1. December 2016
Tax and Accounting News
Chinese CRS: Due Diligence Procedures on Financial Account Information in
Tax Matters for Non-residents (Consultation Paper)
by Cokine WANG (Chinese CPA/ Associate Partner)
Picture1, Source:
http://www.oecd.org/tax/transparency/automaticexchange
ofinformation.htm
With the development of the economic globalization,
local tax residents always bear and manage their
financial assets in offshore accounts to evade their
home country taxation. In order to enhance the
international tax investigation cooperation and
increase the tax transparency, to combat tax
evasion by using the offshore bank accounts, China
stated that it would adopt the Organization for
Economic Co-operation and Development’s
(“OECD”) Standard and participate in Automatic
Exchange of Financial Information in Tax Matters
(“AEOI standards”) during G20 meeting. On 14th
October 2016, the State Administration of Taxation
("SAT") published on its official website Due
Diligence Procedures on Financial Account
Information in Tax Matters for Non-residents
(Consultation Paper) (the "Consultation Paper").
According to the timetable, domestic financial
institutions will operate the due diligence as per the
“AEOI standards” from January 1, 2017, identify
non-resident’s accounts and accounts of enterprises
and collect and report account related information
which will be exchanged by the SAT with the
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Contents:
 Chinese CRS: Due Diligence Procedures on Financial
Account Information in Tax Matters for Non-residents
(Consultation Paper)
 Comparison for tax treatment for company restruc-
turing processes
 Tax Headlines December
 ECOVIS Ruide China Internal News:
- ECOVIS Ruide China Annual Dinner

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I N F O 1 2 . 2 0 1 6
competent tax authorities of other countries (regions) regularly.
Basic principle of “AEOI standards”, domestic financial institutions will operate the due diligence to identify
non-resident’s accounts and accounts of enterprises, and collect/ report account related information to
domestic competent tax authorities and then exchanged with the respective jurisdictions of these emigrants, in
order to realize the controlling of cross-board taxable assets. The account related information include: name,
taxpayer identification number, address, account number, account balance, interest income, dividend income,
and related earnings of financial assets, etc. The details could be referred to as following chart 1:
Source for Chart 1: State Administration of Taxation, www.chinatax.gov.cn
Detailed regulation of the Consultation Paper:
1. Timetable: Reporting Financial Institutions include depository institutions, custodial institutions,
investment entities, and specified insurance companies and its affiliates, which are established in
China according to Chinese law, should operate the due diligence to identify non-resident’s accounts
and accounts of enterprises and collect account information related by the following time schedule.
Time schedule Due diligence scope
From 1st January 2017 Carry out due diligence procedures for new individual and entity
accounts
By 31st December 2017 Complete due diligence procedures on pre-existing high value in
dividual accounts (individual account with an aggregate balance
or value that exceeds RMB 6,000,000 as of 31st December 201
6); and
By 31st December 2018 Complete due diligence procedures on pre-existing low valueindi
vidual accounts and all pre-existing entity accounts

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China will complete its first exchange of financial account information of non-resident’s accounts in
September 2018.
2. Reporting Financial Institutions and financial account scope
Application scope Non-application scope
Institutions
Commercial banks, rural credit
unions & policy banks;
Security companies;
Futures companies;
Securities investment fund
management companies, assets
management companies, private
equity funds;
Insurance companies that issue
cash value insurance and/or
annuity contracts;
Trusts;
Financial assets management
company;
Finance company;
Financial leasing company;
Auto financing company
Consumer finance company;
Money broking company;
Securities registration and Clearing
Institutions;
Others
Accounts
Deposit account;
Other accounts such as custodial
accounts, securities trading
accounts, wealth management
accounts, investment accounts,
accounts held with trustee,
collective wealth management
accounts, cash value insurance
contract and/or partnership
interest in private equity funds
Other account except above-mentioned
account
3. Non-Residents
According to Consultation Paper, account
information comply with certain conditions opened
by non-resident individuals and enterprises in
Chinese financial institutions will be reported and
exchange to competent authority in the country
where tax residents settle. For Chinese of foreign
nationality, holder of foreign Permanent Residence
Right, or Chinese citizens residing abroad over a
certain period, if these people have been local tax
residents according to the law of the local countries
(areas), namely non-resident individuals of China
belonging to Consultation Paper. Chinese financial
institutions will recognize accounts opened by them
in China, collect and report account information, and
SAT will exchange account information to competent
authority in the country where tax residents settle.
Therefore it shows,
1. The correct assessment of tax residents is
the foundation for implementation of the
Consultation Paper. Only when individuals or
enterprises are recognized as Chinese non-
residents, related account information in Chinese
financial institutions will be reported to SAT and then
shared and exchanged with the competent tax
authorities in the country of such tax residents. The
conception of a tax resident therewith is not equal to
that of a resident on account of nationality.
The individual Chinese tax resident comprises any
individual who has a domicile within the territory of
China or who has no domicile but has stayed in the

