STA Interpretation: Supplementary Announcement on Tax Filing for Outbound Payments for Service Trade and Other Items

关于《国家税务总局 国家外汇管理局关于服务贸易等项目对外支付税务备案有关问题的补充公告》的解读

Source (Chinese): STA Policy Database — 政策解读 (International Taxation Division, July 2, 2021)

English translation: Independent translation. Not an official government translation.

---

To thoroughly implement the Opinions on Further Deepening Tax Administration Reform (hereinafter the "Opinions") issued by the General Office of the CPC Central Committee and the General Office of the State Council, to promote deepened reform of streamlining administration, delegating powers, strengthening regulation, and improving government services ("fang-guan-fu" reform), to create a market-oriented, law-based, and internationalized business environment, to promote trade and investment liberalization and facilitation, and to effectively serve the people, the State Taxation Administration and the State Administration of Foreign Exchange jointly drafted the Supplementary Announcement of the State Taxation Administration and the State Administration of Foreign Exchange on Issues Relating to Tax Filing for Outbound Payments for Service Trade and Other Items (hereinafter the "Announcement"). The following interpretation is provided:

Q1: What is the background for issuing the Announcement?

Answer: To meet the requirements of trade and investment liberalization and facilitation, in recent years the tax authorities and foreign exchange management authorities have introduced a series of measures to benefit the public. Through strengthened inter-departmental information sharing, they have achieved "round-the-clock," "paperless," "zero-contact," and "cross-regional" processing of tax filing for outbound payments for service trade and other items, exploring and practicing "non-contact" tax administration adapted to the digital transformation of the economy and society and the normalization of epidemic prevention and control.

To achieve the goal set forth in the Opinions of establishing a new tax and fee service system featuring "no blind spots for offline services, non-stop online services, and broad coverage of customized services," to continuously expand "non-contact" and "no in-person visit" tax and fee payment services, to continuously reduce the number and duration of tax and fee payment processes, and to continuously deepen and expand collaborative tax governance, the State Taxation Administration and the State Administration of Foreign Exchange jointly drafted the Announcement. The Announcement provides filers with multiple optional filing methods — both online and offline — and further simplifies filing procedures, reduces the number of filings, and genuinely facilitates the filing process.

Q2: What are the convenience measures introduced by the Announcement?

Answer: The convenience measures introduced by the Announcement regarding outbound payment tax filing are as follows:

First, only one filing is required for multiple payments under the same contract. Where the same contract requires multiple outbound payments, the previous requirement of filing for each payment has been changed to requiring only one filing before the first payment, reducing the number of filings.

Second, the scope of exemptions from filing has been expanded. Non-trade and non-business foreign exchange payment transactions by government agencies, public institutions, and social organizations within the fiscal budget are now included in the circumstances exempt from filing. Additionally, where a foreign investor uses legitimate proceeds from domestic direct investment to reinvest within China, the tax filing requirement has been abolished. Correspondingly, Article 1, Paragraph 2 of the Announcement of the State Taxation Administration and the State Administration of Foreign Exchange on Issues Relating to Tax Filing for Outbound Payments for Service Trade and Other Items (Announcement No. 40 of 2013, as amended by STA Announcement No. 31 of 2018, hereinafter "Announcement No. 40") — which stated that "where a foreign investor uses legitimate proceeds from domestic direct investment to reinvest within China and the single transaction exceeds the equivalent of USD 50,000, tax filing shall be completed in accordance with these provisions" — has been abolished.

Third, online processing channels have been expanded. The Announcement specifies the channels and procedures for online processing of outbound payment tax filing. Filers may choose to process filings online without needing to visit a tax service hall.

Fourth, diverse tax filing needs of filers are accommodated. While promoting online processing of tax filings, the traditional paper-based filing channel has been retained. Filers may independently choose the filing method that best suits their needs.

Q3: For multiple outbound payments under the same contract, how should the transition before and after the Announcement takes effect be handled?

Answer: Where outbound payment tax filing has already been completed before the Announcement takes effect, and continued outbound payments need to be made for the same contract after the Announcement takes effect, Article 1 of the Announcement applies — "where the same contract requires multiple outbound payments, only one tax filing is required before the first payment." That is, after the Announcement takes effect, no further tax filings need to be repeated for continued outbound payments under the same contract.

Q4: How should "first payment" in Article 1 of the Announcement be understood?

Answer: The Announcement does not change the filing amount threshold specified in Announcement No. 40 — that is, a single outbound payment not exceeding the equivalent of USD 50,000 does not require tax filing. For multiple outbound payments under the same contract, tax filing is only required when a single payment first exceeds the equivalent of USD 50,000.

Q5: What specifically does "non-trade and non-business foreign exchange payment transactions by government agencies, public institutions, and social organizations within the fiscal budget" in Article 2, Paragraph 2 of the Announcement refer to?

Answer: "Non-trade and non-business foreign exchange payment transactions" refers to the circumstances specified in Article 5 of the Notice of the Ministry of Finance on Issues Regarding the Management of Non-Trade and Non-Business Foreign Exchange Use (Cai Yu [2012] No. 410), namely: foreign exchange for overseas missions, foreign exchange for outbound travel, foreign exchange for overseas students, foreign exchange for foreign experts, foreign exchange for international organization membership fees, foreign exchange for rescue and donations, foreign exchange for external publicity, foreign exchange for equity shares and funds, foreign exchange for foreign aid, foreign exchange for overseas Hajj pilgrimages, and other foreign exchange items determined in departmental budgets.

Q6: After the addition of online processing channels, what changes have been made to the processing procedures for outbound payment tax filing?

Answer: A filer choosing to process outbound payment tax filing online may log in to the Electronic Tax Bureau of the province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan, completely and truthfully fill in the Tax Filing Form for Outbound Payments for Service Trade and Other Items (hereinafter the "Filing Form"), submit filing materials, and record the Filing Form number and verification code automatically generated by the system. The filer then proceeds to the bank to process the foreign exchange payment in accordance with relevant foreign exchange management provisions.

A filer choosing to process outbound payment tax filing at a tax service hall may download and print the Filing Form from the official website of the tax bureau of the relevant province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan, or obtain it at the tax service hall of the competent tax authority, and fill in the relevant information. After completing the process, the filer must properly retain the Filing Form number and verification code provided by the tax authority, and proceed to the bank to process the foreign exchange payment in accordance with relevant foreign exchange management provisions.

Q7: After completing tax filing, what should be done if errors in the Filing Form are discovered or if the filed items have changed?

Answer: If no outbound payment has yet been made, the filer may choose to amend or void the Filing Form either at the tax service hall or through the Electronic Tax Bureau. If an outbound payment has already been made, the Filing Form may not be voided but may only be amended.

Q8: How should outbound payment tax filing and foreign exchange payment be processed at a location other than the filer's registered location?

Answer: A filer may log in to the Electronic Tax Bureau of the province, autonomous region, municipality directly under the central government, or city specifically designated in the state plan at any time to process the filing online. When filling in the Filing Form, the filer may select a bank anywhere in China as the payment bank. After completing the filing, the filer may proceed to the bank to process the foreign exchange payment with the Filing Form number and verification code, in accordance with relevant foreign exchange management provisions.