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Research On Taxation Law Regulator Of "Permanent Establishment"

Posted on:2006-12-31Degree:MasterType:Thesis
Country:ChinaCandidate:X Y ZhangFull Text:PDF
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The concept of "permanent establishment "was first introduced to international taxation area in "Agreement Model for the Avoidance of Double Taxation on Income and Capital"by the organization of Economic Cooperation and Development in 1963(OECD as following for short). The use of the concept provides internationally agreed principle for distributing taxation interests among countries and solving the problem of international double taxation. With the further openness of our domestic commodity and service market to foreign investors, correspondingly, foreign invertors and operators will participate in the larger commodity and service market with chances and varieties of manners. As for the significances of taxation, the larger scope of non-resident enterprises engaged in operation activities in China means that the business profits produced in our country will be increased, further, tax organs need to judge that they have set up permanent establishments in our country according to the taxation agreement signed between the resident countries of those non-resident enterprises if our tax organs want to collect taxation on those business profits, otherwise, tax organs cannot do that. Therefore, the identification and government to permanent establishments become a key point in signing taxation agreement with foreign countries and strengthening taxation government to foreign countries. Starting with the following aspects, the article discusses several issues on law regulator of "permanent establishment". The first part of the article uses "taxation regulator system and permanent establishment"as title .it mainly introduces the background and basic definition of the concept "permanent establishment"and its wide application in the area of international taxation. Primarily, the term "permanent establishment"was neither applied in taxation area nor a concept in international law, but was a concept abstracted from German civil law and for other use. The term "permanent establishment"applied in taxation law was purely to avoid double taxation. The term didn't appear in taxation law until 1885 as a formal law phrase. At present, in the external taxation agreement of countries, it is common to cite the requirement of setting up "permanent establishment"in the OECD model and the UN model, which makes the income source country, can execute its tax administrating power only when multinational taxpayers'business activities have reached the standard of forming permanent establishment. Actually the standard of permanent establishment is to clarify tax-collecting power of resident countries and of source countries by restricting the tax administrating power of source countries of business profits. Both the OECD model and the UN model make specific definition to permanent establishment. Both of the two models define "permanent establishment"as the fixed place of an enterprise to perform whole or part of business activities. However, the two models have lots of difference in the specific standards to identify "permanent establishment". In order to provide convenience for the tax regulator and legal research of "permanent establishment ", in the second part, based on the two models and their definition to permanent establishment , we divided permanent establishment and deputy permanent establishment that finally determine the question how to realize the region administrating power to business profits in each country. The third part of the article is "the legal demarcation of permanent establishment". Attribution principle and attraction principle are the two principles for collecting business profits of "permanent establishment". Attention should be paid that the two models adopt different principles for collecting business profits. As for the concrete amount of business profits of permanent establishment, there are three different calculation methods internationally: independent accounting method, total profits method, and checking method. All the external taxation agreements of China stipulate that the tax-collecting power of signatory state to non-resident taxpayers'business profits bases upon that taxpayer set up permanent establishment in the state. Those taxation agreements, usually consulting the prescription in taxation agreement model, define "permanent establishment"as the fixed place of an enterprise to perform whole or part of business activities, and list items thatbelong to permanent establishment and items that doesn't belong to permanent establishment. With the wide application and development of electronic commerce, and with the rapid increase of the proportion of the transaction amount of multinational electronic commerce taken in the total amount of international trade, a new legal issue of international tax distribution is placed before international tax law scholars and finance and tax department in every country: Can the concept and principle of traditional and current permanent establishment be applicable to coordinate the conflicts of tax-collecting power of multinational electronic commerce income? If the business profits under electronic commerce are defined by traditional concept of permanent establishment, at least it will produce two big problems that: fired business place or installation standard"vanishes or web service providers cannot match the requirements of "deputy". The fourth part of the article discusses relevant legal problems existing in China's current tax regulator of "permanent establishment "we must realize that, if our administrative regulation to permanent establishment is not effective, problems will arise such as administration out of control, the loss of tax revenue, state's tax sovereignty being eroded, meanwhile, the phenomena that making use of permanent establishment rules to avoid tax internationally will meet vacuum in government in our country. The improvement and supplement issue of the concept "permanent establishment"involved in our present tax agreements, law, and rules, has become a problem we have to face in the tax identification and government of foreign enterprises "permanent establishment". In China's regulate "permanent establishment", such problems exist as low level of external tax law, low effect, poor execution, the phenomenon of old and lagged low, rules and documents. Problems existing in the tax-paying regulation of permanent establishment are more widespread and projecting. For example: problem of tax stuff's quality; problem that it is hard to clarity domestic and abroad work amount; problem that it is hard to judge the "residence time"as an important standard to "permanent establishment "; problem of exchanging internationaltax information; problem of administrating tax payment receipt. The fifth part uses the latest international research on permanent establishment for reference, and in accordance with questions raised in the fourth part, puts forward some assumptions to improve the taxation law regulation of our "permanent establishment". First, unify the connotation of "permanent establishment"in the state and foreign laws. Based on the negative principle of agreements avoiding double taxation cannot create and enlarge tax-collecting power for signatory state, it settles down that the attribution and determination of multinational income and property should totally depend on the domestic tax law regulation of signatory state. Taxation agreement cannot interfere such regulation in the domestic law, but have to accept and admit the legal facts. Therefore, it is necessary for our country to make more specific regulations on how to collect taxes on business profits, in order to enhance the feasibility of our coordination on collecting taxes on multinational business profits. We should complete the domestic tax law system in the administration of permanent establishment, and make supplements to contents of domestic tax law on time. Second, enhance the dynamic regulator system of our permanent establishment. At first we should strengthen the investigation of tax source, and enhance the coordination between departments. The grass roots tax departments should base upon the reality, give full play to the advantages of every staff, collect information about enterprises "permanent establishment "in the region, collect, analyze and report tax information like investigating abnormal report according to the demand of census register administration, so as to have the first hand materials on taxpayers to make sure that every existing tax is collected while the abuse of tax-collecting is forbidden through improving fundamental administrative organs for entry and exist, customhouse, bank, technical reform office, and soon to share information and administrate together. Enhance the construction of tax information to put the "permanent establishment"of foreign enterprises in China into rational tax information web. Establish a roll of foreign enterprises in China for sharing information in the tax system. Strengthen taxation regulator researchon anti-tax-avoidance with permanent establishment to security state financial profits. Third, different countermeasures are proposed to solve those problems by governments, relevant international tax law circle in the process of analyzing studying problems of permanent establishment caused by electronic commerce. We should start with the reality of our state, considering the reality in a rather long period China will still be in the net import of electronic commerce, go on insisting on the tax administrating power of source place of net import commerce, go on insisting on the tax administrating power of source place of net import country of electronic commerce in the aspect of international tax coordination of multinational business income and its issue of distributing international taxation. The point should be the basic starting point for us to research and make countermeasures to solve questions, and the point also is in accordance with interests of most developing countries.
Keywords/Search Tags:Establishment"
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