding tax filing based on the favourable treatment, which results in the underpayment of tax, the relevant tax authorities can go after the withholding agent for not fulfilling its responsibility to withhold tax and the non-resident taxpayer for settlement of the underpaid tax within a prescribed deadline. As compared with the provision in PN 60, which requires the withholding agent to verify the non-resident taxpayer’s eligibility to enjoy treaty benefits based on taxpayer’s information provided, the responsibility of the withholding agents has been reduced under the Retaining Documents for Inspection Mechanism.


Besides, PN35 also stipulates that if the retained document is considered insufficient to prove the non-resident taxpayer’s eligibility to enjoy treaty benefits, or the non-resident taxpayer is suspected of evading taxes during the post-filing administration, the tax authorities can request the non-resident taxpayer or withholding agent to provide relevant materials within a prescribed deadline and cooperate with the investigation. If the withholding agent fails to provide prescribed documents which led to the underpayment of tax by the non-resident taxpayer, the withholding agent may be held accountable for not fulfilling its obligation to withhold tax.


•Non-resident taxpayers’ responsibility – responsible for the authenticity, accuracy, and legality of the Reporting Form and retained documents


According to PN 35, non-resident taxpayers have to retain the relevant materials on their eligibility to enjoy treaty benefits for future inspection for a certain period3 as specified in Tax Collection Administration Law (TCAL) and Rules for the Implementation of TCAL. Besides, the non-resident taxpayers are also responsible for the authenticity, accuracy, and legality of the Reporting Form and retained documents.


Article 9 of PN 35 stipulates that when a non-resident taxpayer discovers that it had enjoyed treaty benefits which it is not entitled to and resulted in tax underpayment, it shall take the initiative to report underpaid tax to the tax authority and settle the payment. Article 16 stipulates that, except for the situation that the withholding agent has withheld tax based on the treaty benefit treatment without receiving the Reporting Form or on receiving an incomplete Reporting Form, for any other situations where the non-resident taxpayers had enjoyed the treaty benefits which they are not eligible to and resulted in tax underpayment, the non-resident taxpayers shall be regarded as not performing the tax filing appropriately and the tax authority shall go after the non-resident taxpayers for the underpaid tax together with late payment surcharge. In the case of tax withholding, the late payment surcharge shall be calculated from the day that tax was withheld inappropriately. This is to say, in the case of tax withholding at source, the situation that a non-resident taxpayer takes the initiative to report and settle the underpaid tax due to the inappropriate assessment on eligibility of treaty benefits, does not fall within the circumstances set out in Clause 2 of Article 9 of STA Public Notice [2017] No.37 that “making the tax payment before being ordered by the tax authorities to pay tax, shall be regarded as having made the tax payment on time”. In this regard, late payment surcharges cannot be exempted under such circumstances.


Therefore, the Retaining Documents for Inspection Mechanism has not lessened the responsibilities of the non-resident taxpayers. If a non-resident taxpayer fails to make appropriate self-assessment on its treaty benefit eligibility or retain relevant documents as required, it would still face high tax risks in the post-filing administration.


非居民纳税人和扣缴义务人的责任


备查制下,非居民纳税人对税收协定待遇适用性的判定有赖于其自身的税务知识与经验,而税务机关在事后监管时是否可以认同纳税人的判断,存在不确定性。因此,在源泉扣缴和指定扣缴情况下,厘清扣缴义务人与非居民纳税人各自的责任对拟定合同条款、理顺交易事项、降低税务风险显得尤为重要。扣缴义务人的责任——对报告表的完整性负责,也需在税务机关后续管理中配合调查。


根据35号公告,扣缴义务人仅需在收到报告表后确认填报信息的完整性,无需就非居民纳税人是否符合享受协定待遇条件进行审核,即可按照非居民纳税人要求享受的协定待遇进行扣缴申报。若因为扣缴义务人未收到报告表仍按协定待遇扣缴或者报告表填报信息不完整而导致非居民纳税人不应享受协定待遇但享受了协定待遇且未缴或少缴税款的,主管税务机关可追究扣缴义务人的责任,并责令非居民纳税人限期缴纳税款。这相较于60号公告下要求扣缴义务人根据非居民纳税人的资料核查其享受税收协定待遇资格的规定,备查制下扣缴义务人的责任有所减轻。


