案例分析题TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Individual income tax Entrepreneurs who receive production or operations income derived from private industrial or commercial operations Allowance per annum RMB42,000 Monthly personal allowance for a China local RMB3,500 Additional allowance for expatriate employees RMB1,300 Allowance each time for individual service income, income from manuscripts, royalties and rental of property​​​​​​​ RMB4,000 and below RMB800 Over RMB4,000 20% Income from:​​​​​​​ Manuscripts, royalties, interest, dividends, rental of property, transfer of property, incidental income and other income 20% Donations of individuals​​​​​​​ Limited to: 30% of the taxable income; or 100% if the donation is made to certain funds approved by the government Note: The above rates are based on the pilot rules published by 30 September 2016. The new rules issued from 1 October 2016 onwards are not examinable in the 2017 exams.​​​​​​​ Exchange rate USD1 = RMB 6​​​​​​​

案例分析题(a) Wonder Ltd is the subsidiary of a group with its parent company listed on the New York Stock Exchange. The human resources manager is not sure how to calculate the individual income tax (IIT) liability for each of the following persons: (1) Mr Wang is an independent non-executive director who received a directors fee of RMB40,000 in January 2018. He donated RMB1,800 of this to the China Red Cross. (2) Ms Xie is the managing director and general manager of Wonder Ltd. She received salary of RMB80,000 and a directors fee of RMB50,000 in January 2018. (3) Mr Yao, the head of the marketing department, received a salary of RMB70,000 in January 2018 and an annual bonus of RMB1,000,000 due to his excellent work performance. (4) Ms Zhang is the chief financial officer who joined the company in 2015. She was granted 10,000 share options in the company on 2 January 2018 when the market price was USD20 per share. The share option agreement allows Ms Zhang to exercise these options at USD1 per share. She exercised 3,000 share options on 28 January 2018 when the market price was USD19 per share. She sold 2,000 shares on 31 January 2018 when the market price was USD28 per share. Required: Calculate the individual income tax (IIT) liability for each of the above persons. Indicate by the use of zero (0) any transaction which is not taxable or tax exempt. Note: Ignore value added tax (VAT) and surtaxes on VAT (b) Ms Ma is a UK citizen. She started working in Beijing in January 2017. Her payslip for the month of December 2017 showed the following items: RMB (1) Monthly salary 90,000 (2) Rental allowance in cash 10,000 (3) Reimbursement of air-tickets on business trips 6,000 (4) Reimbursement of air-tickets on the third home leave in 2017 4,100 (5) Reimbursement of costs for Ms Ma to learn Putonghua in China 5,500 (6) Reimbursement of piano tuition fees in China for Ms Mas children 2,400 (7) Laundry allowance on reimbursement basis 480 (8) Reimbursement of car rental for private use 6,700 (9) Employers contribution on social security 5,800 (10) Employees contributions on social security 3,200 Required: Calculate the individual income tax (IIT) payable by Ms Ma on the above items (1) to (10) for December 2017. Indicate by the use of zero (0) any item which is tax exempt or not taxable.

案例分析题(b) Jack has set up an e-shop selling goods via an internet platform

案例分析题Make-it Ltd was set up in March 2014 and is a value added tax (VAT) general taxpayer. Details of Make-It Ltds purchases from its inception but before the commencement of production are: In August 2014, Make-It Ltd commenced production of two finished products in the same workshop with the same equipment and materials: Taso, which is subject to VAT, and Exo, which is VAT exempt. Details of Make-It Ltds transactions for the months of August to December 2014 are: All amounts are stated exclusive of VAT and VAT special invoices/or business tax invoices were obtained. Required:

