ey-global-tax-policy-outlook-for-2015

China
2.8 Key tax policy changes in 2014
2.9 Country position on OECD Base Erosion
and Prot Shifting (BEPS) Action Plan
Western Region 21
• In order to balance the economic developments between
the coastal and western areas of China, from 1 January
the western region engaging in encouraged industries as
stipulated in the Western Catalogue, and having 70% of their
total annual income from the encouraged industries, are
• The SAT held a BEPS debrief in Beijing on 25 September
Shanghai Pilot Free Trade Zone
• After being launched in September 2013, the SHFTZ
•
continued to gain traction in 2014. In June 2014, the
revised “negative list” (restricted investment categories) was • Hybrid mismatches (Action 2)
published to provide broader access to foreign investors, for
• Harmful tax practices (Action 5)
all sectors that are not listed as restricted will be fully open
to foreign investment. The list was cut from 190 measures • Treaty abuse (Action 6)
in 2013 to 139 measures in 2014. Meanwhile, cross-border
• Transfer pricing (IP, risk and capital and other high- risk
exchange of intellectual property, such as copyright trading,
transactions) (Actions 8, 9, 10)
will be facilitated after the setup of the state-level copyright
trading center in the SHFTZ in November 2014.
• Country-by-country reporting (Action 13)
VAT pilot program
• Multilateral instruments (Action 15) 25
• China continued with its nationwide VAT pilot program
and expanded the scope of VAT taxable services to cover
services related to railway transportation, postal services and
• BEPS-related
telecommunication services.
•
Resource tax reform on coal
• Harmful tax planning
• Hybrid mismatch transactions
• China changed its resource tax on coal by moving to a
• Treaty abuse
market price-based tax rather than the previous tax based
• Structure and arrangement without substance
on the quantity of coal sold. The tax rate will be decided by
the provincial governments within a range provided by the
Provisional Administrative Measures on GAAR 22
•
•
• Loss of the single function subsidiary
2014. The Provisional Administrative Measures (Circular
•
provide implementation procedures from case discovery to
Please refer to section 2.11 below for details.
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64 | The outlook for global tax policy in 2015
•
Brisbane on 15–16 November 2014. In his keynote address,
he endorsed tackling BEPS and called for enhancing
international cooperation with regard to taxation. 23
•
China supports the BEPS Action Plan. China is actively
participating in the 15 BEPS Action Plan Task Forces.
2014, 24
tax division introduced the seven deliverables of the BEPS
project and China’s responses and concerns. The discussion
covered:
•
and indicated certain unacceptable transactions.
• Unreasonable deductions
•
creation
• Low return on “high-tech” enterprises
•
market
• Transfer of foreign losses to China
• Not cooperative in supplying information
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25 BEPS – SAT debrief in Beijing on 25 September 2014, the State