除此之外,35号公告还规定,主管税务机关在后续管理过程中若发现留存备查资料不足以证明非居民纳税人符合享受协定待遇条件,或非居民纳税人存在逃避税嫌疑的,可要求非居民纳税人或扣缴义务人在后续管理中应税务机关要求限期提供相关资料并配合调查。若扣缴义务人未按规定提供资料而导致非居民纳税人未缴或少缴税款的,扣缴义务人也有被追究应扣未扣责任的风险。


•非居民纳税人的责任——对报告表与留存备查资料的真实性、准确性、合法性负责


根据35号公告,非居民纳税人应按照税收征管法及其实施细则规定的期限内3保存享受协定待遇的相关资料以备税务机关检查,并且非居民纳税人需要对留存备查资料与报告表填报信息的真实性、准确性、合法性负责。


35号公告第九条规定非居民纳税人发现不应享受而享受了税收协定待遇而导致少缴或未缴税款的,应主动向税务机关申报补税。第十六条规定除属于扣缴义务人未收到报告表仍按协定待遇扣缴或者报告表填报信息不完整的情况以外,其他情况导致的非居民纳税人不符合协定待遇条件而享受了协定待遇造成少缴或未缴税款的,会被视为非居民纳税人未按照规定申报缴纳税款,税务机关将依法向非居民纳税人追缴税款并加征滞纳金;在扣缴情况下,滞纳期限自扣缴申报享受协定待遇之日起计算。这意味着在源泉扣缴情况下,非居民纳税人发现自己因错误享受协定少缴税款并主动申报补税不属于国家税务总局公告[2017]37号文第九条第二款“在税务机关责令限期缴纳前自行申报缴纳税款的,视为已按期缴纳税款”的情况,因此不能免除滞纳金的罚则。


因此,备查制并未减轻非居民纳税人的责任,如果非居民纳税人不能正确作出协定待遇资格的判断或留存备查资料不完善,后续管理中依旧面临着很高的税务风险。

BT 201912 FINANCE 04Retained materials and Reporting Form


As listed in PN 35, the relevant materials to be retained includes: non-resident taxpayers’ Tax Resident Certificate, and income-related contracts, agreements, resolutions of the board of directors or shareholders, payment vouchers and other ownership certifying materials (these two items are similar to the record-filing documents required by PN 60). In addition, relevant materials to justify “beneficiary owner” status under the treaty article of dividends, interest or royalties shall be retained, as well.


Compared with the relatively complicated set of reporting forms in PN 60, PN 35 has significantly simplified the attachments to the reporting form: 1) Regardless of which treaty article applies and regardless of whether the non-resident taxpayer is an enterprise or an individual, the formats of the Reporting Form are the same; 2) it is only required to provide simple information including the taxpayer's name, contact information, the treaty article relevant to the tax treaty benefits and other general information. The non-resident taxpayer is required to sign and declare that 1) it is the tax resident of the other contracting jurisdiction; 2) the principal purpose of the relevant arrangement and transaction is not to obtain tax treaty benefits; 3) it has, through self-assessment, determined that it is in conformity with the conditions for claiming tax treaty benefits and will bear the due legal responsibilities; 4) it will collect and retain relevant materials for inspection in accordance with the regulations, and accept the post-filing administration of the tax authorities.


It is worth noting that PN 60 provides that where the non-resident taxpayers make the same treaty benefit claim with the same in-charge tax authority and there are no changes to the reporting information, the non-resident taxpayers are exempted from submitting the supporting documents repeatedly within 3 years of making the claim with the submission of the full set of supporting documents. However, there is no similar provision in PN 35. Therefore, under the Retaining Documents for Inspection Mechanism, it appears that the non-resident taxpayer still needs to fill out and submit the Reporting Form to the tax authorities on self-filing or through the withholding agent on withholding at source situations each time it makes the treaty benefit claim, and collect and retain the relevant materials for future inspection at the same time. As such, the change may increase the frequency with which non-resident taxpayers have to gather the relevant materials (e.g. obtaining the Tax Resident Certificate of the other contracting jurisdiction on a regular basis).


