In May 2011, Qinhuangdao tax authorities investigated a foreign-investment enterprise during the enterprise’s cancellation, and pursued large amount of recessive re-investment refund tax. The case drew tax authorities’ attention for Foreign Exchange Administration’s confirmation request.
The Foreign Exchange Administration sent a confirmation request to the tax authorities, and enquired if a foreign-investment enterprise needs to pay tax based on the balance between the book balance funds after cancellation and the registered capital. The tax authoritiesthought that it might include non-resident income, then investigated the enterprise’s tax declaration information over the years, and confirmed that the enterprise should withhold the withholding income tax.
After that, tax authorities discovered that the enterprise’s investment capital is another foreign-investment enterprise’s after-tax profit through different ground investigations, and had conducted tax refund. Due to the enterprise’s operating period less than 5 years, tax authorities decided to pursue the refunded tax.
In this case, the Foreign Exchange Administration’s assistance brought opportunity, and the cooperation among tax authorities was the key point. The Foreign Exchange Administration grasped foreign investments’ exit passageway, which is the key factor to protect the state’s economic profits. Besides, tax authorities need to enhance the cooperation with commerce departments, local tax authorities, and other relevant authorities, to set effective information share mechanism and investigation mechanism. Currently, tax authorities in different places have formed investigation mechanism in value-added invoice investigations and anti-tax avoidance investigations, and obtained perfect effect. In the future, this kind of cooperation will be applied in more and more fields.
On 19th August, Lecture of Tax Management for Elite Class was held at Intercontinental Hotel of Yuzhong, Chongqing by Private Bank, Agriculture Bank of China, Chongqing Branch. Liu Tianyong, senior partner of Hwuason Law Firm has been invited to the activity as speech guest, and around 120 VIP clients of ABC have been invited to the lecture. Liu has given detailed explanation with actual cases from aspects of tax preference, tax risk management, tax plan, and tax dispute resolution and so on.
Source: Global Times [04:39 April 19 2011]
By Fang Yunyu
The government will generate more revenue by strengthening taxation management on high-income earners and covering loopholes in the existing system, the State Administration of Taxation announced Sunday.
High-income earning expatriates working in China, middle and senior management staff involved in industries such as real estate, securities and private-equity funds, as well as film and music industry professionals and celebrities who generate income from advertisements and performances, are all on the key list of tax collection tightening practices, according to the taxation authority.
The announcement came as China’s Standing Committee of the National People’s Congress prepares for official meetings later this week to review the draft amendment on the personal income tax law.
With inflation at stubbornly high levels, expectations are that the starting level to be taxed on personal income may be raised from 2,000 yuan ($306) to 3,000 yuan per month.
“Enhancing taxation supervision on high-income earners and raising the cut-off point are actually two sides of a coin, which all aim to realize fair taxation,” said Liu Tianyong, a partner at Beijing-based Hwuason Law Firm, which specializes in taxation law. Liu is also a guest professor at Beijing’s Central University of Finance and Economics’ school of taxation.
Liu said supervising the personal income data of all residents, which involve huge numbers of people that are scattered across a vast geographic area, may prove difficult for tax authorities.
“And our current income taxation system is in need of (a broader range) of different tax rates,” he said.
He cited as an example that the current guidelines impose the same tax rates on a person that makes 8,000 yuan in monthly income as they do a resident that makes 20,000 yuan per month.
The Ministry of Finance announced back in February that China’s total tax revenue grew by 23 percent over 2009 figures to 7.32 trillion yuan ($1.17 trillion). While personal income tax revenue rose by 22.5 percent to 483.7 billion yuan, accounting for 6.6 percent of total tax revenues.
According to the 2009 “tax misery index” released by Forbes magazine, China ranked second in “imposing the harshest taxes,” right behind France. But when it comes to corresponding social benefits, China still has a long way to go, compared to the West.