Forging Ahead: 2017 China tax policy review and 2018 outlook

Mar 2018

The China Tax Policy Review and Outlook is a series of annual publications designed by PwC’s China National Tax Policy Services to review key tax policy developments in China and discuss the trends from a forward-looking perspective. This 2017 China Tax Policy Review and 2018 Outlook is the third issue in the series.

2017 ended with stable economic development in China.  Further fiscal and taxation reforms were also written into the 13th Five-Year Plan. China’s Ministry of Finance (MOF), State Administration of Taxation (SAT) and other ministries released a series of tax policies to support the country’s progressive and steady economic growth and promote its innovation-driven development strategy. The reforms are also meant to help taxpayers, explores the tax administration and service for large businesses so as to progressively formulate a well-functioned administrative system in China.  Globally, China played a crucial role in the reform of the international tax administration as well, proactively localising the recommendations of the Base Erosion and Profit Shifting (BEPS) Action Plan.

Some highlights from the 2017 China Tax Policy Review and 2018 Outlook:

  • Promulgation of preferential policies for venture capital enterprises and angel investors, rolling out of tax incentives for Technology Advanced Service Enterprises nationwide, issuance of the Assessment Measures for Small and Medium Sized Technological Enterprises to facilitate “start-up and innovation”.
       
  • A post-B2V era including simplifying VAT rates, improving VAT policies and optimising tax collection and administration.
       
  • More favourable business environment to further open up to foreign investments: a streamlined negative list, tax deferral treatment for foreign investors’ reinvestment, refined withholding tax policies for non-tax resident enterprises.
       
  • The Country-by-Country Tax Guidance on Investments, Tax Guidelines for “Going Abroad”, the “Consolidated Credit Approach” for foreign tax credit to support Chinese enterprises to go farther along the “Belt and Road”.
       
  • A new landscape of tax administration: the new era of the Thousand Groups Project, more equitable and transparent channels for tax disputes resolution, the issuance of new measures for special tax investigation adjustments, the implementation of domestic Common Reporting Standards and signing of the Multilateral Convention.
        
  • Key words on the outlook for 2018 - adjusting consumption tax, individual income tax reform,  legislation of property tax, relieving the tax burden of small-and-medium sized enterprises, optimising VAT tax rate brackets, optimising business environment and exploring the advance ruling mechanism.

Looking at 2018, we believe that China will continue to release some eye-catching tax policies to maintain the economy’s medium-to-high growth, fulfil the State’s innovation-driven development strategy and other objectives under the 13th Five-Year Plan. On 5 March 2018, Premier of the State Council, Li Keqiang, delivered the Report on the Work of the Government at the first session of the 13th National People’s Congress. The Report clarified China’s fiscal and taxation tasks for the new year. It stresses that China will further reduce the taxes and non-tax burden of enterprises and individuals by over RMB800 billion and RMB300 billion respectively. At the same time, the National People’s Congress intends to fully implement the statutory taxation principle by 2020, and replace all the current tax regulations with law. In that respect, the Chinese fiscal and tax authorities need to speed that up in 2018. On top of the domestic agenda, China also needs to face global challenges, including the uncertainties of the US tax reform.

Contact us

Peter Ng

China and Hong Kong Tax Leader, PwC China

Tel: +[86] (21) 2323 1828

Edwin Wong

Lead Partner, China Outbound Investment Service; China North Tax Leader, PwC China

Tel: +[86] (10) 6533 2100

Alan Yam

China Central Tax Leader, PwC China

Tel: +[86] (21) 2323 2518

Charles Lee

China South and Hong Kong Tax Leader, PwC China

Tel: +[86] (755) 8261 8899

Jeremy Ngai

China South Tax Leader, PwC Hong Kong

Tel: +[852] 2289 5616

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