Chongqing- In the first seven months of this year, overseas enterprises in Chongqing benefitted from tax treaty treatment, reducing non-resident enterprises' income tax by nearly 370 million yuan (about 51.7 million U.S. dollars), according to the Chongqing Municipal Taxation Bureau on August 2. 

Tax treaties and bilateral agreements are made to avoid double taxation and deter tax evasion, primarily focusing on corporate and individual income taxes. By the end of 2019, China had brought 103 such agreements into effect.  

Subject to certain conditions, resident enterprises earning income abroad and non-resident enterprises earning income in China can reap the benefits of such treaties. These include business profit tax exemption, tax reduction on dividends, interest, and royalties, and tax exemption for capital gains. As a result, they have become vital tools for businesses operating across borders.

ModusLink Software Technology (Chongqing) Co., Ltd., located in Xiyong Micro-electronics Industrial Park, a subsidiary of Singapore's ModusLink Pte.Ltd., has benefitted from the treaties, saving 418,000 yuan in taxes in the first half of the year. The company, which provides computer peripheral products and components for major tech companies like Microsoft, IBM, and Dell, distributed profits twice this year. Non-resident taxpayers, who were shareholders, benefitted from a 5% corporate income tax rate. 

"The tax savings have enhanced confidence and will be reinvested into the company's Chinese operations," said Ms. Deng, a financial staff member of ModusLink Software.

Further streamlining the process, under the backdrop of the Chengdu-Chongqing economic circle, the Sichuan and Chongqing tax authorities have set up a working mechanism for collaborative management of tax treaty treatment. This mechanism allows for information sharing, mutual recognition of results, and service integration for non-resident taxpayers across both regions. 

Minsheng Commercial Aviation (Ireland) Cooperation Limited, the first overseas enterprise to benefit from the working mechanism, praised the simplified process of only needing to submit information to one local taxation bureau, either Sichuan or Chongqing.

A Chongqing Municipal Taxation Bureau representative revealed plans to assemble an expert team and conduct tax association activities. The bureau will actively implement policies such as tax-deferred reinvestment of profits of foreign investors, tax treaty treatment, and reservation pricing arrangements. 

The aim is to fortify the confidence of cross-border investors and foreign-funded enterprises in the development and to continue attracting overseas investment to the city.