China-South Korea Cross-Border Tax Filing Practical Handbook Tax Declaration, Invoice Issuance, and Tax Audit-All-in-One

Cross-border operations by enterprises in China and the Republic of Korea (ROK) have become increasingly frequent; however, tax compliance often encounters practical difficulties due to differences in regulatory frameworks. Many enterprises, after establishing a permanent establishment (PE) in Korea, fail to timely file for a Certificate of Chinese Tax Residency; others, when applying for benefits under the China-ROK tax treaty in China, face document rejections due to incomplete submissions. Such issues are not isolated incidents but rather typical “breakpoints” arising from gaps in tax administration coordination.

In 2025, the State Taxation Administration of the People’s Republic of China (STA) and the National Tax Service of the Republic of Korea (NTS) jointly released the Practical Guidelines for Tax Administration of China-ROK Cross-Border Business (hereinafter referred to as the “Guidelines”). Although not a legally binding instrument, the Guidelines represent the first systematic effort to harmonize operational interpretations between the two administrations across key areas-including PE determination, attribution of profits to PEs, application of tax treaties, and response protocols for information exchange-offering direct, actionable value to frontline tax officials and corporate finance and tax executives.

I. Bidirectional Calibration in Permanent Establishment (PE) Determination

The Guidelines clarify that when Chinese tax authorities assess whether a foreign enterprise constitutes a PE in China, they will take into account the ROK tax authority’s conclusion on whether the same entity is deemed a PE in Korea-and vice versa. Particular attention is directed toward three categories of scenarios prone to disputes

1. A foreign enterprise delivers technical services in China through a domestic third party, with contract execution, payment settlement, and delivery of deliverables all occurring overseas-but core technical personnel remain stationed on-site in China for an extended period. Where such arrangement has already been determined to constitute a PE in Korea, Chinese authorities will assign heightened scrutiny weight during verification.

2. A Korean enterprise establishes a project office in China. Although the term of the relevant contract is less than six months, the enterprise consecutively undertakes similar projects in the same geographic area for two years. The Guidelines indicate that Chinese authorities may invoke the principle of “continuity of similar activities” to reassess the PE status.

3. Under e-commerce platform business models, Korean sellers complete transactions via warehousing facilities located in China coupled with local delivery services. The Guidelines state that such warehousing infrastructure alone does not automatically constitute a PE; however, if the facility simultaneously performs substantive management functions-including order acceptance, customer service, and after-sales support-a careful, case-by-case assessment is required.

II. Key Documentation Requirements for Claiming Tax Treaty Benefits

When enterprises apply to Chinese tax authorities for benefits under the dividend, interest, and royalty provisions of the China-ROK Tax Treaty, the Guidelines introduce two new practical requirements beyond standard documentation

1. The Certificate of Tax Residency issued by the NTS must explicitly state both the issuance date and its validity period-and must have been issued within the preceding six months.

2. Where the applicant is a Korean partnership, it must concurrently submit a “Beneficial Owner Declaration-Tracing Through to Final Natural Persons or Entities,” issued by the NTS, accompanied by a chain of notarization and authentication recognized by the NTS.

3. If the Chinese tax authority does not issue a request for supplementary materials within five working days upon receipt of the application, the submitted documents shall be deemed complete, and the application shall proceed to the formal review stage for treaty benefit eligibility.

III. Timelines and Scope Boundaries for Information Exchange

Pursuant to the Guidelines, automatic exchange of Country-by-Country Reports (CbCR), as mandated under Action 13 of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, shall be conducted between the two jurisdictions. However, the Guidelines expressly exclude three categories of information from exchange

1. Internal transfer pricing documentation (i.e., local files and master files);

2. Procedural records and preliminary analytical opinions generated during tax audits;

3. Information involving commercial secrets, provided that both parties have jointly confirmed in writing the need for exemption.

The NTS commits to responding to targeted information requests from the STA within 30 days; likewise, the STA applies the same 30-day deadline for responding to equivalent requests from the NTS.

The above highlights represent the most operationally actionable provisions drawn from the Practical Guidelines for Tax Administration of China-ROK Cross-Border Business, jointly issued by the STA and the NTS. We hope this summary proves helpful to you.