Pro Bono Work
Running a business is becoming more and more challenging under the COVID-19 pandemic. Maintaining our current businesses and exploring new opportunities are certainly our primary task now. Nevertheless, we have not forgotten our corporate social responsibility, even in this difficult period.
When it was very difficult to get surgical masks and sanitary products earlier this year, we donated masks to The Ronald McDonald House Charities of Hong Kong. Besides that, through Project WeCan we also donated sanitary items, such as masks, hand sanitizers, etc. to their participating schools to prepare for their class resumption.
Children are our future. CW CPA is the honorable auditor for a few charitable organizations and non-governmental organizations (“NGO”), especially those related to education, such as Esperanza.
The Ronald McDonald House Charities Hong Kong has recently launched an new online fundraising platform “Host a Fundraiser” where you can have your own personalized campaign to raise funds to the sick children and their families. To understand more about this new platform, please click Host a Fundraiser website.
There is a Chinese saying, “It is more blessed to give than to take”. CW CPA continues to serve the community. We shall continue to walk that extra mile as we soldier on in the spirit of “Family and Health” – our firm’s motto.
Written by Mandy Lau, Administration Department, CW CPA
Tax Benefits and New Tax System For Micro-Enterprises In Ecuador
Contributed by Diego Zambrano, Tax Consulting and Practice Manager, Audit Corporate / Tax Corporate
A new tax regime for micro–enterprises was established in 2020 in Ecuador, which applies to those taxpayers (societies or natural persons), including entrepreneurs who fulfill the status of micro–enterprises, i.e. having 1-9 workers and an annual income of less than US$300,000. This regime applies to the following taxes: Income Tax (IR), Value Added Tax (VAT), and Excise Tax (ICE).
Taxpayers not included
Taxpayers engaged in activities related to the banana sector, construction contracts, or those whose economic activity involves the provision of professional services, liberal occupation, the relationship of dependency, as well as those who receive exclusively capital income may not be able to access this scheme.
Duration of the regime
Micro-enterprises will remain under this scheme as long as their status and characteristics in income and number of employees remain, in no case will the companies’ permanence be greater than 5 years. Then, they will subsequently be subject to the general regime.
The formal duties of taxpayers under this scheme include:
- Keeping accounts under SME standards (Small and Medium-sized Enterprises), in addition, they must submit declarations and annexes where appropriate.
- Keeping proof of sale that supports their operations for a period of not fewer than 7 years.
- Providing tax information to authorized officials for inspections or verifications and attending to the tax administration offices when required.
- Carrying out ICE, IR and VAT returns on a 16-monthly basis. If the taxpayer has unrecognized income under this scheme, he or she must also carry out the annual IR return.
PAYMENT AND TAX RETURN FEATURES
Income Tax (IR)
- Tax Base: The gross taxed income from business fewer commercial rebates or discounts and deferred tax adjustments will be considered.
- Income not considered: Financial income, asset revaluation, lottery prizes, raffles, royalties, double taxable income, inheritances, dividends, retirement pensions, or those obtained by the occasional disposal of movable and immovable property, or income detailed as not included under the scheme.
- IR Rate: The rate will be 2%, without the right to rebate or decrease.
- Withholdings at source: Taxpayers under this scheme will be subjected to a 1.75% withholding tax. If they have income under the general scheme (e.g. professional services) the retention they are required to make is based on the type of good or service that you sell outside the regime (8% or 10%).
- Six-monthly declaration: Taxpayers will pay the tax exclusively for income subject to this scheme in July and January.
- Annual Declaration: Only in the following cases should the IR’s annual return be additionally filed:
- Companies and permanent establishments of non-resident companies
- Natural persons with incomes other than Business Activity
- Natural persons who require requesting overpaid payment or filing the claim for improper payment.
Value Added Tax (VAT)
- Six-monthly return: Taxpayers will pay the tax in July (first semester) and January (second semester).
- VAT withholdings: Taxpayers under this scheme will not be withholding agents. In special cases in which they must retain, these values will be declared on a monthly basis (the SRI may include micro-enterprises as retention agents).
Excise Tax (ICE)
- Six-monthly return: Taxpayers will pay the tax in July (first semester) and January (second semester). In the event that they make a monthly declaration within the fiscal year, it must be maintained for the rest of the year.
- Taxpayers subject to this scheme who choose to submit the Simplified Transactional Annex (ATS) on a six-monthly basis. They must do so in accordance with the ninth digit of the Single Taxpayer Register (RUC), in the month following the end of the reported semester. For the semester from January to July, the ATS will be presented in August; for the semester from July to December, the ATS will be presented in February.
- The period for the submission of Annex ICE for the taxpayer that is subject to the micro-enterprise tax regime was established on a six-monthly basis. This addendum shall be submitted to taxpayers in accordance with the ninth digit of the RUC within the month following the end of the reported semester.
Benefits for Microenterprises
New micro-enterprises that start their economic activity from the validity of the “Organic Law for the Reactivation of the Economy, Strengthening the Dollarization and Modernization of Financial Management (year 2018)”, will be exempted from income tax for 3 years from the first fiscal year in which operational revenue is generated, provided that they generate net employment and incorporate national added value into their production processes.
Webinar – Using Hong Kong to strategize your digitalization process
On 23 September 2020, CW held the webinar titled “Using Hong Kong to strategize your digitalization process”. The webinar was co-hosted by InvestHK and the Brazil-China Chamber of Commerce. Among the speakers, we had our Partner, Mr. Thomas Wong, and our Brazilian Business Advisor, Ms. Kemelly Vera, representing CW, Mr. Jimmy Chiang and Mr. Thiago Silveira representing InvestHK, and Mr. Daniel Manucci representing the CCCB.
