January 2025 / China

On January 1^st,2025, the Ministry of Human Resources and Social Security (MOHRSS) has issued the Circular on Issues Related to Average Monthly Working Hours and Wage Calculation for Employees for the Full Year (the "Circular").

The Circular adjusts the methods for calculating employees' average working hours and wages throughout the year. In calculating the standard working time, the following formula applies:

• Annual working days: 365 days - 104 days (rest days) - 13 days (statutory holidays) = 248 days;
• Quarterly working days: 248 days ÷ 4 quarters = 62 days/quarter; Monthly working days: 248 days ÷ 12 months = 20.67 days/month;
• Working Hours: The number of working days in a month, quarter, or year multiplied by 8 hours per day.

Additionally, according to the Circular, employers should pay wages for statutory holidays in accordance with the law. When calculating daily and hourly wages, the 13 statutory holidays prescribed by the State should be included. Therefore, the daily and hourly wages will be calculated as follows:

• Daily wage: Monthly wage income ÷ monthly salary days;
• Hourly wage: Monthly wage income ÷ (monthly salary days × 8 hours);
• Monthly salary days: (365 days - 104 days) ÷ 12 months = 21.75 days.

The Circular is available here: https://www.mohrss.gov.cn/xxgk2020/fdzdgknr/zcfg/gfxwj/ldgx/202501/t20250101_533693.html      

On January 3^rd, 2025, the State Taxation Administration (STA) has recently drafted the Administrative Measures for the Final Settlement of Individual Income Tax on Comprehensive Income (Draft for Comment) (the "Draft"), which is now open for public consultation until February 2^nd, 2025.

The Draft maintains the fundamental framework and core content of the previous five announcements on final settlement while incorporating effective practices from recent years of service and management, thereby improving the settlement service and management system. These include institutionalizing measures that have yielded significant results and been well-received by taxpayers, such as pre-filled tax return services provided by tax authorities, appointment-based services during the initial phase of settlement, and prioritized tax refunds for taxpayers eligible for refunds but facing heavy financial burdens. These measures have simplified and expedited the final settlement process for taxpayers.

The official draft is available here: https://www.chinatax.gov.cn/chinatax/n810356/n810961/c5237598/content.html

On January 8^th,2025, the State Taxation Administration (STA) has issued the Announcement on Optimizing Annual Enterprise Income Tax Return (the "Announcement"). The announcement has revised some forms and filling instructions of the Annual Enterprise Income Tax Return of the People's Republic of China (Category A, 2017 Edition). According to the Announcement, some statements shall be canceled, and revisions shall be made to the form format and filling instructions for a number of forms

Announcement:

https://fgk.chinatax.gov.cn/zcfgk/c100012/c5237968/content.html

 

On January 22^nd, 2025, the Ministry of Commerce (MOFCOM) has issued the Announcement [2025] No. 4, announcing the ruling on expiry review of anti-dumping measures applicable to imports of ortho dichlorobenzene (ODCB) originating in Japan and India.

According to the announcement, effective from January 23^rd, 2025, an anti-dumping duty will continue to be imposed on imports of ODCB originating in Japan and India for a period of five years. The Announcement states that, on January 22^nd, 2024, upon the application of China's ODCB industry, the MOFCOM initiated an expiry review investigation into the anti-dumping measures applicable to imports of ODCB originating in Japan and India.

The official announcement can be read here: https://www.mofcom.gov.cn/zwgk/zcfb/art/2025/art_c9054b34f0b14c54a967e50323386a74.html

With the publication of Law No. 182/2024 in Official Gazette No. 283 on December 3, 2024, the new Double Taxation Convention between Italy and the People's Republic of China, signed in Rome on March 23, 2019, was ratified and executed. The provisions will take effect starting January 1, 2026.

Article 29 of the Convention establishes that the Agreement will enter into force on the thirtieth day following the receipt of the last ratification notification. Its provisions will apply:

• With regard to taxes withheld at source: on amounts earned from January 1 of the first calendar year following the Agreement's entry into force.
• With regard to other income taxes: for fiscal periods beginning on or after January 1 of the first calendar year following the Agreement's entry into force.

The new Convention, more aligned with the OECD 2017 Model, introduces significant changes compared to the previous one (in effect since 1990):

1. Dividends

The Agreement provides for a reduction of the withholding tax rate for Italian companies based in China and vice versa, from 10% to 5%, provided the following conditions are met:

• Direct participation: at least 25% of the capital of the company distributing the dividends.
• Holding period of shares: at least 365 days.

2. Interests

The Agreement introduces a reduction of the interest rate to 8%, which applies under the following conditions:

• Interest paid to financial institutions.
• Loans with a minimum duration of three years, intended to finance investment projects.

There is also a full exemption from withholding tax on interest payments made by:

• The government or local authorities.
• The Central Bank.
• Entities fully owned by the government.

3. Royalties (Licensing Fees)

The Agreement sets the following maximum rates applicable to royalties:

• 10% for royalties related to copyrights (including software, films, TV or radio broadcast recordings), patents, trademarks, designs and models, secret formulas or processes, as well as industrial, commercial, or scientific information.
• 10% on 50% of the gross amount (effectively 5%): for royalties related to the use of industrial, commercial, or scientific equipment.

4. Capital Gains

The Agreement establishes the following provisions for the taxation of capital gains arising from the sale of assets and shares:

• Profits from the sale of real estate located in the other contracting state are taxable in that state.
• Profits from the sale of movable assets connected to a permanent establishment in the other state are taxable in that state.
• Profits from the sale of ships, aircraft, and movable property used in international traffic are taxable exclusively in the state of residence of the selling company.
• Profits from the sale of shares deriving more than 50% of their value from real estate located in the other state are taxable in that state.
• If the seller holds at least 25% of the shares of a company resident in the other contracting state for a period of at least 12 months, the gains from this sale are taxable in the other state.
• Profits from the sale of assets other than those mentioned above are taxable exclusively in the state of residence of the seller.

Diacron is committed to providing comprehensive support and tailored solutions to address the complexities of international taxation. Contact us for dedicated consultancy.