China's Ministry of Finance and State Administration of Taxation
has jointly issued a circular on taxation for wholly-owned foreign
banks that are transformed from foreign bank branches.
The circular involves business tax, value-added tax, enterprise
income tax, stamp tax, and tax on real estate transfer.
According to the Regulations on Foreign-funded Banks promulgated
in November 2006, eligible foreign banks are allowed to incorporate
as wholly-owned banks in China, and foreign bank branches are
permitted to be transformed into wholly-owned foreign banks.
In the process of transformation, the circular says, the
transfer of property rights and equities from a former bank branch
to the transformed wholly-owned bank are exempted from business and
value-added taxes.
A transformed wholly-owned foreign bank should continue to enjoy
tax holidays the former bank branch was being enjoyed. If the tax
holidays expired before the transformation, the new wholly-owned
foreign bank should not to enjoy them, according to the
circular.
(Xinhua News Agency April 7, 2007)