Tax Planning On Foreign Investment Corporation

Tax income is the main revenue of the Government in China. Due to development of external economy, increase of foreign exchange income, from the 1980 opening system onwards, Chinese government spreads out a series of favored policies for foreign investors so as to attract them to build up factories, to operate the producing and sub-contracting activities. At the same time, in order to protect the living room of domestic enterprises, most or all of products manufactured in China are being used for exports under the government control. Foreign invested enterprises set up factories in China, also derive business income from China, and so this must involve Chinese tax law. In view of foreign investor, notwithstanding with the amount of tax to be paid, this is a loss of their economic income. For the sake of loss reduction and their profit earned maintenance, tax planning comes because of such demand. Therefore, this paper attempts to probe Chinese taxation and law, in the viewpoint of foreign investors, to discuss the possible tax planning based on the characteristics in tax category, and the tax effect implied in foreign owned enterprises.First of all, this paper introduces the theory of tax planning, through its beginning and development, explains its existing reasons, characteristics and principals, derives the effect from tax planning, factors to be considered when tax planning adopted by foreign investors. Moreover, we try to investigate, in view of foreign investors, the possible tax planning, through the common characteristics in tax category: transfer pricing and tax benefits, with examples. Furthermore, we consider the tax planning involved by different methods chosen under fixed assets and inventory. Finally, we discuss the changes of working activity in foreign owned enterprises due to China entered into WTO so as implies the effect of tax planning...