After China optimized its COVID policies, more foreign companies have chosen to invest and do business in Shanghai. Many foreign enterprises are making equity investments in Chinese companies.

Equity transfers are common in the business world. Most of these foreign investors have no establishments or entities thus having no withholders, or withholders are unable to fulfill withholding obligations in China. Therefore, this constitutes self-declaration conditions for Enterprise Income Tax and Stamp Duty.

China's State Taxation Administration (STA) is striving to meet non-resident taxpayers' needs of filing taxes overseas. Therefore, in April, STA launched a pilot program nationwide with new features in China Electronic Tax Services online making it possible for non-resident enterprises to file Enterprise Income Tax (EIT) and Stamp Duty through Electronic Tax Services.

Q1: How do non-resident individuals register an Electronic Tax Services Account?

(1) Log on to Electronic Tax Services of Shanghai (https://etax.shanghai.chinatax.gov.cn/).

(2) Click 新版登录 Log in on top right of the webpage, which will direct you to the Login page.

Click the arrow on the top right position and click "English" to switch to English service.

(3) Select Overseas Individuals and click Registration.

There are 4 steps to create an account.

Step 1: Choose a registration method. Select Online Registration for Overseas Individual. You will be able to register via e-mail. Check the box below that acknowledges the terms of service. And click "Next."

Step 2: Input personal information including Name, Type of ID Document, ID Number, Gender and Nationality. Click "Next."

Step 3: Enter your password, e-mail address and click "Get a verification code."

You'll receive an e-mail from etax@chiantax.gov.cn including a One-Time Password (OTP).

Step 4: Enter the e-mail OTP you received and click "Next."

Now you have successfully created an account for E-Tax China. You could use this account to roam across E-Tax bureaus of different provinces, autonomous regions and municipalities across China.

Q2: How to apply for a Tax Identification Number (TIN) for a Non-resident Enterprise (NRE)?

Once you have logged into Electronic Tax Services of Shanghai with your individual account, you could then apply a TIN for NRE.

(1) Click http://etax.shanghai.chinatax.gov.cn and log onto the main page of Electronic Tax Services of Shanghai.

(2) Click "新版登录" on the top right area.

Select "English" to switch to English service.

(3) Log in via Individuals portal and make sure you have selected "Overseas Individuals."

Input your e-mail address and password that you used to create an account. Slide to confirm. Then click "Login."

Once you have logged in, you will see the menu "Non-resident Enterprise Information Collection" and you can start the process to apply a TIN for NRE.

(4) Make sure all the information are correct before you click "Submit."

Please note that the size of one file shall not exceeds 10M and the file shall be in jpg, jpeg, png, bmp, gif, doc, docx, pdf, xls, xlsx format.

(5) Click "Submit" and hand in your application.

Your application will be processed. It takes 1 working day to process your application.

Once it's done you will receive an e-mail from etax@chinatax.gov.cn with a TIN.

The Municipal Tax Bureau of Shanghai may seek further clarification regarding the nature of income derived.

Once you have the TIN for NRE, you could log into E-Tax Bureau Shanghai through Non-resident Enterprise portal. This TIN is recognized across China's mainland. If NRE has income derived from other jurisdictions in China, you could still use this TIN for e-filing.

Q3: What documents does a Non-resident Enterprise (NRE) need to submit when applying for a Tax Identification Number (TIN)?

Copies of business registration and proof indicating individual's connection with this NRE such as a letter of representation or valid working ID.

Q4. How does a Non-resident Enterprise (NRE) report an equity transfer contract to a competent tax office?

(1) Go to the Login page just like how you log in as an individual.

Select "English" to switch to English service.

On the main page, make sure you select "Non-resident Enterprises" and type in the TIN that was e-mailed to you starting with capital letter "FJ" and your e-mail address and password which you used to log in as an individual.

(2) You will find three features on the main page once you have logged in.

Click "Cross-border Tax Service For Non-resident Enterprises" to start reporting equity-transfer contracts.

(3) On the contract information page, click the button "New Contract" and create a new equity-transfer contract.

(4) Fill in the contract information form. The red asterisk (*) before the bracket means this field is required to be filled in.

(5) In the "Information of the Transferred Chinese Resident Enterprises" section, click to add a new holding company (a tax resident in Shanghai).

Companies from previous reports will display automatically. If you want to add a new holding company, click "Add" and input the tax identification number of the enterprise in the pop-up window and click "Inquiry."

The tax identification number also known as the Unified Social Credit Code is an 18-digit code issued by Shanghai Market Regulation Bureau. It is recorded on the business license of the resident enterprise.

(6) Confirm the result and click "Save" and holding company's information will be shown on the contract information page.

(7) Currently contracts cannot be altered or revoked once it has been saved. Make sure all the information is correct and you could then click "Save."

Electronic Tax Services will generate a contract number for this contract and you could see it reflected in contract details in the contract information portal.

Once you have reported an equity-transfer contract, you could start to file tax returns.

