Column: PRC Technical Column(s)

現在中國經濟快速發展，個人收入多元化，收入水平不斷提高，與之相對的是，貧富差距也在逐步擴大， 差距的擴大不利於中國和諧社會的建設。個人所得稅是調節社會各階層財富收入的重要手段，對實現社會 公平上可以發揮積極的作用。於 2016 年，個人所得稅實現總稅收收入 10,089 億元，佔國家整體稅收約 8%， 但相比美國個人所得稅稅收佔財政收入 50%，澳大利亞個人所得稅稅收佔財政收入 55%，比重明顯偏低， 其發揮調節社會收入分配的作用仍存在較大差距。究竟問題出在哪裏?...

During the course of its economic transformation, China has become more and more aware of the importance of the role played by research and development (“R&D”) activity. As the country’s manufacturing industry is shrinking, China hopes very much that the R&D industry can take the baton and run and become the cornerstone of its new economy. To stimulate innovation, China, like many other jurisdictions, has been revamping the enterprise income tax (“EIT”) incentive rules within the current legal framework in recent years. On one hand, China has relaxed the requirements and procedures for R&D activities to be eligible for the EIT incentives with a view to attracting more R&D investment and retaining more of the income generated by intellectual property (“IP”) within China. On the other hand, given the latest BEPS development, China’s attitude towards tax avoidance has become tougher, aiming to close any loopholes in the EIT incentive system. Given the rapid changes in China’s tax environment, multinational enterprises...

The State Administration of Taxation (SAT) has issued a series of regulations to address questions regarding the Chinese individual income tax (IIT) liability of foreign individuals holding director or senior management positions in mainland China. However, some differences exist among these regulations concerning the nature of directors' fees and how foreign individuals perform their duties. These differences lead to potential contradictions in the assessment method and tax jurisdictional basis which in tum affect these individuals'need for certainty in determining their Chinese IIT liability. This paper endeavours to canvass systematically the IIT policies applicable to these foreign directors and senior managers and to assist them in correctly fulfilling their Chinese IIT obligations in practice....

On 17 September 2015, China’s State Administration of Taxation (SAT) issued a Consultation Draft of the circular “Implementation Measures for Special Tax Adjustments” (Consultation Draft), which would replace the existing Guoshuifa (2009) No. 2 (Circular 2). The SAT asked for public comments on the Consultation Draft by 16 October 2015. The existing Circular 2 contains the main body of rules on transfer pricing (TP) in China. It also covers other areas such as thin capitalisation, controlled foreign corporations, and the general anti-avoidance rule. The Consultation Draft can be considered a localisation of the recommendations of the G20/OECD’s Base Erosion and Profit Shifting (BEPS) project. It continues to follow the internationally accepted arm’s length principle, while adding some China-specific features that the SAT has advocated for some time. As in the China chapter ofthe United Nations (UN)TP Manual, concepts such as location savings, market premium, and other locationspecific advantages (LSAs) are advanced. The Consultation Draft is expected to bring many changes...

Manufacturing has long been one of the key economic drivers in Asia particularly in China, where its well-known low labour and operating costs have given it a competitive edge. The changing global economic landscape and strong economic growth in China is now creating challenges for manufacturers based there Geographical transformation and strategies for running manufacturing businesses effectively are now of strategic, financial, and operational interest to managers. This article provides a general overview of several new and desirable manufacturing locations in South East Asia, namely Cambodia, Indonesia, Myanmar and Vietnam, that are increasingly being used as production bases. It also provides a snapshot of some of the challenges that may arise from such geographical transformation....

With the deepening of globalisation, the OECD has called for the strengthening of multilateral cooperation and the adoption of harmonised measures to suppress double non-taxation and transfer pricing has become one of the core international taxation and anti-avoidance subjects. In this context, Chinese companies will inevitably encounter transfer pricing issues when investing overseas. This article discusses potential transfer pricing issues and the coping measures for Chinese companies from a “going-out” perspective....

VAT reform in China has dominated the domestic tax landscape for the past two years. This reform—a key component of the country’s 12th Five-Year Plan (the blueprint for China’s economic development until 2015)—is seen as one way of assisting China to successfully shift its focus away from a manufacturing model and towards the development of its services sector. It was therefore no surprise when VAT reform was announced at the end of 2011, ending years of speculation....

On 19 July 2013, at the request of the G20 finance ministers, the Organisation for Economic Cooperation and Development (OECD) publicly released its “Action Plan” for multilateral cooperation to address tax base erosion and profit shifting (BEPS). The BEPS Action Plan describes 15 proposed actions, outlined herein, intended to provide concrete solutions to address the tax avoidance issues identified in the report “Addressing Base Erosion and Profit Shifting (BEPS Report)” prepared by the OECD and released on 12 February 2013....

Since the Enterprise Income Tax Reform in 2008, Chinese tax authorities have been increasing their scrutiny of cross-border transactions and have been challenging the perceived abusive use of holding structures and other offshore tax arrangements. One of the areas which Chinese tax authorities have been focusing on is whether the offshore recipient of dividends, interest, and royalties from mainland Chinese enterprises is, in fact, the “beneficial owner” thereof under China’s double tax treaties or arrangements (“DTAs”)....

Anti-tax avoidance has become a common effort of the international tax community to prevent companies from eroding the tax base of the source/resident countries and paying tax nowhere.1 China is no exception. The year 2012 witnessed a significant growth in China’s tax collection through anti-tax avoidance efforts. According to the latest statistics published by the State Administration of Taxation (SAT),2 the total amount of tax collected from anti-tax avoidance efforts amounted to RMB34.6 billion (or approx. US$5.5 billion), representing a year-to-year growth of 45 per cent over the year 2011 and 74 times the amount collected in 2005. The Chinese tax authorities initiated 233 anti-tax avoidance cases in 2012. Among the 175 settled cases, the average amount of tax collected was RMB26.2 million (or approx. US$4.2 million) per case, and the largest single sum of tax collected was RMB843 million (US$134 million). Altogether, there were nine cases in which the reclaimed tax amounted to over RMB100 million and 59 cases...