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