Meaning
Statutory regulation issued by the State Taxation Administration that governs the management and calculation of income tax for representative offices of foreign enterprises. This public announcement 2010 no 19 established rigorous methods for assessing tax on a cost-plus basis when gross income is difficult to measure.
Administrative Method
Representative offices must maintain specific records of their overhead and operational spending to satisfy the authorities during annual reviews. Through public announcement 2010 no 19, the tax office enforced a system where non-trading entities are taxed on a deemed profit margin of at least fifteen percent of their expenses. This ensures that foreign entities contributing to the local market ecosystem provide a fair share of fiscal revenue regardless of their direct sales volume.
Assessment Formula
Calculating tax liability involves aggregating salaries, rent, equipment costs and travel items then applying the designated profit coefficient. Once the deemed profit is established, it is subjected to the standard corporate income tax rate during each quarterly filing. This public announcement 2010 no 19 removed many previous exemptions for offices involved in general marketing or logistics coordination.
Reporting Duty
Compliance is verified by the submission of detailed audit reports from local certified public accountants by May 31 each year. Failure to align reporting with the rules in this announcement can result in penalties or the loss of the right to sponsor foreign employee visas. The regulation stays the primary standard for rep offices until they are liquidated or converted into full foreign-invested enterprises.
