| Loss-trafficking is the arrangement of the company in order to obtain the tax ben efit at the advantage of accumulative trade loss for itself or for other target companies. Trading parties capitalize on legal loopholes to seek tax benefit in the legal form of M&A, which has unreasonable business goals, breaks the fair competitive market order and violates tax equity principle which is illegal tax avoidance behavior. The major market economic countries in the world have recognized the mechanism of such abnormal trading behavior, and have done the relevant restrictions on the company when it makes up for losses carried forward. For example, America has a history of loss trafficking regulation which dates back to the article 269 of 26 USCS which came into effect in 1939.However; article 269 became inapplicable for the difficulty to prove the intention of tax avoidance. Therefore, article 382 came into effect in 1954 as an amendment and had been used until now. Recently, IRS proclaimed a notice as an exception of Bank’s M&A: If a subject bank is to acquire other banks in bankruptcy or debts, its unpaid loans and mortgages can be carried forward as a one-time tax offset or deduction from tax which is not subject to article 382. In Japan, a country also in civil law system, merger can be divided to be eligible merger and ineligible merger. As for eligible merger or similar separation, not only the book value of assets and liabilities of an enterprise can be inherited, but also a certain amount of loss. As regards to eligible separation, the conditions for the application of loss make-up include: the main business of the separated enterprise must be ran by the inherited enterprise etc.In China, tax legislation is still at a low level which made it hard for the concept of tax law be well accepted and the sense of tax law for the masses need to be improved. Most people cannot distinguish reasonable tax saving and illegal tax avoidance. We don’t have general a tax code in our legal system. It is inspiring that the third edition of the drafted amendment of Legislative Law had been passed by the NPC(National People’s Congress)on March 15 th,2015,which stipulates in the eight article that “types of taxes, tax rate and tax levy regulation etc are all stipulated by law.” Since then, statutory taxation principle has been made clear in China and March 15 th,2015 will be a landmark.Secondly, the present anti-tax avoidance system mainly focused on regulations of transfer pricing, the legal fruits of which are Enterprise Income Tax Law of People’s Republic of China and Implementing Measures of Special Tax Adjustment.The six chapter of enterprise income tax stipules “ Special Tax Adjustment”, which is a relatively comprehensive anti-tax-avoidance legislation. The Implementing Measures is a landmark in the history of pricing and signals the tax avoidance of China has been geared to international standards. China doesn’t have a special department to implement tax avoiding measures and relative implementing measures converge in the Law of the People’s Republic of China on the Administration of Tax Collection and other regulations.Furthermore, China is still in the enlighten period of loss trafficking, and mainly adopt anti-tax-avoidance provisions or restriction son transfer pricing provisions to handle relative problems. Therefore, the precaution of loss trafficking mainly embodied in restriction provisions of loss trafficking and there is no concrete and specific anti-tax-avoidance rules. The general anti-tax-avoidance provisions of loss trafficking adjustment are Miscellaneous Provisions to special anti-tax-avoidance provisions and it has the risk of being misused. So in the strict sense, there is no clear and definite rules of restriction principles of loss trafficking. The existing legislation results of the application of carry-over of losses in or not in M&A are: Enterprise Income Tax Law of People’s Republic of China, The Notice of Ministry of Finance and State Administration of Taxation on Several Issues Concerning Enterprise Income Taxes for Promoting Enterprise Reorganization promulgated by State Administration of Taxation and Announcement No. 4 [2010] of the State Administration of Taxation-Measures for the Enterprise Income Tax Administration of Enterprise ReorganizationsThe theme of the paper is to study the regulation of loss trafficking by adopting comparative analysis, empirical analysis, qualitative analysis and other multiple analysis methods to organize relevant issues, clarify concepts and discuss relevant system. In detail, this article includes five parts:The first part is introduction, mainly illuminates: Firstly, under the background of loss trafficking behavior. Of complicated economic and trade and the international into a taxpayer evade tax obligations in various trading link planning provides the possibility of more. Tax avoidance has become an important subject of tax administration. Improve anti-avoidance system, not just in order to meet the demand of the country’s fiscal revenue of China, but also to maintain “fair taxation principle”. This article discusses the “loss trafficking”, which are the enterprise mergers and acquisitions in one of the common way of tax evade. This approach can achieve congenital conditions are specified in the national tax law: net operating losses on deferred terms, offset clause means loss of carry forward. Second, the research results of scholars: our country academic circles to loss trafficking very little academic research, and focuses on the introduction of international regulations, lack of comparison with domestic as well as the reference at present. Mainly in 2004, Dr Wu Shenjun during wrote many articles introduces and compares the countries such as Germany, the United States and Australia about the loss carry forward make up for the losses to carry forward and restrictions. But which limited to introduce and compare other countries, no compare the relevant regulations to China, and also did not form a clear can draw lessons from. While, Professor Huang Maorong, in the book of general tax law, introduced losses carried-forward legal matter. The third part is the research method in this paper which is empirical study and comparative analysis.The second part introduced the matters as follow: Firstly, the concept of loss trafficking. Second, loss trafficking is loss in the premise of the concept o f deferred terms, loss, carry forward the “loss” in the category list to comparethe financial losses in the concept and the losses of the difference of the con cept of the tax law. And the reason allows carry forward. Third, Loss trafficki ng happens in M&A, Introducing the concept of corporate restructuring, reorga nization of enterprises in our country income tax in the processing results of l egislation introduced, and the restructuring of the easily confused to clarify the concept of finishing.The third part introduces loss trafficking anti-avoidance rules in system evolution, the present situation of China. First, the summary of merger, acquisition and reorganization of carry forward the applicable rules of losses in the historical evolution of legislation in our country. Tax-free reorganization includes inside and outside the enterprise tax period type, and losses carried forward the provisions shall be applicable. Types of losses carried forward at this stage. And the article illustrate the special tax treatment under loss make up absorbed how to do it.The fourth part is the reflection to the trading loss anti-avoidance rules. Firstly, trade through the case found that loss of loopholes in the rules of anti-tax avoidance in China. And then, the article introduced the loss trafficking anti-avoidance rules in Japan’s tax system evolution and the status at present, as well as the case in the case of tax law related to the corresponding set in Japan. Thereafter, to reflect on the current can improve the measures.The fifth part is the conclusion of the article, summarizes the present situation of the loss of trade, points out that insufficient, and expectations for the future. |
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