Study On The Income Tax System Of Partnership In China

In the process of China's economic development,the partnership is a young market subject.From the partnership composed of natural persons to partnership composed of natural persons and legal persons and other organizations,the partnership has developed from general partnership to special general partnership and limited partnership.At the same time the income system of partnership in China has developed from entity theory to mixed theory showing the characteristics that the tax subject transferred from accounting subject to legal subject.Though it has achieved certain results,it still remains many shortcomings which hinder the development of this economic organization form.From the tax theory and tax practice,there are three kinds of partnership taxation modes which are entity theory,mixed theory and aggregation theory.The three modes have advantages and disadvantages.It should be selected according to the legal system,economic development and tax administration ability of every country.Now China selects the mixed theory as the U.S.A does,but there's a certain distance of our national conditions with the United States so that we can't overcome the inherent defect of mixed theory.As we can't find method to solve the problems of income tax of partnership in China from the tax theory,we try to transfer the vision to a higher angle such as the constitution of the tax rule.Tax rule is composed of identification civil of law and measurement of accounting and collection of power.Because there are two subjects of tax rule,the collection authority has to make the choice to determine tax subject between legal subject and accounting subject like the two tax theories do.The entity theory chooses the latter while the aggregation theory chooses the former.In China,though there is still some difference between the two subjects,it shows the convergence trend.So the essay puts forward the new entity theory trying to distinguish legal responsibility from legal subject,direct liability from supplementary liability.The new entity theory choose the accounting entity as the tax subject because it can simplify the tax system and improve the efficiency of tax collection and management without affecting the premise of accountability.Based on the new entity theory,the essay tries to design the income tax system framework of partnership,which put the partnership into corporation tax category.It also distinguishes the capital attributes from service attributes of partners and in the taxation of dividend all the income is treated as capital attributes.After comparing the tax burden of shareholder with partner and clear that the partnership is applicable to the tax incentives of corporate income tax law,the essay gets a conclusion that if it establishes a preferential rate for the partnership there is no significant increase in the actual tax burden of the partners while the tax management is much more easier.This kind of tax system solves the three difficulties originally proposed in the essay and the application of tax preference and promote the diversification of economic organization forms.