Taxation of sponsorship agreements in China - the rules for International Sports Federations without permanent establishment
It is not uncommon nowadays to spot Chinese companies' profiles at international sports events such as the 2018 FIFA World Cup and Pyeongchang Winter Olympics. Alibaba Cloud tied the knot with the International Olympic Committee confirming its Olympics Partner (TOP) status, and Alipay marched into the UEFA national men's competitions not only aiming for Chinese fans travelling to Europe for UEFA Games, but also carrying the ambition to "build awareness of Alipay's brand worldwide before a potential expansion beyond its home market".1 Chinese companies are riding the trend to sponsor international sports events in exchange for greater international impact. Such sponsorship deals will usually generate income derived from Mainland China (hereinafter referred to as “China”).
The author of this article has been receiving enquiries from international sports organizations and federations (IFs) regarding relevant tax obligations for IFs without permanent establishments in China. This article is intended to clarify these questions. For the purpose of this article, “permanent establishments” refers to a fixed place of business through which the business of an enterprise is wholly or partly carried on.2
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- Tags: Agreements | China | Commercial | Contract | Enterprise Income Tax | Football | Olympics | Sponsorship | Tax | UEFA | Urban Construction Tax and Educational Supercharges | Urban Construction Tax and Educational Surcharges | Value-added Tax (VAT)
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Ms. Guo Cai oversees the International Law and Sports Business practice, Jin Mao Law Firm, the first Chinese law firm to establish a practice dedicated to the sports industry. Ms. Cai graduated from Harvard Law School and China University of Political Science and Law. She also held an LLM in Human Rights (distinction) from the University of Hong Kong. Admitted to practice in China and the US (New York), Ms. Cai specializes in international dispute resolution and sports law, with the aspiration to grow with the Chinese sports industry and connect international best practice with sports in China.
Ms. Cai’s involvement in sport dated back to the Beijing Olympics in 2008, for which she served as a professional volunteer. The case of IOC v. Xinyi Chen in the 2016 Rio Olympics motivated her to specialize in the sports sectors so as to make quality legal services available to Chinese athletes where needed. Ms Cai has successfully represented sportspersons, national and international sports associations in disputes at both domestic and international level, with particular strengths in new, unsettled areas. In 2020, Ms. Guo Cai contributes to the debut of Annual Review on Sports Dispute Resolution in China (2020) published by the Beijing Arbitration Commission, the first time that sports has been broken out from entertainment for separate discussion. She is the co-author of this inaugural volume.