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territory of China for one year or longer. "Individuals
domiciled in the People's Republic of China" means
individuals who, by reason of their permanent
residence, family or economic interests, habitually
reside in the People's Republic of China for 365
days of a tax year. No deduction from that number of
days shall be made for temporary trips out of the
People's Republic of China. For the purposes of the
preceding paragraph, "temporary trips out of the
People's Republic of China" means absence from
the People's Republic of China for no more than 30
days in a single trip, or no more than a cumulative
total of 90 days over two or more trips, within the
same tax year.
Chinese tax resident enterprises means Enterprises
that are set up in China in accordance with the law,
or that are set up in accordance with the law of a
foreign country (region) whose actual administrative
institution is within China.
2. Up to now, 101 countries (areas) have
committed to implementing AEOI, which including
British Virgin Islands, Cayman Islands etc. those low
tax burden countries (areas). For those Chinese tax
residents, who would like to transfer financial assets
to the financial institutions of “tax heaven”, in order
to avoid the taxes paid in China, their financial
account information will be exchanged to Chinses
Tax authority according to AEOI. Off course, AEOI
itself does not impose or increase any tax burden for
tax residents worldwide.
If you need further information or support:
Please do not hesitate to get in touch with us via
marketing@ecovis.cn

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Comparison of the tax treatment for company restructuring processes
by Richard SHENG (CPA, CTA)
Picture source: www.fotolia.com , Author: Chris Titze
Imaging
In practice, we know that the applicable tax
treatment of enterprise restructuring may be
classified as either an “Ordinary Restructuring” or a
“Special Restructuring” based on various criteria.
According to “Caishui [2009] No.59”, these two
applicable tax treatments of “Ordinary Restructuring”
and “Special Restructuring” are mainly different in
the tax base and the time of confirming tax incomes
(or tax losses).
Comparing with Ordinary Restructuring where the
taxable income is entitled to be confirmed and
claimed once the transaction is done; the advantage
of Special Restructuring is the possibility to apply for
the tax deferral.
Then what conditions should be met of applying for
Special Restructuring?
According to “Caishui [2009] No.59”, Special
Restructuring treatment may be applicable if all of
the following conditions are satisfied:
(1) The restructuring has a bona fide commercial
purpose and the primary purpose is not to
reduce, exempt, or defer any tax payments.
(2) The assets or equity transferred in an
acquisition, merger, or split should meet the
prescribed threshold. (According to “Caishui
[2009] No.59”, the related threshold has been
adjusted.)
Thereof:
a. Equity Acquisition – In the event of equity
acquisition, where at least 50% of the equity
interest in the acquired enterprise is acquired;
b. Asset Acquisition – In the event of asset
acquisition, where at least 50% of the
transferring enterprise’s assets are acquired by
the receiving enterprise;
(3) The original business operations of the
transferred enterprise or assets shall remain
unchanged within a consecutive 12-month
period after the restructuring.
(4) The equity consideration shall comply with the
prescribed ratio. (According to “Caishui [2009]
No.59”, the related ratio has been adjusted.)
Thereof:
a. Equity Acquisition – In the event of equity
acquisition, the equity consideration received is
at least 85% of the total consideration;
b. Asset Acquisition – In the event of asset
acquisition, the equity consideration is at least
85% of the total consideration;
(5) The main shareholder receiving equity
consideration cannot transfer the equity
consideration acquired within 12 months after
the restructuring.
If the company restructuring meets all of the
conditions as mentioned above, each party involved

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may elect for special tax treatment in respect of the
equity consideration of this transaction.
Besides, the tax bases of Ordinary Restructuring
and Special Restructuring differs from each other:
1) Under the circumstances of Ordinary
Restructuring, the tax base of the assets the
transferee obtained after the restructuring should be
calculated based on the fair value.
2) Under the circumstances of Special
Restructuring, the tax base of the assets the
transferee obtained should be equivalent to the
original tax base of transferor before the
restructuring, (which is called as historical tax base),
except the gains or losses caused by the non-equity
payment.
In the environment like the Chinese market where
the fair value market is still in developing phases,
the acquisition of the fair value in Ordinary
Restructuring appears to be more difficult than
acquisition of the original tax base of transferor for
Special Restructuring.
In conclusion, Special Restructuring can bring the
benefits in tax deferral and the related accounting
treatment is more convenient than Ordinary
Restructuring. Meanwhile, however, it also puts
forward more requirements on the restructuring
company.
If you need further information or support, please
contact: marketing@ecovis.cn .

