The Chinese State Administration of Taxation (SAT) recently issued a circular regarding imposition of the business tax on a sale of software to Chinese entities by foreign businesses that do not have business establishments in China. Specifically, the circular provides that payments for such transfers will not be subject to business tax, regardless of whether the transfer is bundled with a sale of hardware, such as postal and communication equipment, or a computer. The circular further clarifies that separate payments for software transferred in connection with the lease of hardware to Chinese lessees will be treated as rent on which business tax will not be levied.
December 01 2000