留存备查资料和报告表


35号公告列举的留存备查资料包括:非居民纳税人税收居民身份证明,与取得相关所得有关的合同、协议、董事会或股东会决议、支付凭证等权属证明资料(这两项与60号公告要求的备案资料相似),以及股息、利息、特许权使用费协定条款下可证明“受益所有人”身份的相关资料等。


相对于60号公告较为复杂的表格填报体系,35号公告对附件报告表进行了大幅度的简化:1)不论适用哪个协定条款,不论非居民纳税人是企业还是个人,报告表的式样都是相同的;2)报告表的内容仅涉及纳税人名称、联络方式、享受协定待遇条款名称等一般性信息。报告表的最后要求非居民纳税人签字声明:根据缔约对方法律法规和税收协定居民条款为缔约对方税收居民;相关安排和交易的主要目的不是为了获取税收协定待遇;自行判断并承担相应法律责任;按规定归集和留存相关资料备查,接受税务机关后续管理。


值得注意的是,60号公告针对非居民纳税人就享受同一条款协定待遇且报告信息未发生变化的情况给予了三年内免于向同一主管税务机关重复报送资料的规定。而35号公告并没有类似的规定。因此在备查制下,非居民纳税人每次在享受协定待遇时,似乎都需要在纳税申报(或通过扣缴义务人扣缴申报)时填写并提交报告表,同时按规定归集和留存相关资料备查。这可能增加非居民纳税人准备某些相关资料的频率(如定期需要取得缔约对方税收居民证明)。


Key issues for individual non-resident taxpayer


When an individual non-resident taxpayer, namely an individual who is a tax resident of the other contracting jurisdiction under the relevant tax treaty referred to in PN 35), claims treaty benefits for personal income under articles of employment, independent personal services or operating profit, director's fee, royalties or technical service fee, that individual shall refer to the relevant provisions in Article 4 of Public Notice on Individual Income Tax Treatments for Non-resident Individuals and Non-domicile Individuals4 (the Ministry of Finance (MOF) and the STA Public Notice [2019] No. 35) for the individual income tax treatment and submit the Reporting Form, as well as retain the relevant materials for inspection as stipulated in PN 35. For example, the situation of using a more favourable time apportionment formula than under the domestic regulations as the individual is a tax resident of the other contracting jurisdiction (for example, the condition for applying Formula 1 is extended from “not more than 90 days” to “183 days”), that individual should still submit the Reporting Form and retain the relevant materials for future inspection as stipulated in PN 35. One of the materials required to be retained for future inspection is the Tax Resident Certificate issued by the in-charge authority of the other contracting jurisdiction. Relevant individuals should pay particular attention to this compliance requirement, otherwise, they may not be able to enjoy the tax treaty benefits.


In addition, some individuals may be both a tax resident of China and the other contracting jurisdiction at the same time. Under this circumstance, the individual has to be recognized as the tax resident of the other contracting jurisdiction in accordance with the tie-breaker rules5 in Article 4 (the resident article) of the applicable tax treaty in order to enjoy the treaty benefits. The criteria for being considered as a tax resident of a jurisdiction and the application of tie-breaker rules are rather complicated, assistance from professional experts should be sought where necessary.


个人非居民纳税人需要留意的问题


个人非居民纳税人,即35号公告所指按照税收协定居民条款规定应为对方税收居民的个人,需要享受税收协定下受雇条款、独立个人劳务或营业利润条款、董事费条款、特许权使用费或技术服务费条款等涉及的个人所得项目协定待遇时,应结合之前发布的《财政部、税务总局关于非居民个人和无住所居民个人有关个人所得税政策的公告》(财政部、税务总局公告[2019]35号)第四条的相关规定进行个人所得税处理,并应按本次35号公告的要求报送报告表,留存相关资料备查。例如,因是缔约对方税收居民而需要适用比国内法规定更有利的破天计税公式的情况(比如适用公式一的条件从不超过90天延长到183天),也应按35号公告的要求报送报告表,并留存资料备查。而留存备查资料要求的其中一项是缔约对方主管当局出具的税收居民身份证明,相关个人应重视这一项合规要求,否则可能无法享受相关税收协定待遇。


此外,有些个人可能同时构成税收协定缔约对方和中国的税收居民。在这一情况下,应按照税收协定第四条的加比规则5判定该个人是缔约对方税收居民的前提下,该个人才可在中国享受相关税收协定待遇。是否构成一个国家/地区的税收居民,如何适用加比规则这些问题都非常复杂,有必要寻求专业人士的帮助。

BT 201912 FINANCE 06The takeaway


On one hand, the Retaining Documents for Inspection Mechanism simplifies the reporting forms, reduces the paperwork for non-residents, and facilitates the claiming of treaty benefits by non-resident taxpayers administratively. On the other hand, the new mechanism reduces the responsibilities of the withholding agents. Hence, this will be welcomed by both parties. However, this does not alleviate the responsibilities of the non-resident taxpayers and tax uncertainty. Non-resident taxpayers need to have a good understanding of tax treaty and tax filing to assess the eligibility of enjoying tax treaty benefits and retain sufficient supporting materials for the follow-up inspection by the tax authorities. Once the eligibility for tax treaty is denied in the subsequent administration process, the non-resident taxpayer may be subject to late payment surcharge in additional to the underpayment tax. It is especially complicated for individuals to understand the tax treaty rules related to cross-border activities and the provisions of the domestic tax law. Moreover, tax authorities in different regions may have different practices. It is recommended to seek assistance from professional experts where necessary.


