The Economic Substance Doctrine and China’s Power to Tax Income from Indirect Equity Transfers by Non-Resident Enterprises
0
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
The indirect transfer of equity in a Chinese resident corporation by a foreign investor that is a non-resident enterprise through transferring shares in an intermediate holding company is a common technique used in cross-border capital flows. According to the Corporate Income Tax Law of China, the place where a company is located (i.e., registered) determines the location of transfers of equity in that company and which country has the power to tax that transfer, which also gives rise to the problem of the legal scope of this taxing power. The State Administration of Taxation has issued relevant documents to establish the economic substance doctrine, adopting a “look-through approach” to negate the existence of an intermediate holding company and accordingly claim jurisdiction to tax in order to deal with the growing problem of base erosion and profit shifting. The taxing power on indirect transfers does not apply, however, to a transfer which has reasonable commercial purposes or meets the special provisions in tax treaties. China should develop rules through legislation to clarify the specific circumstances relating to such “reasonable commercial purposes”, to provide specific exemption from tax for cross-border internal restructuring-related indirect equity transfers, to introduce an advance ruling system, and to perfect the mechanisms for monitoring revenue sources.
Abstract
The indirect transfer of equity in a Chinese resident corporation by a foreign investor that is a non-resident enterprise through transferring shares in an intermediate holding company is a common technique used in cross-border capital flows. According to the Corporate Income Tax Law of China, the place where a company is located (i.e., registered) determines the location of transfers of equity in that company and which country has the power to tax that transfer, which also gives rise to the problem of the legal scope of this taxing power. The State Administration of Taxation has issued relevant documents to establish the economic substance doctrine, adopting a “look-through approach” to negate the existence of an intermediate holding company and accordingly claim jurisdiction to tax in order to deal with the growing problem of base erosion and profit shifting. The taxing power on indirect transfers does not apply, however, to a transfer which has reasonable commercial purposes or meets the special provisions in tax treaties. China should develop rules through legislation to clarify the specific circumstances relating to such “reasonable commercial purposes”, to provide specific exemption from tax for cross-border internal restructuring-related indirect equity transfers, to introduce an advance ruling system, and to perfect the mechanisms for monitoring revenue sources.
참고문헌 (16)
- Fu Shulin, "Considerations Regarding Taxation on Foreign Investor Indirectly Transferring Equity of Chinese Resident Enterprise", International Taxation, 9, pp.16~ (2013)
- Guo Weizhen, "Taxation Regulations on Non-residents Enterprises’ Indirect Transfer of Equity", International Taxation, 9, pp.65~ (2013)
- Li Songxi, "International Practice on Taxing the Non-Resident Enterprise which Indirectly Transfers the Equity of a Resident Enterprise", International Taxation, 9, pp.26~ (2013)
- Liu Lei, "Researches on Advance Ruling", Tax Research, 42, pp.9~ (2012)
- Wu Zhenyu, "The Analysis of Reasonable Commercial Purposes", International Taxation, 24, pp.9~ (2013)
- Yang Shulian, "Analysis on the Largest Single Income Tax Case of the Indirect Equity Transfer of Non-resident", International Taxation, 3, pp.31~ (2013)
- Yin Yinpin, "Research on Indirect Equity Transfers by Non-Resident Enterprises", China Journal of International Taxation, 7, pp.65~ (2012)
- Zhou Qiguang, "The Income Tax Treatment of Indirect Transfers of Shares in the PRC Companies from the Perspective of Vodafone Case", International Taxation in China, 7, pp.58~ (2012)
- Victor Thuronyi, "Comparative Tax Law" (2003)
- Zhang Wenxian, "Jurisprudence" (2003)
- "Decree of the State Council of the People’s Republic of China No. 512", ~ (2008)
- "Guoshuihan No. 698", ~ (2009)
- "OECD Model Tax Convention on Income and on Capital", ~ (2010)
- "Action Plan on Base Erosion and Profit Shifting" (2013)[URL]
- "United Nations Model Double Taxation Convention between Developed and Developing Countries", ~ (2011)
- "Vodafone International Holdings B.V. v. Union of India & Anr (Civil Appeal No. 733 of 2012), para. 71", ~