Newsletter
INCOME TAX ISSUES FOR FOR-EIGN-INVESTED VCS
The Regulations Governing Foreign-Invested Venture Capital Enterprises were promulgated in January 2003 by the PRC Ministry of Commerce. To facilitate their implementation, and to further regulate issues regarding the payment of income tax by foreign-invested venture capital compa-nies (including those invested in by Hong Kong, Macao or Taiwanese investors), on 4 June 2003 the State Taxation Administration promulgated its Notice on Taxation Issues Regarding Pay-ment of Enterprise Income Tax by For-eign-Invested Venture Capital Companies. The notice took effect retrospectively from 1 March 2003.
The notice distinguishes between incorporated and unincorporated venture capital enterprises, to which different provisions apply. If a venture capital enterprise is incorporated, it is a taxpayer in its own right, and should file and pay enter-prise income tax as a single entity. But if it is unincorporated, the individual investors are separately liable for income tax. However, on application to and approval by the local tax au-thorities, an unincorporated venture capital en-terprise may be taxed as a single entity. A ven-ture capital enterprise engaged in share invest-ment and transfer in accordance with the relevant provisions, and providing venture capital in-vestment management services and consultancy, is not eligible for tax concessions available to foreign-invested manufacturing enterprises un-der the PRC tax laws.