State Administration Of Taxation Interpretation Of General Anti Tax Avoidance Management Measures (Trial Implementation)

In December 2, 2014, the State Administration of Taxation promulgated the "general anti tax avoidance management measures (Trial Implementation)" (the State Administration of Taxation Decree No. thirty-second in 2014). "International tax" has interviewed Wang Xiaoyue, deputy director of the international taxation department of the State Administration of Taxation, and asked her to interpret the background of the "going to go" issue, the global legislation and application experience of the General Anti Avoidance Rule (hereinafter referred to as "GAAR"), and the important concepts of China's anti tax management work.

The first macro background is the international tax evasion action under the framework of the group of twenty (G20). For a long time, many multinationals have shifted most of their profits to low tax and tax shelters through a series of more radical arrangements, greatly reducing their overall tax burden, so that both developed and developing countries are not able to levy taxable taxes, resulting in the objective result of double or multiple non taxation, eroding the tax base of a sound tax system, not only damaging the tax sovereignty of every country, but also impair the fair taxation and good business environment.

In 2013, G20 and the economic cooperation and Development Organization (OECD) launched an action plan to tackle the tax base erosion and profit transfer (BEPS) and set off a global wave of BEPS attacks. The action plan is highly valued and responded positively by the world's major economies, including China. On November 2014, Chinese President Xi Jinping pointed out at the ninth summit of G20 leaders: "strengthen global tax cooperation, combat international tax evasion, and help developing countries and low-income countries improve their tax collection and management capabilities". This is the first time that the supreme leader of China has made important comments on the tax issue on major international political occasions, raising the international tax administration to a new height. The general provisions of international tax rules can only be carried out smoothly only by refining the specific provisions of domestic laws of various countries and supporting them with domestic law. The release of the "measures" is an important directive for the chairman of the State Administration of Taxation to drop the chairman of the internship. The measures further regulate and clarify the applicable scope, standard of judgement, adjustment method, working procedure and dispute handling of the general tax avoidance measures adopted by the tax authorities. The introduction of the measures has become the first shot for China to implement the BEPS action plan.

The second is that China is facing a serious situation of anti tax avoidance. In recent years, many "incoming" and "going out" enterprises in China have become increasingly closely linked to tax shelters, and there is a situation where profits are transferred to tax shelters. In order to prevent enterprises from transferring unreasonable profits to external profits, the State Administration of Taxation issued a notice on the investigation of anti - tax avoidance for external payments in September 2014 (the general tax office issued [2014]146), requiring all localities to conduct a thorough investigation of the situation of enterprises paying large amounts of service charges and royalties to overseas related parties, especially for the low tax countries and regions such as tax havens. The investigation found many problems. For example, in the process of "going out", many Chinese enterprises transfer the ownership of intangible assets cultivated in China to tax shelters by establishing companies in tax shelters, and then charge royalties to domestic enterprises in China. Under normal circumstances, the intangible assets that are cultivated for China should be paid by foreign enterprises to Chinese enterprises. This kind of putting the cart before the horse can not only make Chinese local companies unable to collect fees, but also pay outward expenses. The two effects superimpose serious tax losses. Another prominent problem is that in the process of "Introduction", many parent companies of multinational corporations set up subsidiaries in China to avoid tax through related party transactions or other tax avoidance schemes. Facing the increasingly fierce tax base erosion, the task of safeguarding the national tax base security is becoming increasingly urgent. The introduction of the measures and the above investigation are in fact coherent anti avoidance actions.

The third background is that China's general anti avoidance laws need to be improved. The earliest introduction of GAAR in China was in 2008. The sixth chapter of the enterprise income tax law, the forty-seventh special tax adjustment part forty-seventh, stipulates that "the tax authorities shall have the right to adjust in accordance with reasonable methods when implementing other arrangements that do not have a reasonable commercial purpose and reduce their taxable income or income." The 120th article of the regulations on the implementation of the enterprise income tax law further clarified: "the forty-seventh section of the enterprise income tax law does not have a reasonable commercial purpose. It refers to the reduction, exemption or postponement of paying taxes as the main purpose". In January 2009, the State Administration of Taxation issued the "special tax adjustment implementation measures (Trial Implementation)" (national tax [2009]2 number, hereinafter referred to as "No. 2"), and set up tenth chapters of general anti tax avoidance management separately, and refined the forty-seventh articles of enterprise income tax law and 120th implementation regulations. Among them, the ninety-third rule states: "the tax authorities should examine the existence of tax avoidance arrangements in accordance with the principle of substance over form." The ninety-fourth rule states: "the tax authorities should redefine the tax avoidance arrangements of enterprises according to the economic nature, and cancel the enterprises' access to tax avoidance arrangements. tax revenue Interests. Enterprises with no economic essence, especially those located in tax havens and causing tax avoidance by their affiliated parties or non related parties, can deny the existence of the enterprise in terms of taxation. The above provisions have been constructed in general. tax avoidance The basic legal framework. Generally speaking, the general anti tax avoidance is a relatively new field in China. The above laws and regulations provide general principles for the avoidance of tax avoidance, but lack a comprehensive and comprehensive management approach to regulate the operation procedures and implementation standards of tax authorities everywhere. For example, the general anti avoidance investigation procedures, adjustment methods, and the definition of reasonable business objectives need to be clarified. " Way On the one hand, it has perfected the general anti tax avoidance laws in China. On the other hand, it can ensure the unity and normalization of the general tax avoidance cases in various tax offices, and establish a more transparent, unified and equitable general anti avoidance mechanism.