Foreign Enterprise Income Tax Analysis

Any foreign enterprise shall pay its income tax on its income derived from sources within China. "Foreign enterprises" mean foreign companies, enterprises and other economic organizations which have establishments or places in China and engage in production or business operations, and which, though without establishments or places in China, have income from sources within China. The income tax on foreign enterprise is different from the income tax on enterprises with foreign investment. Any foreign enterprise which has no establishment or place in China but derives profit, interest, rental, royalty and other income from sources in China, or though it has an establishment or a place in China, the said income is not effectively connected with such establishment or place, shall pay an income tax of ten percent on such income. We call this kind of income tax"withholding income tax". The income tax on foreign enterprise has influence on the capital market, labor force market, domestic industry and domestic revenue.Another important subject related to the income tax on foreign enterprise is international tax treaty. The purpose of international tax treaty is avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. There are some differences between tax law and tax treaty.Although many measures are taken to strengthen the administration of the income tax on foreign enterprise, there is still a long way to go. We should persist in it and try our best to improve it.