Introduction
The enactment of a PRC Legal Aid Law is due to serve the urgent need to improve the judicial protection system for human rights, a necessary requirement to ensure that legal aid work is carried out in a standardized and orderly manner and that all assistance should be provided, with an important legal system to promote the correct implementation of the law and safeguard social justice.
Legal aid is provided free of charge to citizens in financial difficulties (and to other parties who meet the legal requirements) which may arise in the following forms: legal advice; drafting of legal documents; criminal defense and representation; litigation and non-litigation representation in civil cases, administrative cases and state compensation cases; legal assistance by lawyers; mediation and arbitration representation in labour disputes; and other forms as stipulated by laws, regulations and rules.
Key points
In order to implement and guarantee the quality of the relevant provisions of the Legal Aid Law of the People's Republic of China, the Ministry of Finance issued the “Announcement on Taxation Policies Relating to Legal Aid Subsidies” on the 22nd of August (hereinafter referred to as the “Announcement”), which clarifies that legal aid subsidies received by legal aid personnel in accordance with the provisions of the Legal Aid Law of the People’s Republic of China are exempt from value-added tax and personal income tax.
The most important points following the Announcement are:
1. Legal aid subsidies received by legal aid personnel in accordance with the provisions of the Legal Aid Law of the People’s Republic of China shall be exempted from value-added tax and personal income tax.
2. When legal aid institutions pay legal aid subsidies to legal aid personnel, they shall file tax exemption declarations for the subsidized legal aid personnel in respect of income from labour remuneration for personal income tax purposes.
3. The judicial administrative departments and the taxation departments shall establish an information-sharing mechanism and exchange tax-related information of the recipients of legal aid subsidies before the commencement of the annual comprehensive income tax remittance and settlement.
4. The legal aid institutions referred to in this announcement refer to the legal aid institutions established in accordance with Article 12 of the Legal Aid Law of the People’s Republic of China. If a group organization carries out legal aid work with reference to the provisions of Article 68 of the Legal Aid Law of the People’s Republic of China, it shall handle tax exemption declarations for legal aid personnel in accordance with the provisions of this announcement and submit relevant information of legal aid subsidy recipients to the judicial administrative department.
5. This Announcement’s provisions have effect from January 1st 2022. For VAT that shall be exempted in accordance with this Announcement and has been collected prior to the issuance of this Announcement, the VAT collected may be offset against the tax payable by the taxpayer in subsequent tax periods or refunded; if the taxpayer has issued a special VAT invoice to the purchaser, the taxpayer shall apply for a tax exemption after recovering the special invoice; for personal income tax that shall be exempted in accordance with this Announcement and has been collected prior to the issuance of this Announcement, the withholding unit shall apply for a tax refund in accordance with the law.
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