SAT Issues 40 Kinds of Country-specific Tax Guide to Help Enterprises Participate in the Belt and Road Initiative

Issuance Date: April 28, 2017     Source: General Office of the State Administration of Taxation

On April 28, the State Administration of Taxation (SAT) held a press conference on Tax Guide on Country-specific Investments (hereinafter referred to as Tax Guide) at the 12366 Shanghai (International) Taxpayer Service Center and issued 40 kinds of Tax Guide to help enterprises going global to understand the tax policies of host countries, guard against tax risks and facilitate healthy development of these enterprises. The SAT has released 59 kinds of Tax Guide, which cover the countries or regions along the Belt and Road as well as other overseas investment destinations.

Alongside the deepening of China's reform and opening up, especially the Belt and Road Initiative, Chinese enterprises have picked up their pace to go global and expand overseas markets such as through investments and M&As. Data from the Ministry of Commerce show that China's ODI continued to expand in 2016, including non-financial ODI in 7961 overseas enterprises from 164 countries and regions, which totaled USD 170.11 billion, up by 44.1% year on year. Its foreign trade volume with the countries along the Belt and Road amounted to RMB 6.3 trillion, and its non-financial ODI in 59 countries along the Belt and Road hit USD 14.53 billion.

According to Liao Tizhong, director of the International Tax Department of the SAT, the SAT began to explore collecting the country-specific tax information in 2013, and established the mechanism for country-specific tax information study in 2015. The 40 kinds of Tax Guide released this time give a detailed introduction to overall business climate, main types of taxes, tax collection system and bilateral tax treaties, agreements or arrangements in overseas investment destinations. With the Tax Guide, enterprises going global can quickly familiarize themselves with the basic tax information in overseas investment destinations, making it much easier for them to collect tax information in investment destinations. The Tax Guide can help enterprises reduce tax compliance costs and also will be favorable for enterprises to guard against tax risks and enhance their confidence and courage in going global.

"The Tax Guide provides detailed information on taxes in host countries, allowing enterprises to guard against tax risks arising from outbound investments and feel more confident in going global." According to enterprise representatives participating in the press conference, they felt at a loss as to what to do for lack of the tax information in host countries. This is also why they failed to reasonably judge and effectively guard against tax risks associated with cross-border operations.

How could the enterprises going global make good use of the Tax Guide? According to Liao Tizhong, three aspects should be ensured: first, enterprises should get familiar with the basic tax information such as tax system of the investment destinations from the Tax Guide before going global. Second, enterprises going global shall develop a thorough understanding of the concerns of tax authorities in the host countries, and become familiar with the bilateral tax treaties and tax dispute resolution mechanism, so as to mitigate the potential major tax risks facing the investment destinations. Third, enterprises shall pay continued attention to the updates of the Tax Guide, and dynamically understand the changes in tax policies of host countries to enhance tax compliance in overseas operations.

In addition to publishing the Tax Guide, tax authorities have adopted many measures in recent years to facilitate enterprises going global and better serve the Belt and Road Initiative. In April 2015, the SAT introduced 10 tax measures in support of the building of the Belt and Road, in terms of "negotiating and signing tax treaties to safeguard rights and interests, enhancing the level of services to promote development, and strengthening cooperation for mutual benefits, to refine supporting policies and implementation programs. As at the end of 2016, China's tax treaty network had covered 106 countries and regions, making China the world's top-three by the number of treaties negotiated and signed. China also has established the bilateral tax cooperation mechanism with 116 countries and regions including the absolute majority of those along the Belt and Road, in a bid to eliminate international double taxation for both domestic and overseas taxpayers using the bilateral negotiation mechanism. In 2014-2016 alone, China conducted 181 bilateral negotiations and eliminated double taxation of RMB 13.18 billion for cross-border taxpayers.

As the Belt and Road Initiative is deepened, the SAT will step up efforts to collect, analyze and study tax information to expand the coverage of the Tax Guide; dynamically update the Tax Guide to ensure the timeliness of relevant tax information; and expand the contents of the Tax Guide to make it more practical and operable in the next step.