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On The Anti-tax Avoidance Of China's Controlled Foreign Company Under The BEPS Background

Posted on:2019-12-01Degree:MasterType:Thesis
Country:ChinaCandidate:N N MaFull Text:PDF
GTID:2416330545994215Subject:Economic Law
Abstract/Summary:PDF Full Text Request
In the context of economic globalization,international economic communication and cooperation have become more frequent as a large number of multinational corporations have emerged.Multinational corporations have always made tax considerations an important consideration,or even their main consideration,when making overseas investments.Due to the different levels of political and economic development in different countries,their tax systems also differ.Multinational corporations make use of the legal loopholes caused by differences in tax regimes among different countries to set up Controlled Foreign Companies in tax havens with low tax rates or even zero tax rates.Profits are transferred or accrued to Controlled Foreign Companies and are not distributed,thereby delaying and avoiding their own tax obligations.In order to curb the deferral of tax payment by multinational corporations,the United States took the lead in establishing legislation on Controlled Foreign Companies and subsequently became a model for the relevant legislation in other countries.China also introduced this regime in 2008.In response to the growing global problem of profit shifting and tax base erosion(BEPS),the Organization for Economic Co-operation and Development(OECD)released BEPS Action Plan in 2015,Designing Effective Controlled Foreign Company Rules,which has provided best practices for establishing and improving Controlled Foreign Company rules.With the continuous implementation of the "Going Global" and "Belt and Road" strategies in our country,more and more enterprises will "Go Global".The problems that Chinese resident enterprises and individuals use controlled foreign companies to evade taxation in our country are bound to be increasingly prominent,if not regulated,not only will our country's tax base be seriously eroded,but also will affect the capital flow,which is not conducive to the healthy and orderly development of our economy.China should timely implement the latest achievements of the BEPS project,improve the Controlled Foreign Company regime in our country as soon as possible,protect the tax base of our country from being eroded while effectively maintain the competitiveness of China's "Going Global" enterprises.The Article first takes literature research method to analyze the background and theoretical basis of the legislation of Controlled Foreign Company,and introduces the basic content of the legislation of Controlled Foreign Companies.Secondly,this Article uses the normative analysis method to expound the insufficiency existing in the system of Controlled Foreign Companies in our country.In terms of defining the Controlled Foreign Companies,the standard of legal control test and substantive control test is not perfect enough.In terms of taxpayers,due to China's enterprise income tax and personal income tax system,resulting in uncontrolled resident individual shareholders of Controlled Foreign Companies subject to the rules of Controlled Foreign Companies;in the geographical area of application,the existing "white list" has not been updated since its establishment and therefore can no longer reflect the real tax burden;in the aspect of tax object,our country did not clearly stipulate the negative income,and the method that the entity law belongs to the controlled foreign company does not accord with tax equity pricinple;Also,exemption clause are very vague,which did not take into account the industrial differences,the main acquisition of positive operating income did not have a specific and specific ratio,the reasonable operation needs of the situation is not specified.Thirdly,this Article analyzes the merits and shortcomings of the BEPS report critically using the comparative research method,selects the legislation of the Controlled Foreign Companies in the United States and Japan,and analyzes the current legislative trends.In the end,this article draws lessons from the system that accords with our country's national conditions,and puts forward the following suggestions for our country to implement the BEPS achievements and perfecting the Controlled Foreign Companies: From the perspective of protecting the national tax benefits,this Aritcle proposes that legal control standard should be improved and substantive control standard should be refined,at the meanwhile,the scope of application of the Controlled Foreign Companies Anti-Tax Advoidance Rules should be further expanded.The conditions in which individual residents individually or jointly control foreign companies should be included in the conditions that constitute the control.Blacklists should be added to reduce the cost of collection and management,and the connotation of negative income should be clarified.The ownership of foreign-owned companies is vested with a clear exemption clause.From the perspective of restricting the anti-tax avoidance power tax authorities,this Article proposes that China should learn from the practice of the United States and limit the tax authority's exercise of discretion within the reasonable limits of anti-avoidance purposes,thus to strike a balance between the public interest such as safeguarding the interests of tax authority and the tax equalization,whilst ensuring the taxpayers' legitimate rights,such as autonomy of contracts,legitimate expectations and legal certainty.
Keywords/Search Tags:Controlled Foreign Company, Anti-Tax Avoidance, BEPS
PDF Full Text Request
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