China announced her stance on BEPS and her localisation plans
On 5 October 2015, the Organisation for Economic Co-operation and Development (OECD) released the final reports on all of the 15 action points of the Base Erosion and Profit Shifting (BEPS) Action Plan (the BEPS Package). Soon after that, all the G20 finance ministers endorsed the BEPS Package in Lima, Peru on 8 October.
With an amazingly response time, China’s State Administration of Taxation (SAT) held a propaganda conference in Beijing on 10 October 2015 to present its stance on the BEPS Package and future action plans to localise the recommendations on an as-needed basis. At the same time, the SAT also published the Chinese translation of all of the BEPS reports on its official website.
We anticipate that the BEPS Package will bring along significant changes, over a reasonable time span, in China’s transfer pricing (TP) standards, tax treaties, many parts of her domestic tax laws and regulations, and even Chinese tax authorities’ behaviours, with an aim to counter tax avoidance as well as reinforcing her taxing rights to get a fairer share of MNC’s taxation.
Multinational companies (MNCs), be they foreign-based doing business in China or Chinese-based doing business overseas, need to get ready for the challenge of new requirements on transparency and substance-tax alignment. They are suggested to assess the impact of the BEPS recommendations and SAT’s action plans on their business and tax strategies as soon as possible in light of the BEPS Package and the BEPS-driven changes of China’s tax laws and regulations.
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