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December Tax News Headlines
Catalogue of some important tax regulations and laws for the release period:
16 November 2016 – 15 December 2016
Release
Date:
Circular: Title: Effective Date:
2016-11-16 Cai Shui [2016] No. 121
Circular on Continuing the Implementation of
Certain Value-added Tax Policies for the
Purchase of Equipment by Research and
Development Institutions
From 1 January 2016 to 31
December 2018
2016-11-17 SAT [2016] No. 71
Announcement of the State Administration of
Taxation on Relevant Issues concerning the
Administration by Category of the Use of
Value-added Tax Invoices Depending on
Taxpaying Credit Grades
Taking effect from 1 December
2016
2016-11-24 SAT [2016] No. 73
Announcement of the State Administration of
Taxation on Relevant Issues concerning the
Deduction of Certain Items for Value-added
Tax Levied on the Transfer of Real Property
by Taxpayers
Taking effect from the date of
release
2016-11-29 SAT [2016] No. 77
Announcement of the State Administration of
Taxation on Issuing the Administrative Rules
for Stamp Duty (for Trial Implementation)
Taking effect from 1 January
2017
2016-11-30
ShuiZongHan [2016] No.
638
Circular of the State Administration of
Taxation on Relevant Matters Concerning
the Comprehensive Promotion of Online
Application for Value-added Tax (VAT)
Invoices
2016-11-30 SAT [2016] No. 78
Announcement of the State Administration of
Taxation on Issuing the Rules on the
Exercise of Discretion over Taxation
Administrative Penalties
Taking effect from 1 January
2017
2016-12-01 SAT [2016] No. 76
Announcement of the State Administration of
Taxation on Relevant Issues concerning the
Determination and Handling of Issuance of
Special Value-added Tax Invoices by
Evading (Unreachable) Enterprises
Taking effect from the date of
release
2016-12-03 Cai Kuai [2016] No. 22
Circular of the Ministry of Finance on Issuing
the Provisions on the Accounting Treatment
for Value-added Tax
Taking effect from the date of
release
2016-12-13 SAT [2016] No. 82
Announcement of the State Administration of
Taxation on Relevant Issues concerning
Starting Using General Value-added Tax
Invoices (Roll-printed Invoices)
Taking effect from 1 January
2017

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News from ECOVIS Ruide China
ECOVIS Ruide China Annual Meeting
by Katharina SIEGRIST, Luise CHEN
Picture 1: Angel SHI （施倩倩)
Due to the auditing season demanding too much
time of everybody in January, closer to the
Chinese New Year holiday season, this year’s
“annual dinner” happened early.
The timing did give a chance, among others, to
combine a Christmas celebration with traditional
annual joint evening.
On 23 December 2016, all staff members and the
senior management team got off work a little
earlier than usual to head towards the long-
planned joint dinner.
After our 2015 experience in a Thai restaurant in
Shanghai where the ECOVIS Ruide team only
had a small area of the space to themselves this
year was going to be different !
Organized by the internal financial and
administration department and moderated by
Laura LIU the location paid tribute to our new
Taicang office and its team, opened in early June
2016.
A MOBO business center meeting room in
DongTing Tower Taicang was transformed into a
banquet hall. A never ending line of foods kept
being dished up throughout all the evening; in a
manner, that it was hard to decide which of them
to try first. With that large space at hand it meant,
too, all prerequisites were met to extend the
scale of our annual dinner way beyond a modest
eating area: We were about to sing !
Party band “Trigonometric Function” with two
guitar players, a singer and drummer, the stage
as well as the space for sound design and
karaoke equipment was set.
Picture 2: Angel SHI （施倩倩)
A long list of gifts prepared and presented by Laura
LIU and her colleagues and a line of self-sung
songs awaited us.
What’s more, a not insignificant number of singers
had been unprepared but did to the delight of all
attending comply with requests for their
contribution.
75 of our old staff members from the earliest
moments of ECOVIS Ruide until the latest
newcomers that joined in the past 12 months were
there to be merry.
For questions or remarks, please contact:
marketing@ecovis.cn .

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About ECOVIS
Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 4,500 people operating in
over 66 countries. Its consulting focus and core competencies lie in the areas of tax consultation, accounting, auditing
and legal advice. The particular strength of Ecovis is the combination of personal advice at a local level with the
general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on
qualified specialists in the back offices as well as on the specific industrial or national know-how of all the Ecovis
experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of
international transactions and investments – from preparation in the client‘s home country to support in the target
country. In its consulting work Ecovis concentrates mainly on mid-sized firms.
Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and
administrative issues. The name Ecovis, a combination of the terms economy and vision, expresses both its
international character and its focus on the future and growth.
Imprint
ECOVIS Ruide Certified Public Accountants Co., Ltd.
Unit 302, LJZ Fund Tower,
1528 Century Avenue, Pudong New District,
200122 Shanghai, P.R. China
Telephone:+86-21-6105 7333 ext. 176
Telefax: +86-21-6105 7330
Email: marketing@ecovis.cn
Website: www.ecovis.cn
Shanghai, 31 December 2016
ECOVIS Ruide China Info is published for the clients and the
professionals of Ecovis Ruide China. The contents are of a general
nature only. Before taking action on any information contained in this
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