Study On The Enterprise Income Tax System Related To Trust Business

Trust business is a system that controls the property for people's benefit. Because of its special law construction of the duality of the proprietorship and the profit, it makes the right and obligation of the trust property among the trust party is different from the traditional credit relationship and real right relationship. So, it is necessary to establish a special rule of tax revenue. Trust business may result in various tax-paying obligations, which are difficult to deal with in details due to the differences of the regulations on various categories of taxes. As the transfer of the trust property and the production and allocation of the trust income must be involved in the establishment, continuation and termination of the trust business and a series of actual and formal "income"can cause the collection of the income tax, most of which is covered by enterprise income tax; therefore, this paper will focuses on the enterprise income tax involved in a series of income happening in the trust business. But now, the regulation of our enterprise income tax system to the trust business is nearly vacant; the collection and the payment of enterprise income tax can carry through only with the common regulation of the enterprise income system. This gives the unfavorable impacts on the trust business such as double taxation, unfair tax burdens and strike on the public trust, etc. The basic reason is that we haven't considered the specialties of the trust and haven't establish or adjust the relevant tax laws in consideration of the separation of the substance and the form in the trust activities. The trust means that the trustee controls the trust property in his or her own name according to the purposes of the trust; therefore, the trustee has the rights beyond the economic purposes entitled by the trustor and can only exercise the rights in the range of the economic purposes. This results the separation of the form and the substance of trust activities in every period. The trust plays an important role in the finance industry, but the barriers brought about by lacking of trust tax system became increasingly prominent. Viewed from the current situation of the development of the trust business of our country, the establishment and perfection of the enterprise income tax system related to trust business should be made on the schedule of the legal construction as soon as possible. The main spirit of the trust business is that the trustee is the nominal owner of the trust property, and the real beneficiary is the proprietor of the benefit. Because of this specialty, the problem of the taxation became the difficulty in the trust income system. Through the simple evaluation and the comparison of the systems of the three countries ----England, America and Japan, we can see that the same characteristic of the three patterns lies in rationally avoiding the double taxation of the trust and only adopt the different methods. Starting from the situation of the current tax system of our country, the author thinks that the Japanese is the most applicable to the national situation of our country. Firstly, both Japan and our country belong to the countries of continent legal system, with the similar legislative modes easy to be accepted by the taxpayers; secondly, the Japanese conduit theory is adopted, which can avoid problems of attributes produced by the setting of the legal entity of trust planned to be established; thirdly, it is unnecessary to establish a series of regulations specific to the trust if the trust is not regarded as the entity, which agrees with the requirement of simplifying the tax system; fourthly, in the current case of the coexistence of individual income tax and enterprise income tax, the problem will necessarily occur that the trust is regarded as being owned by the person or the enterprise if the conduit theory is not taken. In the actual design of the system, some UK and US regulations can be used for reference. The first principle applicable to enterprise income tax related to the trust business is the substantive taxation principle. It means that if the substance under the form is found out in line with a great number of phenomena of the separation of the form from the substance in the trust activities, we must estimate the taxpayer's real ability of paying tax. One of the important functions of the substantive taxation principle lies in judging what the object on which taxes are levied belongs to. It is of great significance for such an important function of the substantive taxation principle to resolve the problem of the separation of the nominal beneficiary from the substantive beneficiary caused by the current income tax system or the enterprises related to the trust which does not consider the separation of the nominal ownershipfrom the substantive ownership of the trust property. Because it is easiest for the substantive taxation principle to abstract and summarize the trust and taxation activities, the substantive taxation principle can most reflect the basic discipline of the trust taxation and meet the needs of the legislation of the trust taxation. The author points out that as the principle of the enterprise income tax system, the substantive taxation principle has the justifiability. The first is that the tax legislation of the trust income must insist in the tenet of guiding the healthy and stable development of the trust. The second is that the three purposes of avoiding double taxation, fighting against tax evasion and encouraging the public trust must be realized on the basis of analyzing the property and ownership of rights of various types of income involved in the trust. The third is that the four basic principles of the tax law of the tax legality, justice and efficiency as well as social policies must be taken into account. In order to make the substantive taxation principle can carry out easily in the trust tax income system, we must comply with the following two principles: One is the actual beneficiary taxation principle and the other is the taxation principle when income occurs. Finally, the writer makes three suggestions on the legislation improvement of our country's enterprise income system based on the study and analysis. Project 1 is about the suggestions of the legislative modes of the income tax system related to the trust business in our country. As considering the rank and form of legislation and combining the main legislative mode of the tax law of our country, the author proposes to adopt the treatment rules stipulated in the regulations of the departments of the State Administration of Taxation on the commonalities of various taxes relevant to the trust, based on which, the concrete division should be made in the standard documents of taxation according to the different categories of taxes and elements and a dynamic mechanism should be established, realizing the simultaneous development of the trust tax system and the trust activities. Project 2 is about the suggestions of the basic framework of the enterprise income tax system related to trust business. Because the beneficiaries of the self-beneficial trust is different from the altruistic trust ,the different regulations on collection of the two types of trust taxes should be made in view of the substantivetaxation which must find out the substantive beneficiary. And the public trust, which brings about welfare to society, is encouraged by the nation, and the regulations on it should also be different from those of the private beneficial trust. Therefore, the author suggests that the three parts of the self-beneficial trust and the private beneficial trust of the altruistic trust and the public trust should be established in the basic framework of the enterprise income tax system, with some concrete suggestions of the three types of trust presented. Project 3 is about the suggestions of enterprise income tax paying methods related to trust business. The first is that the author proposes to determine the tax-paying methods of withholding and remitting according to the trustee's withholding and remitting advantages and assurance of the national taxes. The second is that as we have large group of beneficiaries, it is not feasible to require the trustee to tell apart the beneficiary cases; therefore, it is suggested that for the group trust, we should use tax deducing system, and the beneficiary can do the deducing when settling at year-end after the trustee carries out withholding and remitting according to the basic tax rate of enterprise income tax.