Meanwhile, there are some issues in PN 35 which need further clarification. For example, 1) PN 35 listed some materials that have to be retained for future inspection, but without any detailed explanation. For example, it needs further clarification on which supporting documents are required to justify the Beneficial Owner status under the article of dividends, interest, and royalties. A further comparative analysis of STA Public Notice [2018] No. 96 and its interpretation may help to better understand the requirement of supporting materials; 2) Under the situation of self-filing by the non-resident taxpayers, it is not clear when the late payment surcharge would commence if the eligibility for treaty benefit is denied in follow-up administration and the tax authorities goes after the non-resident taxpayer for its responsibility related to the delayed payment; 3) PN 35 requires the withholding agent to provide relevant materials and cooperate in the investigation, it is not clear to what extent the withholding agent has to “cooperate” in order to be clear of the relevant liability. In practice, it is recommended to sufficiently communicate with the in-charge tax authorities.


From the perspective of individual income tax, with the full implementation of the new Individual Income Tax Law, especially the establishment of the cross-departmental individual tax-related information sharing system and the joint incentive and disciplinary mechanism, it will provide strong support to the tax authorities for follow-up administration on individuals with cross-border activities enjoying tax treaty benefits. Therefore, enterprises need to pay close attention to the activities of their employees and the potential impacts of these activities. At the same time of ensuring the compliance of individual income tax matters, enterprises should also effectively manage their tax risks (such as permanent establishment risk) and related costs. In addition, one of the difficulties in managing cross-border personnel activities was the collection of accurate and timely information on the relevant individual’s length of stay in China and abroad. Enterprises can now use scientific and technological methods and tools to achieve instant and effective information collection and summary, and improve management efficiency.


注意要点


备查制一方面简化了报告表,减轻了非居民的文书工作负担,提高了非居民纳税人享受协定待遇行政上的便捷性,另一方面减轻了扣缴义务人的责任,将受到双方的欢迎。不过,这并未减轻非居民纳税人的责任与税收不确定性。非居民纳税人需要掌握足够的税收协定及纳税申报相关知识,以正确判断是否适用税收协定待遇,并留存足够的证明资料以备税局的后续检查。一旦后续管理被否定享受协定待遇的资格,非居民纳税人除了补缴税款之外还会被加征滞纳金。特别是对于个人来说,跨境活动相关的税收协定及国内法等税收专业知识具有高度复杂性,各地征管实践也不尽一致,为避免后续管理中潜在的税收风险,建议在必要时寻求专业人士的帮助。


此外,35号公告仍有一些问题有待澄清,例如1)35号公告列举了一些需要留存备查的资料,但并未对其进行细化解释。如协定中股息、利息、特许权使用费条款下,未进一步明确哪些资料可以用于佐证受益所有人的身份,具体需要留存备查的资料还需要结合国家税务总局公告[2018]9号文6及其解读作进一步分析。2)非居民纳税人自行申报情况下,在后续管理中被否定税收协定待遇的,若追究延迟缴纳责任,滞纳金从何时起开始加征并不清晰。3)35号公告要求扣缴义务人在后续管理中提供相关资料并配合调查,但未明确究竟扣缴义务人具体需要做到何种程度的“配合”才可免除相关责任。实务操作中建议与主管税务机关进行充分沟通。


个人所得税角度,随着新个人所得税法的全面实施,特别是跨部门个人涉税信息共享及联合激励惩戒机制的建立,将为税务机关针对跨境活动人员享受协定待遇的后续管理提供有力的支持和保障。因此,企业需要高度关注这类员工的活动及其潜在影响,在确保个人税务合规的同时,也对企业的税收风险(如常设机构)和相关成本进行有效管理。此外,及时准确的获取相关人员在境内外的停留时间曾经是企业跨境人员活动管理中的难点之一。企业可以通过运用科技化信息化的手段和工具,实现即时有效的信息收集和汇总,提升管理效率。

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