In recent years more and more foreign accounting offices, auditing companies, law firms and consulting companies (hereinafter referred to as consultation enterprises) have come to China to conduct taxation, accounting, auditing, law and consulting businesses (hereinafter referred to as consultation business or services). Some overseas consultation enterprises have set up in China enterprises with foreign investment that are engaged in consultation business, and some have set up representative offices in China. In some cases, overseas consultation enterprises participate in consultation business in China by sending personnel directly to China to do the business, or cooperating with consultation enterprises with foreign investment or representative offices in China. To standardize taxation management, the State Bureau of Taxation issued on May 12, 2000 the Circular concerning Taxes for Enterprises with Foreign Investment and Foreign Enterprises Engaged in Consultation Business (Guo Shui Fa  No.82), which regulates the taxation on incomes obtained by foreign-invested enterprises, representative offices and overseas consulting businesses from consulting activities in China.
I. Taxation on incomes obtained from consulting activities by enterprises with foreign investment and representative offices in China
All the income from consultation business based on individual contracts between enterprises with foreign investment, or representative offices, with their customers (including those signed by a representative office on behalf of its head office, but actually fulfilled by the representative office) shall be entered as the income of the said enterprises or representative offices, and shall be reported for business and income taxes at the place where the said enterprises and representative offices are located.
II. Taxation on incomes obtained from consultation services provided to customers on individual basis by overseas consultative enterprises
All the income obtained by an overseas consultative business from consultation services that take place in China and based on individual contracts with its customers shall be reported and levied with business and income taxes in China. When the services provided take place both inside and outside China, the income shall be segmented into a domestic and an international part according to the places where the services occur, and the domestic part of income shall be reported in China for taxation. Generally, when the customer of the said consultative business is within the territory of China, the domestic part of the income should be no less than 60 percent of the total.
If all the consultation services take place outside of China, no taxes on the income will be levied in China.
III. Taxation on incomes from consultation business jointly conducted by overseas consultation companies and enterprises with foreign investment or representative offices in China
When an overseas consultation company signs a contract and conducts consulting business jointly with a domestic foreign-invested enterprise or representative office in China, the income so obtained should be segmented in accordance with the individual involvement of each party or stipulations of the contract. The foreign-invested enterprise or the representative office shall report its share of the income for business and income taxes. In cases where the customer of the joint consultation conducted by the overseas consultation enterprise and the domestic foreign-invested enterprise, or the representative office, resides within the Chinese territory, the share of income taken by the domestic foreign-invested enterprise and the representative office shall not be lower than 60 percent of the total income.
In cases where the overseas enterprise sends personnel to China to participate in the said consultation business, its income share shall again be segmented according to places of occurrence into a domestic part, which should be no less than 50 percent of its total share and should be reported for business and income taxes in China.
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