Treatment of partnerships
Partnerships established in China are not taxable entities. The income of a partnership is taxable at the partners' level. The corporate partners and individual partners are subject to corporate income tax (CIT) and IIT, respectively, on the taxable income so allocated. In other words, the taxpayers are the corporate partners and individual partners, instead of the partnership.
Anti-avoidance rules are introduced into the IIT Law taking effect since 1 January 2019. The tax authorities are provided legal basis to perform tax adjustment in case of transactions against arm’s-length principles, controlled foreign company (CFC) arrangements in tax havens, as well as arrangements deriving inappropriate tax benefits without reasonable commercial substance.