案例分析题(a) Phi Ltd is a company set up in Guangzhou

案例分析题Sware Ltd is a software company set up in the Xinjiang Autonomous Region. Sware Ltds enterprise income tax (EIT) rate is 25%. The companys accountant has prepared the following statement of profit or loss for the year end 31 December 2014. Notes: (1) Customers who settle their bills within 30 days receive an early payment discount of 2%. Discounts totalling RMB55,000 were deducted directly from sales. (2) Staff welfare is calculated and provided for in the accounts at 14% of the wages and salaries paid of RMB8,240,000. The actual amount of staff welfare expenses incurred was RMB1,026,350. (3) Entertainment expenses incurred in the year 2014 were as charged in the profit or loss account, i.e. RMB967,000. Entertainment expenses incurred in 2013 in excess of the deduction threshold were RMB68,000. (4) The bad debt related to a debtor who went bankrupt in 2013. The accountant has submitted a report to the tax bureau in relation to this bad debt. (5) The specific provision for doubtful debts relates to an amount which was difficult to recover. The accountant has submitted a report to the tax bureau in relation to this specific provision. (6) These research and development costs qualified for an additional deduction. (7) The compensation was due to the late delivery of software to the customers. (8) Sware Ltd was penalised by the State Administration for Industry and Commerce because of misstatements on its website. (9) Project Pibeta relates to the piloting of software encouraged by the government. The project was started in 2013 and is expected to be completed in 2016. The project is subsidised by the government (see (18) below). (10) A fire destroyed a warehouse with a net book value of RMB2,500,000. Sware Ltd received insurance compensation of RMB2,284,000. The accountant has submitted a report to the tax bureau in relation to this loss. (11) Sware Ltd declared an interim dividend of RMB5,000,000 in 2014. Individual income tax was withheld from this interim dividend before distribution to the companys shareholders. (12) A donation receipt was obtained for the donation to China Red-Cross. (13) A donation receipt was obtained for the donation to the school. (14) Sware Ltd acquired a new subsidiary in 2014 and wrote off the goodwill incurred on this acquisition. (15) Sware Ltd lent some of its surplus funds to its Shanghai subsidiary at an interest rate of 36% per annum. The market interest rate was 8% per annum. (16) Sware Ltd has invested some of its surplus funds in the capital market. The profit on the sale of government bonds included interest of RMB15,000. (17) The A-shares were acquired in 2012. (18) The government granted Sware Ltd a specific financial subsidy to cover all of the expenditure on Project Pibeta. Required:

案例分析题(a) Chris and Wendy graduated from high school in 2012 and set up a hair-dressing shop in the form of a limited company, Hair Ltd

案例分析题TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Individual income tax Entrepreneurs who receive production or operations income derived from private industrial or commercial operations Allowance per annum RMB42,000 Monthly personal allowance for a China local RMB3,500 Additional allowance for expatriate employees RMB1,300 Allowance each time for individual service income, income from manuscripts, royalties and rental of property RMB4,000 and below RMB800 Over RMB4,000 20% Income from: Manuscripts, royalties, interest, dividends, rental of property, transfer of property, incidental income and other income 20% Donations of individuals Limited to: 30% of the taxable income; or 100% if the donation is made to certain funds approved by the government Note: The above rates are based on the pilot rules published by 30 September 2017. The new rules issued from 1 October 2017 onwards are not examinable in the 2018 exams. Exchange rate USD1 = RMB6​​​​​​​

案例分析题(a) Mr Xu, a domestic Chinese, is a designer

案例分析题(b) State, giving reasons, whether the following persons will be subject to individual income tax in China on their worldwide income in 2014:

案例分析题TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Enterprise income tax Deduction limits on certain expenses Individual income tax Entrepreneurs who receive production or operation income derived from private industrial or commercial enterprises Monthly personal allowance for a China local RMB 3,500 Additional allowance for expatriate employees RMB 1,300 Individual service income​​​​​​​ Allowance each time for individual service income, income from manuscripts, royalties and rental of property​​​​​​​ RMB 4,000 and below RMB 800 Over RMB 4,000 20% Income from:​​​​​​​ Manuscripts, royalties, interest, dividends, rental of property, transfer of property， incidental income and other income 20% Donations of individuals​​​​​​​ Limited to: 30% of the taxable income; or 100% if the donation is made to certain funds approved by the government VAT pilot programme for transportation and modern services Note: The above rates are based on the pilot rules effective from 1 August 2013. The new rules effective from 1 January 2014 are not examinable in the 2014 exams.​​​​​​​ Exchange rate ​​​​​​​USD1 = RMB