Q5: What are the precautions for Non-resident Enterprises when reporting equity transfer contract in Electronic Tax Services of Shanghai?

The investee company with which the equity transfer holds your company liable to EIT in China is established and registered in Shanghai. If your direct or indirect investee is not registered in Shanghai, Shanghai Municipal Tax Bureau has no jurisdiction over this transaction.

If your investee is registered in other provinces in China, you could avail yourself of the same TIN and individual account you applied in Shanghai to login into E-Tax Services of other regions of China and report your tax liabilities accordingly.

Currently, we only support reporting for Equity-transfer of Non-listed Enterprises. So if your direct or indirect investee is publicly listed on stock market, please seek other reporting options.

Upon receiving a TIN for NRE, you can log into Electronic Tax Services of Shanghai through Non-resident Enterprise portal.

Q6: How do Non-resident Enterprises (NRE) do online filing of EIT and Stamp Duty when the target enterprise transferred in the contract is located overseas?

If the target enterprise transferred in the contract is a non-resident company in China and consequently affects the share-holding structure of a Chinese resident enterprise, the investor is liable to Enterprise Income Tax.

Currency and Income are brought out from the contract reported. Input the investment cost (in RMB), the date of obtaining income and the exchange rate, E-Tax will finish the computation and work out the total amount of tax payable.

The formula is:

Total amount of EIT payable+ (Amount of income obtained X exchange rate - Investment cost in RMB) X10%

Click "Submit" after thorough scrutiny.

Q7: How do Non-resident Enterprises (NRE) do online filing of EIT and Stamp Duty when the target enterprise transferred in the contract is a Chinese resident?

If the target company is a Chinese resident enterprise, then the equity transaction involves EIT as well as Stamp Duty.

Currency and Income are brought out from the contract reported. Input the investment cost (in RMB), the date of obtaining income and the exchange rate, E-Tax will finish the computation and work out EIT and Stamp Tax payable in total.

The formula is:

Total amount of tax payable = EIT +Stamp Tax = (Amount of taxable income obtained X exchange rate - Investment cost in RMB) X10% + Amount of taxable income obtained X0.5‰

Click "Submit" after thorough scrutiny.

After clicking "Submit," confirmation window will pop up. Click "Switch to English."

Type in the word "Authenticity" and "Reliability" and click "Confirm."

Please wait for the system to process your return. Once it's finished, you will see the result interface indicating filing status. It usually take 1-2 minutes for E-Tax to display filing status.

Q8: What are the precautions for Non-resident Enterprises while doing online filing of EIT and Stamp Duty?

(1) E-filing is not applicable to equity-transfer of companies that are public listed on stock market and doesn't include transfer of restricted share.

(2) E-filing is not applicable if you qualify for application of special tax treatment for equity transfer.

(3) E-filing is not applicable if you are eligible for preferential treatment under Avoidance of Double Taxation Agreements (DTAs) signed between your resident jurisdiction and China.

If none of the above conditions hinders, you could click "Submit" and start filing online.

Q9: How do Non-resident Enterprises do the tax payments?

Click "Pay Now" and you'll be directed to the Tax payment page. You could also click "Tax Payment" on the main page.

Enterprise Income Tax and Stamp Duty tax payable incurred during equity transfer can be paid via Unionpay Online and QuickPass QR Code.

If you decide to change payment mode after the tax slip number has generated, you could use the Payment Receipt Processing feature to unlock the tax bill and change to another payment mode.

Be sure to check with your bank first about amount limits and terms and conditions of online payments.

If you want to make payments through international remittance, please contact tax office in charge or call 12366 for further assistance.

Q10: How to report the identity Information Amendments for Non-resident Enterprises (NRE)?

NRE could report amendments to its Identity Information through this feature.

(1) Click "Non-resident Enterprises Identity Information Change" and you'll be directed to the application page.

You could change the Chinese name of the enterprise, the English name of the enterprise, the registered address in resident jurisdiction. In addition, you could add a new tax agent or delete a previous one.

(2) Supporting documents to reflect these changes shall be attached to the application and is subject to approval by the Municipal Tax Bureau of Shanghai.

(3) Once approval is finished, you'll see the changes reflected in NRE's account.

Disclaimers

This user guide is intended to help non-resident individual serving as an agent to file tax regarding to equity-transfer of a resident Chinese company or indirect equity transfer of a Chinese company.

Please note that the information provided in this guide is intended for better general understanding and is not intended to comprehensively address all possible issues that may arise. The contents are correct as at April 4th 2023 and are provided on an "as is" basis without warranties of any kind.

The Municipal Tax Bureau of Shanghai shall not be liable for any damages, expenses, costs or loss of any kind however caused as a result of, or in connection with your use of this user guide.

While every effort has been made to ensure that the above information is consistent with existing policies and practice, should there be any changes, the Municipal Tax Bureau of Shanghai reserves the right to vary its position accordingly.