New rules to halt tax evasion
CHINA may implement new rules by the end of this year to prevent tax evasion by multinational companies as the G20 has endorsed a plan to enhance fairness of international tax revenue, Ernst & Young said.
The State Administration of Taxation last Friday finished collecting feedback for amendments to a 2009 guide on anti-tax avoidance rules to deal with profit shifting and enhance profit monitoring. The final version is expected to be released within this year, according to EY.
Most of the items in the proposal were drafted in line with the principles of a global project on Base Erosion and Profit Shifting, or BEPS, which was finalized earlier this month to stop multinational companies from avoiding tax by shifting profits to destinations with lower corporate tax requirements.
“Unlike many developing countries, China has been very active in framing and implementing the BEPS,” said Walter Tong, tax managing partner of EY China.
“Companies have just finished giving feedback to the China tax authorities on the new special tax adjustment rules, and we think it’s very likely that the final version will be released within this year.”
The BEPS plan is set to close loopholes within global and national taxation systems.
The new rules mean that both multinationals and Chinese companies expanding overseas will have to pay a fair tax to the countries they operate in, Tong added.
Initiated by the Organization for Economic Cooperation and Development, the BEPS project has won endorsement from the G20 to change international rules that have governed taxation of profits in global commerce for almost 100 years.
Chinese Minister of Finance Lou Jiwei said at a conference during the G20’s annual meeting in October that China will help advance the BEPS plan as it takes up presidency of the G20 in 2016.
EY China’s Tong said: “It’s a significant move for China to make its tax rules more transparent and principally consistent with global practices at a time when outbound investment from China has exceeded inbound.”
