China Tax/Business News Flash

Jul 2015, Issue 31

Localisation of BEPS actions is moving ahead in China


Nearly two years have passed since the 15 action plans were identified by the Organisation for Economic Co-operation and Development (OECD) in the OECD/G20 Base Erosion and Profit Shifting (BEPS) project in July 2013. During this period, the OECD has published a number of reports to provide recommendations in draft on how to implement these action plans in jurisdictions that participated in the project.

While some foreign jurisdictions have already revised their domestic tax laws (or proposals) in order to tackle their respective BEPS issues, the Chinese State Administration of Taxation (SAT) has not publicised any positions and strategies in detail to respond to the BEPS issues. It seems that very few unilateral actions were taken by China so far. However, that is not the truth. In fact, the SAT has been actively participating all along in the OECD’s BEPS action plans development. It has also been studying and working very hard to attempt “localising” the BEPS action plans through revision to a series of domestic tax laws and regulations as well as Sino-foreign tax treaties. We understand that the SAT is keen to promulgate some of them in conjunction with the finalisation of the OECD’s BEPS action plans by the end of 2015.

Among them, the revision (and, to be precise, upgrading) of SAT Circular Guoshuifa 2009 No.2 (Circular 2), a master guide on the Chinese transfer pricing (TP) and anti-tax avoidance rules, is under its way and is attracting most of the attention of taxpayers, tax professionals, and many other stakeholders. The revised Circular 2, together with other new principles and rules to be introduced in the domestic tax laws and tax treaties, is expected to reflect China’s response to the BEPS recommendations and change the cross-border tax landscape of China dramatically.

In this issue of our China Tax News Flash, we will provide our observations as well as comments on the strategy, approaches and timing that the SAT may likely take in its revision (and upgrade) of Circular 2.

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