Taxation FAQ's

---

In the tax jurisdiction it's enormously important to know the difference between permanent established and non-establishment of the company. How is the characterization and which consequence for burden tax exists?

Usually, permanent establishment includes:

• place of management;
• a branch;
• an office;
• a factory;
• a workshop;
• a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources;
• a building site, a construction, assembly or installation project, or supervisory activities in connection therewith, but only where such site, project or activities continue for a period of more than six months;
• an installation, drilling rig or ship used for the exploration or exploitation of natural resources, but only if so used for a period of more than three months; and
• the rendering of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where such activities continue (for the same or a connected project) within the country for a period or periods aggregating more than six months within any twelve month period.

There are also some activities by a foreign enterprise in China will not be considered as constituting permanent establishment, including:

• the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
• the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
• the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
• the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;
• the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activities of a preparatory or auxiliary character;
• the maintenance of a fixed place of business solely for any combination of the activities above, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.