China Beijing Q&A Concerning EIT Allocation for Enterprise with Cross-region Head Office and Branches-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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China Beijing Q&A Concerning EIT Allocation for Enterprise with Cross-region Head Office and Branches

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Before submitting the enterprise income tax return for the first month or first quarter each year, the head office of the cross-region enterprise subject to the consolidated collection of enterprise income tax shall fill in and submit the ‘Table of Allocation of Consolidated Enterprise Income Tax to Branch Offices’ so as to determine the apportion ratio of the branches.

Q：	When should a newly established branch begin to pay the apportioned enterprise income tax?
A：	The newly established branch should begin to pay the apportioned enterprise income tax from the following year after it is set up.
Q：	Under what circumstances the branches do not need to prepay the apportioned enterprise income tax?
A：	The following secondary-level branches shall not apportion and pay enterprise income tax locally: A second-level internal auxiliary branch of an enterprise paying taxes on a consolidated basis, which does not have production and operation functions but is engaged in the after- sales services, international research and development, warehousing, etc. that are not subject to the value-added tax and business tax, does not have to prepay enterprise income tax locally. If an enterprise was recognized as a small low-profit enterprise in the previous year, its branches do not have to prepay enterprise income tax locally. Newly established secondary branches do not have to apportion and pay enterprise income tax locally in the year of establishment. A secondary-level branch, which is cancelled in the current year, does not have to apportion and pay enterprise income tax locally from the prepayment period of its enterprise income tax since the date of cancellation of tax registration. A secondary-level branch without independent legal person status, which is established overseas by an enterprise paying taxes on a consolidated basis, does not have to apportion and pay enterprise income tax locally.
Q：	What is the ratio of enterprise income tax should be apportioned to the head office of the cross-region enterprises subject to the consolidated collection of enterprise income tax?
A：	50% of current period enterprise income tax shall be apportioned to the head office of the cross-region enterprises subject to the consolidated collection of enterprise income tax, the other 50% shall be apportioned among all the branches.
Q：	If there are several second-level branches in the cross-region business, how to calculate the apportion ratio for each branch?
A：	With regard to the 50% of current period enterprise income tax which is apportioned among all branches, the head office should calculate the apportion ratio based on three factors, which are each branch’s annual business income, employee remuneration and total assets of preceding year, and report to competent tax authority. For third-level and lower-level branches, their business income, employee remuneration and total assets shall be consolidated to second-level branches. The weight of the three factors is 0.35, 0.35 and 0.30 respectively. The calculation formula is as follows: Apportion ratio of a branch = ( its business income/business income of all branches) ×0.35 + （its employee remuneration/employee remuneration of all branches）× 0.35 + (its total assets/total assets of all branches) × 0.30
Q：	Must the head office report the ratio of enterprise income tax apportioned among the branches to tax authority every month (or every quarter)?
A：	No, it does not have to. Once the ratio is determined using the aforesaid formula, no adjustment will be made in that year unless under some special circumstances.
Q：	How should the head office of the cross-region enterprises subject to the consolidated collection of enterprise income tax report the ratio apportioned to its branches?
A：	If more than one branch need to pay the apportioned income tax locally, the head office shall fill in and submit the ‘Table of Allocation of Consolidated Enterprise Income Tax to Branch Offices’ in the electronic tax bureau before filing the enterprise income tax return for the first month or first quarter each year.
Q：	What should the enterprise subject to the consolidated collection of enterprise income tax do when submitting the annual tax return for enterprise income tax reconciliation?
A：	The head office shall uniformly calculate the annual tax payable of an enterprise paying taxes on a consolidated basis, offset and deduct the enterprise income tax that have been locally prepaid by the head office and branches (those have been deregistered in the current year are exclusive) in the current year, work out the payable and refundable taxes, and then, in accordance with the method of tax apportionment as specified in these Measures, calculate the payable and refundable enterprise income taxes of the head office and branches, which shall be locally turned over or refunded to treasuries respectively by the head office and branches.

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