Research On China’s Foreign Tax Credit Regime

International double taxation is not only a barrier to the efficient allocation ofresources all over the world, but also a challenge to the principle of international taxequity. Every country tries to solve this problem by international double taxationconventions or domestic income tax rules. At the same time, international doubletaxation is also a big problem troubling China’s tax law makers: how to protect statetax revenue while avoiding double taxation and how to strike a balance betweeneconomic efficiency and equitability of taxes? China’s tax credit regime emerged asthe time requires.Ministry of Finance of the People’s Republic of China and State Administrationof Taxation of China issued the Guidance on Administration of PRC EnterpriseForeign Tax Credit in2009. The Guidance provides further details and examples toclarify the PRC’s enterprise foreign tax credit regime (FTCR), marking the formationof China’s FTCR. This paper probes into the operability of China’s tax credit regime,and questions whether the regime could effectively eliminate double taxation andprotect China’s tax revenue with the purpose of improving China’s tax credit regime.Up to now researches on the tax credit regime in China mainly focus on thesphere of practice like the specific application. State Administration of Taxation ofChina and local tax bureaus at various levels discuss and study this regime, pointingout the problems in operation and offering advice on improvement. In general,researches on this regime are more about practical applications rather than theoretical studies, which deserve equal attention. So far, no study has been conducted on thesystematical analysis and evaluation of China’s tax credit regime from the perspectiveof economic efficiency, equitability of taxes and tax benefits. Cai Lianzeng carried outa systematical research on the tax credit regime of United States in his work On theForeign Tax Credit Regime of U.S. Federal Income Tax Law, which sparkedinspiration of this thesis writing. It’s a pity that there is little analysis and evaluationon the China’s tax credit regime in Cai’s writing.This paper, based on the perspective of protecting China’s tax jurisdiction andeliminating double taxation, looks into China’s original intention of the establishmentof forging tax credit regime and proposes the rationality of the existence of foreign taxcredit regime by analyzing the superiority of tax credit regime. The write of this papercarries out a systematical analysis on the specific rules of China’s foreign tax creditregime and compares China’s tax credit regime with that of United State, aiming toimprove China’s foreign tax credit regime, eliminate the double taxation, protect taxjurisdiction and balance the economical efficiency with the equitability of taxes.The innovation of this thesis lies in the following aspects: firstly, it performs atheoretical analysis of the significance of China’s foreign tax credit regime, showingthe superiority of tax credit regime from the point of tax rights protection, economicalefficiency and equitability of taxes. Secondly, it comprehensively and systematicallyexamines China’s tax credit regime, offering advice on law making from the point oftax rights protection, economical efficiency and equitability of taxes. Thirdly, itcompares the United States’ tax credit regime with that of china and uses examples tolook into the problem in China’s tax credit regime in practice.