Research On Legal Rules Of Tax Credits For Offshore Income Of Chinese Enterprises

Under the current circumstances where overseas investment is increasing rapidly,tax policy plays a role that that has impact on China’s overseas investment.Therefore,to promote overseas investment and achieve the overall goal of "going out",it is necessary to enhance the tax incentives on one hand,and on the other,to avoid tax-base erosion.Deficient offshore income tax law rules may encumber China’s economic development.Many offshore income tax rules in China were formulated when the economic development is far less than now,and our understanding of foreign investment was less acute.The main problems include,firstly,our country implemented a tax credit system which is country-specific and does not discriminate the types of income.This system is relatively complex,the benefit of credit is not great enough.Moreover,the requirements for credit are hard to meet.Tax treaties are not suited to the current situation;and our anti-tax avoidance system can not meet the demands of corporate tax planning of China’s diversified investment.The United States and Japan as current economic powers boast rich experience in overseas investment.The United States divides income into indirect income and common income,and applies a non-country-specific approach to tax credit,and in addition,it classifies indirect credit into six levels.These measures increase the credit for the US foreign investment to provide a strong tax protection,and through the anti-conduit system to protect the US tax base from erosion.Japan applies a gross income tax credit,which broadens the scope of credit and is more stimulating to overseas investment.It is also worth noting that its three-tier allowable indirect credit system and offset of domestic and foreign profit and loss are mutually supporting to each other,and arbitrary selection of one is not desirable.To support Chinese enterprises in investing abroad,it is proposed that the country-specific credit system of our country is to be changed,and the indirect credit system be optimized.This can stimulate overseas investment.The time of taxing should also be deferred to encourage enterprises to invest overseas.And revision of some of the tax treaties on the basis of fairness principle is necessary to meet the current situation so that the treaties can better promote the development of both parties.In addition,China’s anti-tax avoidance provisions to be modified and improved to avoid the abuse of tax treaties.New means shall be introduced into our legal system to cope with the transfer pricing and capital weakening so that the legal rules work together to reduce the cost of taxation and improve tax efficiency.