China’s legislative body ratifies the multilateral convention on tax matters
On 1 July 2015, the National People’s Congress Standing Committee (the “NPC Standing Committee”) ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention”), which was designed to strengthen international co-operation on tax administration worldwide. After ratification, it will not take long before the Convention becomes effective in China. The Convention will extend the scope of exchange of information (EoI) between China and other Contracting States. Apart from income taxes, other taxes will also be covered in the EoI network. Nevertheless, since China has reservations on a number of articles, some forms of administrative assistance like assistance in recovery, measures of conservancy and service of documents stated in the Convention will not apply between China and other Contracting States.
For Multinational corporations (MNCs), strengthened international co-operation on tax administration means that their cross-border transaction information will be available to tax authorities in the jurisdictions that their businesses are involved. As such, it becomes increasingly important for MNCs to improve tax compliance in their cross-border transactions.
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