The Tax Department Will Conduct A Comprehensive Survey Of Dividend Distribution.

At present, the annual dividend distribution of listed companies is in progress.

The State Administration of Taxation recently issued the Circular of the State Administration of Taxation on strengthening the management of enterprise income tax related to the dividends of Listed Companies in China's non resident enterprises ([2010]183), requiring all tax authorities to strengthen the management of enterprise income tax paid by non resident enterprises to share dividends in China's domestic enterprises, conduct a comprehensive survey of the dividend payout of Listed Companies in 2008 and subsequent years, and obtain information on dividend announcements and tax withholding obligations to shareholders of non resident enterprises, and urge listed companies to inform non resident enterprises of their tax obligations in distributing dividend notices and fulfill the withholding obligations of enterprise income tax according to law.

According to some areas, some of the resident enterprises in China have paid dividends to the non resident enterprises shareholders in 2008 and subsequent years, but there is a situation of failing to perform the duty of withholding enterprise income tax according to law.

In the notice, the State Administration of Taxation has asked all local tax authorities to strengthen the management of tax sources, conduct a comprehensive investigation of the dividend of China's domestic and foreign public offerings and listed stocks, including A shares, B shares, H shares and other overseas shares, and check the listed companies' withholding tax registration, submit relevant information and set up relevant books and archives, and obtain information on dividend announcements and tax withholding obligations to shareholders of non resident enterprises, and urge listed companies to inform non resident enterprises in the distribution of dividend notices, and to fulfill the withholding obligations of enterprise income tax according to law in accordance with the law of the people's Republic of China in 2008.

In the survey, it was found that the listed companies failed to perform the withholding obligations according to law. The competent tax authorities should order them to withhold them within a specified time and deal with them according to the relevant provisions of the tax collection and management law and the enterprise income tax law.

China's enterprise income tax law and its implementation regulations stipulate that when the Chinese public enterprises issuing public offerings and listed stocks (A shares, B shares and overseas shares) inside and outside China distribute their dividends in 2008 and subsequent years to non resident enterprises shareholders, the enterprise income tax shall be withheld at the rate of 10%.

Where a shareholder of a non resident enterprise needs to enjoy the treatment of the tax agreement, it shall be dealt with in accordance with the relevant provisions of the tax agreement.

In January 1, 2008, after the implementation of the new enterprise income tax law and its implementation regulations, the tax exemption of corporate income tax exempt from non resident enterprises derived from China was abolished, and corporate income tax was levied at a rate of 10%.

In February 2009, the General Administration of Taxation issued the "Interim Measures for the management of the tax withholding of non resident enterprise income tax". It requested that non resident enterprises obtain the income tax on the rights and interests of the non resident enterprises, such as dividends and bonuses originate in China, interest, rent, royalties, income from the pfer of property and other income, which should be paid by the source. The units or individuals who directly bear the obligations of paying the relevant funds to the non resident enterprises are the withholding agents.