Study On How To Determine The Subject Of Taxation Of Trust Income—Under The Perspective Of Comparative Law

With the continuous development of the economy,the trust industry has great prospects for development in China.However,the current regulations on the trust taxation system in China are almost in a blank state,and there is no uniform view from local taxation authorities on whether and how to tax trust income.This lack of legislative provisions may lead to double taxation by tax authorities on the same income and increase the burden of taxpayers;or be abused for the purpose of tax avoidance and damage the national tax base.Therefore,a trust tax law should be enacted as soon as possible to provide guidance for tax authorities and trust parties.This article will focus who are to be responsible for trust income in the design of trust taxation system.Chapter Ⅰ analyzes the lack of provisions on the subject of trust income taxation and the difficulties in determining the subject of trust taxation.To determine the subject of trust income taxation,firstly,the trust income should be attributed to a specific entity based on legal or economic relationship,and the subject of trust income attribution is the subject of trust income taxation.The difficulty of identifying the subject of trust income taxation is that in China,the attribution of tax objects is generally based on the principle of ownership attribution.However,in the case of trusts,due to the separation of ownership rights of trust property,there are different views and no consensus on the ownership rights of trust property in academic circles.If we insist on using the ownership vesting rule,we will inevitably enter a "dead end".Chapter Ⅱ firstly introduces how the U.S.,U.K.and Japan determine the subject of taxation of trust income and analyzes the common elements of the laws of the three countries-reflecting the concepts of "control","benefit" and anti-avoidance considerations,which reflect the substance of the taxation principle.This chapter then explores the feasibility and path of applying the principle of substantive taxation to the determination of the subject of taxation of trust income.Chapter Ⅲ specifically analyzes the application of the substantive taxation principle to the determination of the tax subject of trust income in the tax legislation process,i.e.,the adoption of the tax object attribution approach.Specifically,the principle of substantial attributor taxation is used to attribute the trust property to the person who has the dominant position over the trust property and the person who actually enjoys the trust benefit.This chapter also analyzes the possible scenarios of dominance of trust property in the context of the U.S.principal attribution rules.Finally,this chapter points out that the legislator may break away from the substantial attributor taxation principle and attribute trust income to persons other than those who dominate the trust property and enjoy the trust benefits based on other policy considerations such as antiavoidance needs and encouraging the development of public trusts.There are numerous forms of tax avoidance in practice,and it is impractical to require the law to respond to all tax avoidance behaviors in a timely manner.Therefore,Chapter Ⅳanalyzes the principle of substantive taxation and general anti-avoidance rules,and introduces the principle of economic substance in the common law system and the principle of abuse of power in the EU.For the taxpayers’ acts of establishing false trusts and other abuses of trust forms for tax avoidance,the tax authorities can apply the general anti-avoidance rules for adjustment,break through the legal form of trusts and carry out tax collection according to the legal substance and economic substance of the relevant acts.Through the above analysis,this paper concludes that,first of all,at the legislative level,the principal or other people who enjoy exclusive dominion over the trust property and the actual beneficiaries of the trust property can be the subject of taxation.The specific situation where the principal enjoys the exclusive right to dispose of the trust property may need to be further considered in the light of the actual situation in China.Secondly,at the level of application of tax law,if the parties engage in trust business for the purpose of tax avoidance,the tax collection authority may reconstruct the tax obligations of the trust parties according to the economic substance and deny the improper granting of tax benefits through the general anti-avoidance rules.