On 7 July 2017, the Finance Ministers of China and Norway met in Hamburg in the margins of the G20 Summit. The ministers discussed the global economic situation and the strong economic links between the two countries.
The ministers also recognized the importance of starting negotiations on the update of the tax treaty between the two countries when necessary.
Finance Minister Siv Jensen said, “Since the present tax treaty was signed in 1986 there has been a substantial development in the economic relationship between our two countries and the international framework for tax. A modernization and customization of the treaty, especially to avoid double taxation, would further promote trade and investments between China and Norway”.
The government of China has announced a range of tax incentives including certain reduced rates to boost the Chinese economy. The tax incentive measures include a reduced taxable income threshold for eligible small enterprises to pay corporate income tax on half of their income at a rate of 20%.
Venture capital enterprises may enjoy a 70% tax deduction to invest in non-listed small and medium high and new technology enterprises and special tax treatment for premiums paid to eligible commercial health insurance providers applied on a nationwide basis.
An extension period of 3 years is being applied to the package of existing tax incentive policies due to expire at the end of 2016. The VAT brackets for general VAT taxpayers are being reduced from 4 to 3. All these measures are effective in 2017.
On 3 May 2017, China announced measures to encourage research and development (R&D) by tech firms through favorable tax terms. Small and medium sized-enterprises (SME) in the technological sector can deduct an additional 75% of the R&D costs that occurred before paying taxes, effectively lowering their taxable income.
Tech SMEs that chose alternatively to capitalize the R&D costs as intangible assets in the current accounting period can amortize the assets at 175% of the original costs. The new tax term will be in effect from the beginning of 2017 to the end of 2019.
On May 3, the MOF also announced tax incentives for venture capital firms, allowing them to deduct a certain amount of taxable income for investing in startups. The value added tax (VAT) system will also be streamlined, with four VAT brackets reduced to three, the MOF said.
On 8 May 2017, Mr. Klaus Iohannis, the Romanian president signed a law ratifying the Double Taxation Agreement (DTA) with China. Once ratified by China and becoming effective, the Agreement will replace the existing DTA of 1991 and effective as of 1 January 1993.
In the new treaty withholding tax rate on dividends and interest decreases from 10% to 3%, withholding tax rate on royalties decreases from 7% to 3%, specific provisions on commissions have been eliminated and an update of the provisions on exchange of information.
On 3 May 2017, the Ministry of Finance and the State Tax Administration issued a joint announcement listing the categories of goods benefiting from a reduction in the VAT rate from 13% to 11%. The list includes agricultural products, water, natural gas, coal and other 19 kinds of products. The new tax rate will enter into force on 1 July 2017.
The government of China plans new tax cuts to reduce the burden on businesses, support innovation and stabilize growth. On April 19, tax cuts were approved at a State Council executive meeting presided over by Premier Li Keqiang, after the government announced measures to decrease business costs in the first quarter.
Value added tax (VAT) will be simplified, small and micro companies will enjoy income tax incentives, and pretax deductions for innovation-based tech companies will rise, according to a statement made public after the meeting.
Tax incentives for venture capital firms will expand, with pretax deduction of commercial health insurance nationwide and a package of tax-cuts due to expire by 2016 extended for another three years.
A government work report released in March promised around 350 billion yuan ($51 billion) of cuts to corporate taxes and with business fees cut by around 200 billion yuan in 2017. After the new measures become effective, the total tax reduction will amount to more than 380 billion yuan this year, the statement said.
The meeting ordered authorities to implement the policies as soon as possible and come up with more new measures to reduce business fees. The meeting also approved a draft law on public libraries, which will be forwarded to the Standing Committee of the National People’s Congress for deliberation.
On 10 April 2017, the Senate of Romania approved the Double Taxation Agreement (DTA) with China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.