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In the context of economic globalization, the tax authority of China has been taking an active part in global tax governance and continuously enhancing international tax administration so as to meet the needs of the opening up of the economy.

Upgrading the Governance Capacity of Anti-tax Avoidance

In 2019, the STA focused its efforts to push forward the transformation and upgrading of the administrative system of anti-tax avoidance and, while sticking to the mainline of monitoring cross-border profits level, conducted risk identification and classified response by using big data-oriented by risk monitoring to improve the tax compliance of enterprises. In addition, to build a more comprehensive anti-tax avoidance system that integrates administration, service, and investigation, it established an anti-tax avoidance system featured by the leadership of the STA, modeling the effect of professional teams and national coverage after the setting up of 3 Specialized Anti-avoidance Bureaus located in Beijing, Jiangsu Province and Shenzhen to firmly safeguard the transformation and upgrading of the system and promote the capacity for governance on anti-tax avoidance.

Promoting Bilateral Advance Pricing Arrangements (APA) and MAP

In order to avoid and eliminate international double taxation, the STA has been actively engaged in APAs and transfer pricing MAP cases. In 2019, it signed 10 bilateral APAs and made 3 transfer pricing corresponding adjustments, resulting in an amount of 3.1 billion RMB relief from international double taxation for multinational enterprises.

Optimizing Tax Policies and Administrative Measures for Non-Residents Taxpayers

The STA rolled out growth-friendly tax policies in order to facilitate the free flow of cross-border capital and factors of production. In 2019, it continued to implement favorable tax policies to support the development of real economy and capital market including temporary exemption of withholding tax on overseas investors’ profits that are directly invested in China and temporary exemption of the Enterprise Income Tax and VAT on interests derived by an overseas institution from bond markets in China. By deepening the reform of “delegating power, streamlining administration, and optimizing government services”, the STA abolished the approval procedure for consolidated tax payment of the establishments and places of non-resident enterprises and allowed certain non-resident enterprises to offset profits and losses among establishments and places. The STA improved the sharing mechanism of cross-border tax information and realized the electronic filing for cross-border payments in order to promote the trade and development of cross-border service. The STA has continued to strengthen the risk management of non-residents with particular types of income and improve the tax service and administration system for cross-border transactions.

Improving Tax Service and Administration for Outbound Investment

In 2019, as part of its efforts to upgrade tax administration and services for outbound investment, the STA refined its measures to facilitate the BRI from a tax perspective. The STA successfully held the First Conference of the Belt and Road Initiative Tax Administration Cooperation Forum (BRITACOF) in Wuzhen, Zhejiang Province, and officially launched the Belt and Road Initiative Tax Administration Cooperation Mechanism (BRITACOM) with the aim to build a growth-friendly tax environment. It established the Belt and Road Initiative Tax Capacity Enhancement Group (BRITACEG) as a training platform in order to help developing countries in building tax administration capacity and elevate their influence on it. It further engaged in MAP cases between competent authorities to help businesses with overseas operations reduce the tax burden and settle tax disputes.

With focused efforts and resources, it published and updated 78 tax guides for investment in countries and jurisdictions, serving as the core of its consultancy service on tax policies. As one of its targeted measures to facilitate enterprises with overseas operations, it updated and issued Tax Guides for Corporations with Overseas Operations (the revised 2019 version) by collecting tax policies for corporations with overseas operations and 110 tax treaties(arrangements and agreements). The STA also established a tax administration system for outbound investment on the basis of risk management so as to improve their compliance.

Advancing Tax Treaty Implementation

It further broadened the network of Double Taxation Agreements (DTAs),
accelerated its pace of the conclusion and revision of DTAs to improve the international tax legal safeguard for outbound investment. In October 2019, the STA successively introduced the Administrative Measures for Non-resident Taxpayers Claiming the Benefits of Double Taxation Agreements which allows non-resident taxpayers to enjoy treaty benefits through collecting and retaining relevant supporting documents for post-filing inspection, significantly simplifies the documents that taxpayers shall fill in and clearly clarifies the responsibilities between non-resident taxpayers and withholding agents so as to bring convenience for non-resident taxpayers to enjoy the benefits of the DTAs.

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