Then, when Company A pays the consulting fee of Company M, does it need to withhold business tax and enterprise income tax?
In this regard, the author believes that it should be analyzed from two aspects: first, whether economic business belongs to the scope of business tax and enterprise income tax; The second is to specifically analyze how to pay.
I. Economic and business analysis
The Notice of People's Republic of China (PRC) State Taxation Administration of The People's Republic of China on Printing and Distributing (Guo Shui Fa [1993] 149) stipulates that "consulting service" belongs to one of other service industries.
Article 1 of the Provisional Regulations on Business Tax stipulates that units and individuals that provide labor services, transfer intangible assets or sell real estate in People's Republic of China (PRC) are taxpayers of business tax and shall pay business tax in accordance with these regulations.
Article 4 of the Detailed Rules for the Implementation of the Provisional Regulations on Business Tax stipulates that the provision of labor services stipulated in the Regulations in People's Republic of China (PRC) mentioned in Article 1 of the Regulations means that "the units or individuals that provide or accept labor services stipulated in the Regulations are in China".
The Notice on Partial Tax Exemption Policy for Personal Financial Commodity Trading (Caishui [2009]11No.) stipulates: "IV. Provisional Regulations of the People's Republic of China on Business Tax provided by overseas units or individuals to domestic units or individuals (the State Council Decree No.540th, hereinafter referred to as the Regulations). The specific scope of the above services shall be stipulated by the Ministry of Finance of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China.
According to the above provisions, business tax is not levied on services provided by overseas units or individuals to domestic units or individuals such as culture and sports (except broadcasting), entertainment, hotels, restaurants, warehouses and other services such as bathing, hairdressing, dyeing, painting, copying, carving, copying and packaging. "Consulting services do not belong to the scope of business tax exemption stipulated in the document.
According to the provisions of the above-mentioned tax laws, regulations and normative documents, as the units that receive and provide labor services are in China, this economic business belongs to the scope of business tax.
In addition, Article 3 of the Enterprise Income Tax Law stipulates that if a non-resident enterprise has not established an institution or place in China, or if it has established an institution or place, its income has no actual connection with the institution or place it has established, it shall pay enterprise income tax on its income originating in China. Article 7 of the Regulations on the Implementation of the Income Tax Law stipulates that domestic and overseas income and income from providing services mentioned in Article 3 of the Enterprise Income Tax Law shall be determined according to the place where the services occur.
According to the above tax laws and regulations, since the labor service occurs in China, enterprise income tax is required.
It is worth mentioning that in the domestic and overseas division of labor income, the enterprise income tax takes the place where the labor service occurs as the judgment principle. Business tax is levied according to whether the service provider or recipient is in China. Enterprises must pay attention to careful identification and judgment when making specific analysis.
Second, tax declaration.
Article 11 (1) of the Detailed Rules for the Implementation of the Provisional Regulations on Business Tax stipulates that if people in China and units or individuals outside China provide taxable services, transfer intangible assets or sell real estate in China, their domestic agents shall be withholding agents; If there is no agent in China, the transferee or the buyer shall be the withholding agent.
If Company M has not established a business organization or entrusted agent in China, Company A will withhold and pay the business tax at the rate of 5%.
As for how to declare and pay enterprise income tax, it is more complicated.
Third, the analysis of actual treatment.
From the above analysis, we know that the enterprise income tax is determined by the place where the labor service takes place. If the consulting service takes place overseas, there is no need to pay enterprise income tax in China. In this case, if consulting services take place in China, should corporate income tax be paid?
There are two questions to be paid attention to whether the labor service in China needs to pay enterprise income tax: 1, whether the labor importing country (region) has signed a tax agreement (or tax arrangement) with China; 2. If a tax agreement (or arrangement) is signed with China, it shall be judged whether its economic and business activities constitute a permanent establishment.
According to Article 1 of the Reply of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China on the Decision of Foreign Enterprises Providing Labor Services in China and the Ownership of Profits (Guoshuihan [2006] No.694), the provisions of the permanent establishment of tax treaties stipulate that "an enterprise of a Contracting State provides labor services, including consulting services, for the same project or related projects in the other Contracting State through employees or other personnel only for a continuous or cumulative period of more than six months in any twelve months", which in practice means that foreign enterprises do not set up offices in China. When these employees actually work continuously or cumulatively in China for more than six months in any twelve-month period, it can be judged that the foreign enterprise constitutes a permanent establishment in China. However, in the Notice of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) on Printing and Distributing the Second Protocol on Tax Arrangements and Exchange of Letters between Representatives of Tax Authorities in the Mainland and Hong Kong (Guo Shui Fa [2008] No.70) and the Notice of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) on Printing and Distributing the Agreement and Protocol Interpretation between the Governments of People's Republic of China (PRC) and Singapore on Avoiding Double Taxation and Preventing Fiscal Evasion on Income (Guo Shui Fa [2065] No.438),
According to the above provisions, since Singapore has signed a tax agreement with China, and the consulting service time of Company M in China does not exceed 183 days, it does not constitute a permanent establishment. Therefore, there is no need to pay enterprise income tax in China. Company A doesn't need to withhold and pay corporate income tax for Company M either.
It should be specially reminded that if the consulting service meets the conditions for taxation of royalties, the enterprise income tax shall be paid according to the transfer of royalties, and the enterprise income tax shall be withheld and remitted according to 10% of the total income, regardless of whether it has been in China for more than 183 days. For the difference between technical service fees and royalties, please refer to Article 4 of the Notice of State Taxation Administration of The People's Republic of China on Relevant Issues Concerning the Implementation of Royalty Clauses in Tax Agreements (No.507, 2009). In the service contract, if the service provider uses some expertise and technology in the process of providing services, but does not transfer or license these technologies, then this service does not belong to the scope of royalties. In this case, Company M did not transfer or license these technologies, so it is not within the scope of royalties.
Of course, if Company M stays in China for more than 183 days, the overseas enterprise constitutes a permanent establishment in China and should pay enterprise income tax according to its operating profit. At present, the usual practice is that the tax authorities verify its profit rate, and then multiply the service fee income by the profit rate, and then multiply it by the statutory tax rate of 25% to pay enterprise income tax. The profit rate shall be reported and paid with reference to the relevant provisions of the Notice of State Taxation Administration of The People's Republic of China City, People's Republic of China (PRC) on Printing and Distributing (Guo Shui Fa [20 10] 19).
In addition, if the labor services provided by some overseas companies meet the scope of registration and filing stipulated in the Interim Measures for the Administration of Non-resident Contracted Project Operation and Labor Tax (OrderNo. 19 of State Taxation Administration of The People's Republic of China City, People's Republic of China (PRC)), relevant procedures shall be handled according to the regulations.