The Research On Tax System Of Thin Capitalization In China

The expression'thin capitation'is commonly used to describe an approach of international tax avoidances where a corporation's debt to equity ratio exceeds certain limit, using an excessive proportion of debt capital financing in order to avoid income tax payable. At present, thin capitalization has become one popular approach of international tax avoidance used by multinational corporations. It has become one important method which the multinational corporation and even the native corporation avoids taxes, also is the new task which the international tax revenue domain faces. Developed countries have adopted Thin Capitalization Rules to avoid the problem. Our country has joined WTO, the problems which the multinational corporation avoids taxes in our country are similarly inevitable. The article proposed some suggestions on introduction of Thin Capitalization Rules to China based the international experiences and circumstance in China after analyzing the phenomenon of Thin Capitalization, and also through the concrete to be listed company's case analysis.