Tax Risk Management Of China’s Foreign General Contracting Project Under EPC Model

Since the 1980 s when China’s foreign contracting business went abroad,its scale has been expanding continuously in the past 40 years,especially in the 5 years since the state put forward the "one belt and one way" initiative in 2013,more and more enterprises have gone abroad.China’s foreign contracting engineering enterprises cater to the international market demand,relying on increasing technological strength and scale advantages,from the traditional single-link mode of foreign contracting to the external general contracting mode(Up to now,EPC is the main mode of general contracting).Its International competitiveness has been greatly enhanced.The foreign general contracting project across the border is a business activity that integrates technology,service and labor with wide coverage,complex procedures and high risk.It involves tax administration in two or more countries,including many tax-related matters and complicated elements of tax system.From the shortage of supply and demand to the emergence of large-scale construction enterprises with outstanding qualifications,the increasingly saturated market has gradually attracted the attention of the host country’s tax collection and administration agencies.The tax risk coefficient increases with the improvement of the level of supervision of the levying and the increase of the scope and intensity of compliance review.Being unfamiliar with the tax laws and regulations of the host country,sometimes administrative penalties are incurred for underpayment or omission of taxes due to errors in calculating the taxable amount of a certain tax category,sometimes tax treaties and preferential tax policies are not fully utilized,more taxes are paid.And other times incomplete understanding of tax-related clauses in contracts incurs additional contract costs……The minimum damage of these tax-related risks is to reduce the economic interests of enterprises and their competitiveness.More serious situation will cause construction to be stopped,affecting the progress of the project,causing contract breach,even damaging the corporate brand image,and making the enterprise lose the opportunity to undertake international projects.The cases of loss caused by tax risk are often reported in newspapers,which has become a difficult problem for Chinese "going out" enterprises to break through urgently.Because the tax systems of different countries are quite different,and Different enterprises have different business scales and tax management modes,which incur ever-changing tax risks.Therefore,tax risk management needs to be combined with specific work practice in order to be more applicable.In order to help Chinese enterprises have a deeper understanding of international tax issues,they have a new understanding of the daily management,control and prevention of tax risks,This paper takes H Company’s hydropower project in Malaysia as an example.With the help of the tax risk management model adopted in the practice of the contracted project,this paper will elaborate and analyze the current situation of tax risk management of EPC’s external contracted projects in China,and put forward optimization strategies.This paper will discuss the causes of tax risk,the key concerns of tax risk and the path of tax risk management in theory and practice,trying to sort out the policy environment at home and abroad,the system construction of transnational tax risk management,the management ideas of taxable economic matters,the prevention and Countermeasures of important risks for EPC in China.And provides a useful reference for the follow-up project contracting business.