案例分析题(b) With respect to the three turnover taxes in China, namely, value added tax (VAT), business tax (BT) and consumption tax (CT):

案例分析题(a) Chops Ltd produces one-off wooden chopsticks

案例分析题TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Enterprise income tax Rate Income tax for resident (domestic) and non-resident (foreign) enterprises 25% Individual income tax Entrepreneurs who receive production or operation income derived from private industrial or commercial enterprises Monthly personal allowance for a China local is RMB 3,500. Note: VAT reforms in certain cities in China need not be considered. Exchange rate USD1 = RMB 7

案例分析题(b)Manu Ltd

案例分析题(a) Mr Wang operates a sole proprietorship

案例分析题(a) Prop Ltd is a property developer

案例分析题(a) GH Ltd is a construction company set up in Shanghai and pays enterprise income tax (EIT) at 25%. XY Ltd is its holding company and is based in the Cayman Islands. The average amount of net equity of GH Ltd was RMB4,000,000 in 2017. The manager of GH Ltd proposes that XY Ltd provides a loan of RMB10,000,000 to GH Ltd, on which GH Ltd pays interest to XY Ltd at a rate of 20% per annum (inclusive of all China taxes). Hence, the interest will reduce the taxable profit of GH Ltd. Required: (i) Calculate the value added tax (VAT) and enterprise income tax (EIT) (withholding tax) on the annual interest income payable to XY Ltd. Note: You should ignore surtaxes on VAT. (ii) Calculate the interest deductible by GH Ltd in 2017 according to the thin capitalisation rules if the market interest rate is 7% per annum. (b) Lont Pte Ltd is a Singapore company which carried out the following transactions in 2017: (1) Sold goods to its Chinese customers for RMB5,500,000 and earned a profit of RMB520,000. (2) Received a royalty from a Chinese company, Tstar Ltd, of RMB700,000. (3) Sold shares held in a Beijing company for RMB8,000,000 and made a gain of RMB4,800,000. (4) Received a fee of RMB260,000 (tax inclusive) on the provision of services in China. Lont Pte Ltd has created a permanent establishment in China for the provision of these services. The China tax authorities assessed a deemed profit rate of 30% on the service fee. (5) Leased an aircraft, without a crew, to an airlines company in China at a rent of RMB3,300,000. The depreciation of the aircraft amounts to RMB2,700,000. Note: Each of the above items is an isolated transaction. Required: Calculate the enterprise income tax (EIT) for each of the above items of income (1) to (5) received by Lont Pte Ltd in 2017. Indicate by the use of a zero (0) any item which is not subject to EIT. Note: You should ignore value added tax (VAT) and ignore tax treaty reduction.

案例分析题(a) In January 2013, BVI Co-XX

案例分析题TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. Enterprise income tax Deduction limits on certain expenses Individual income tax Entrepreneurs who receive production or operations income derived from private industrial or commercial operations Allowance per annum RMB42,000 Monthly personal allowance for a China local RMB3,500 Additional allowance for expatriate employees RMB1,300 Allowance each time for individual service income, income from manuscripts, royalties and rental of property RMB4,000 and below RMB800 Over RMB4,000 20% Income from: Manuscripts, royalties, interest, dividends, rental of property, transfer of property, incidental income and other income 20% Donations of individuals Limited to: 30% of the taxable income; or 100% if the donation is made to certain funds approved by the government VAT pilot programme​​​​​​​ Note: The above rates are based on the pilot rules published by 30 September 2015. The new rules issued from 1 October 2015 onwards are not examinable in the 2016 exams.​​​​​​​ Exchange rate USD1 = RMB6​​​​​​​