Research On Tax Risks Of A Company's Permanent Establishment In China

In recent years, with the deepening of economic globalization, transnational business activities have become increasingly frequent. On the background of economic globalization, tax management of non-resident enterprises has become the main concerned topic for the worldwide tax authorities. The constantly improved tax laws and regulations of our country for non-resident enterprises also require them to pay more attention to prevent and avoid their tax risks. As a prerequisite for taxation of business profits to resident enterprises of the other Contracting State, the PE is an important basis's source for division of international tax rights, but it is also a difficulty in tax-related risk management for non-resident enterprises. Therefore, it becomes an highly valued segment for non-resident companies to operate business across borders. In this context, this paper takes the A company which registered in Singapore as the research object through case analysis. It is meaningful to study the tax risk of the PE which may be involved in the operation of the A company in China. On the one hand, it can provide a feasible proposal for the A company to guard against the tax risk of the PE. On the other hand, it can also play a reference role for other non-resident enterprises.The paper first teased apart related rules about PE from the prospective of both international and internal tax law, which offers policy basis for the case analysis of this paper. Secondly, in the case analysis, organizational structures, business domain and other information was introduced, and A company's business operating arrangement in China was detailed introduced and classified with emphasis. Thirdly, the paper identified the tax risks of permanent establishments involved in A company's operating arrangement scheme in China combined with the specific business and related regulations and policies. The following tax risks can be found: labor service type tax risk of PE, engineering type tax risk of PE, site type tax risk of a PE, and agency type tax risk of PE. Accordingly, the paper analyzed the tax treatment and tax implications supposing that A company were defined as a PE in China and offered related solutions after referring to several typical cases that some non-resident companies'branches were judged as PE. Finally, on the basis of risk identification, the paper proposed corresponding preventive measures, including the prevention of PE tax risks of specific business arrangement and other precautions.