Recently a guidance concerning when the cross-border secondment of expatriate workers by foreign enterprises into China may give rise to a taxable presence in China is issued by the China’s State Administration of Taxation.
Factors taken into account in determining the whether a permanent establishment of the foreign entity is created in China include any management fees paid by the Chinese entity; the extent to which any fees paid are in excess of the wages and other costs in respect of the personnel; and the extent to which the enterprise seconding the personnel decides on their functions, location and level of pay in China. If personnel are seconded to China only to attend Board meetings and protect the rights of shareholders this will not be considered to create a permanent establishment.
