Bulletin 2013 Number 56

Assessment Methodology

Tax officials calculate the tax due by applying a deemed profit rate to the reported gross income of the enterprise. This rate typically ranges from fifteen to fifty percent depending on the nature of the industry and the complexity of the services provided. Using bulletin 2013 number 56 allows the bureau to settle tax obligations without a detailed audit of global expense allocations.

Compliance Obligation

Foreign companies must disclose their contract values and project durations to the tax authorities to avoid punitive assessments. Failure to provide supporting documents results in the automatic application of the deemed profit method.

Enforcement Scope

Local tax bureaus exercise significant discretion when selecting the specific percentage for the income calculation. The statutory position focuses on ensuring that revenue generated within the borders of China is captured regardless of where the payment is processed. Non-resident parties have a right to provide evidence of actual costs, but the remedy is often difficult to execute if the records do not meet local standards.

Disputes over the deemed rate are common during the closing stages of a project.