Recent discussions about e-commerce have gained more visibility due to the current economic and social scenario caused by the pandemic. Many companies are turning to digitalization to increase their revenue and to save their businesses. In this sense, we prepared this webinar focusing on the advantages of using Hong Kong as a leverage on the digitalization process of companies and providing some tips for establishing a successful e-commerce.
China Updates – October 2020
- Tax data shows a rapid rebound in service consumption during the National Day holiday
- China sets up national fintech certification center in Chongqing
- Announcement of the General Administration of Customs on Promulgation of the Decision on Commodity Classification for 2020
- Facilitation Measures Regarding the Renewal and Reissuance of Hong Kong and Macao Residents Entry and Exit Permits
- Notice on Issuance of the Implementation Measures on the Administrative Assessment for Talent Green Cards in the Guangzhou Huadu District (Hua Ren She Gui Zi  No.2)
Tax data shows a rapid rebound in service consumption during the National Day holiday
The State Taxation Administration (STA) indicates that the consumption of goods and services in China showed a positive trend during the National Day holiday. During the eight–day national holiday, the goods market remained active. For instance, the average daily sales revenue of Chinese wholesale and retail trade had a 14.1 percent increase year-on-year. The consumption of sports goods, second-hand vehicles, durable goods, cosmetics, and hygiene products, and furniture has also shown a double-digit percentage increase.
China sets up national fintech certification center in Chongqing
According to the People’s Bank of China (PBOC), China established a national fintech certification center in Chongqing municipality. This center marked a significant step in the implementation of the Fintech Development Plan (2019-2021) and the establishment was an active measure to improve the regulatory framework for fintech, said Fan Yifei, Deputy Governor of the PBOC. Safeguarding the integrity, innovation, safety, and compliance in fintech development is the top priority. Especially, its purpose is to strengthen the joint governance system for fintech in China.
CUSTOMS & INMIGRATION
Announcement of the General Administration of Customs on Promulgation of the Decision on Commodity Classification for 2020
The General Administration of Customs (GACC) of the PRC has taken steps to guarantee the standardization and uniformity over the commodity classification system (stipulated on Annex I). As a response to the current import and export situation of commodities and international trade that China faces, the Commodity Classification Opinions of the Committee on the World Customs Organization Coordinating System have been transformed into the commodity classification decision (stipulated on Annex II). The previous commodity classification became invalid and a new classification has been promulgated (stipulated on appendix III). This implementation shall enter into force on 1 October 2020. In case of any new regulations, the previous stipulation shall become invalid while the new one will come into effect simultaneously.
I. Relevant Commodity Classification Decisions.
II. Commodity Classification Decision on the Transformation of Commodity Classification Opinions Given by the Committee on the World Customs Organization Coordinating System.
III. Commodity Classification Decisions Losing Effect in 2020.
Facilitation Measures Regarding the Renewal and Reissuance of Hong Kong and Macao Residents Entry and Exit Permits
Residents of Hong Kong and Macao who want to work and study in Mainland China can now renew and reissue their corresponding Resident Entry and Exit Permits (“Home Return Permits”) in Mainland China starting from 10 October 2020. The process will be similar to that in Hong Kong and Macao.
Notice on Issuance of the Implementation Measures on the Administrative Assessment for Talent Green Cards in the Guangzhou Huadu District (Hua Ren She Gui Zi  No.2)
In Guangzhou, the Huadu District authorities have issued measures to grant Green Cards to residents who meet certain talent criteria. Legal residents who work or have started a business for over 6 months in the district and meet the criteria in the third article of the “Guangzhou Talent Green Card System” can apply for the Talent Green Card. The measures took effect from 11 September 2020 and have a validity of 5 years.
On 25 September 2020, CW had the honor to sponsor the 4th HR Summit in Shenzhen, organized by the German Chamber of Commerce in China – South & Southwest. Our Business Advisor, Ms. Virginia Tan, gave a workshop about how to optimize HR structure and save costs in the Post Covid-19 Era, which aroused great interest among the participants and ended on a satisfactory note. Our external consultant, Mr. Pan Lidong, took part in the event as a moderator, eliciting a good response from the participants.
Written by Therese Feng, German Desk, CW CPA
Sino-German Business Updates – October 2020
Xi Jinping’s message on opening-up meets with a warm response by the German Chamber
President Xi Jinping delivered a speech at the gathering marking the 40th anniversary of the Shenzhen Special Economic Zone on 14 October 2020, which has been warmly greeted by audiences from all walks of life, especially the local German Chamber community.
“Foreign companies’ expertise and experience have been indispensable for China’s growth over decades,” said Maximilian Butek, delegate and chief representative of the Delegation of German Industry and Commerce Guangzhou.
“China is Germany’s most important trading partner and German companies are committed to the market”, he said. “We are all eager to sustain and strengthen existing partnerships.”
2020 China-Germany Automobile Conference Successfully Held
The 2020 China-Germany Automobile Conference was held from 13 to 16 October 2020. The conference set its main venues in Changchun, Jilin, Changsha, and Hunan as well as other venues in Ingolstadt and Dusseldorf of Germany.
The Chinese and German auto sectors have close, long-standing ties, and this year’s conference has attracted more than 400 participants including company representatives, government officials, and experts from the two countries, discussing a wide range of topics, including industry cooperation and future technologies.
For cooperation and inquiry about our German Desk, please feel free to contact Ms. Therese Feng (email@example.com).