Suggestions For The Improvement Of China's Tax Treaty

Bilateral tax agreement is important to encourage companies to “go out” by giving tax credits to foreign investment and trade.The first part of this article analyzes from cases and the text of existing Sino-foreign tax agreements and finds four drawbacks that may impede foreign investment.These four drawbacks are: the unclear status of partnerships in tax resident recognition,the absence of income source criteria of E-commerce,the relatively small tax reduction and preference treatment,and a less protective dispute settlement mechanism.Following that,the article explores reasons on historical and practical basis.The failure to meet the companies' demands is due to the fact that,basic theories of international taxation and model tax agreements are made by developed countries.The interest inclination behind those articles harms the contemporary needs of China,at the time when China is transmitting from a capital inflow country to a source of capital outflow.Nowadays,Chinese companies make large amount of foreign investment,which makes dispute settlement more frequent and significant.Moreover,new forms of foreign investment come into existence based on Internet,and this new situation is not anticipated when most tax agreement were concluded.In order to solve the problems and to better protect Chinese investors overseas,after learning from international and foreign domestic leading examples and models,the third part of this article proposes four responsive ways to improve existing tax agreement.First,clear conditions of partnership status should be added;second,new standards of permanent institution should be introduced to deal with E-commerce;third,increase tax credits and lower some thresholds;and fourth,introduction of arbitration mechanism in dispute settlements.