Song Qinghui, a well-known economist, told the China Trade News reporter that after the implementation of the adjustment of the overseas income tax credit policy, it has brought benefits to the overseas operations of enterprises, reflecting that the problems in taxation in the process of overseas operations of enterprises are gradually eliminated. However, the problem of double taxation still exists, which still brings inconvenience and burden to enterprises, and we urgently need to continuously improve the overseas income tax credit policy to reduce the tax burden cost of Chinese enterprises "going out" even lower.
Avoid repeated tax collection to reduce the burden of enterprises "going out"
China Trade News reporter Zhang Fan
"The overseas income tax credit refers to the method by which an enterprise obtains a tax of the nature of enterprise income tax paid directly or indirectly borne abroad by an enterprise, which can be deducted from the amount of income tax payable in China. This is a method of eliminating international double taxation, which can effectively reduce the tax burden of China's 'going out' enterprises. Liu Baozhu, deputy director of the Income Tax Department of the State Administration of Taxation, said at a press conference on the interpretation of tax policies in the first quarter of 2018 held by the State Administration of Taxation on February 27.
At the end of last year, the Ministry of Finance and the State Administration of Taxation jointly issued the "Notice on Improving the Policy of Credits for Overseas Income Tax Of Enterprises." Its content mainly includes the following two aspects:
First, an enterprise may choose to calculate its taxable income from overseas sources separately by country (region) (i.e., "no sub-itemization by country (region)" or not by country (region) (i.e., "no country (region) without sub-itemization"), and calculate its deductible overseas income tax amount and credit limit respectively according to the tax rate stipulated in Article 8 of Cai Shui [2009] No. 125 document. Once the above method is chosen, it cannot be changed for 5 years. When an enterprise chooses to calculate the amount of tax and credit limit that can be deducted from overseas income tax in a different way than in the previous year (hereinafter referred to as the new method), the balance that has not been credited in the previous year in accordance with the provisions of Cai Shui [2009] No. 125 document may continue to carry forward the credit in the credit limit calculated in the new way within the remaining years specified in the tax law.
Second, when calculating the deductible income tax amount and credit limit of the enterprise's overseas dividend income in accordance with the regulations, foreign enterprises that directly or indirectly hold more than 20% of the shares by the enterprise are limited to the five-tier foreign enterprise determined in accordance with the shareholding method specified in Article 6 of Cai Shui [2009] No. 125 Document, that is, the first layer is the foreign enterprise in which the enterprise directly holds more than 20% of the shares; the second to fifth layer is a single foreign enterprise directly holding more than 20% of the shares. And a foreign enterprise that is directly held by the enterprise or indirectly holds more than 20% of the total shares through one or more foreign enterprises that comply with the shareholding method stipulated in Article 6 of Cai Shui [2009] No. 125 Document.
"This makes the credit of enterprises more sufficient, effectively reduces the overall tax burden of overseas income of enterprises, and better encourages Chinese enterprises to 'go global'." Liu Baozhu said.
"The overseas income tax credit for enterprises is a good thing, which is the state's policy to attract foreign investment and help enterprises to comply with the 'Belt and Road' initiative to better 'go global'." Zhang Mengqi, president and CEO of Hubei Qianyuan Tourism Investment Co., Ltd., told reporters, "However, the biggest problem with such a policy is its operability." Because the policy purpose is often very good, but for enterprises, it is still difficult to operate and apply, which is not only reflected in the internal administrative complexity of the relevant departments in China, but also because the policies of various countries are different and difficult to coordinate, such as the difference between the policies of high-tax countries and low-tax countries. In the future, we will have to face multinational investment, and judging from the current situation, it is still difficult to offset. ”
For the situation reflected by Zhang Mengqi, Huang Suhua, deputy director of the International Taxation Department of the State Administration of Taxation, also has relevant explanations: the Ministry of Finance, the State Administration of Taxation, the Development and Reform Commission, and the Ministry of Commerce jointly issued documents to make specific provisions on the conditions for foreign investors not to levy withholding income tax, the procedures and responsibilities for enjoying preferential treatment, follow-up management, and departmental coordination mechanisms.
At the same time, in order to better adapt to the changes in the situation and the new situation encountered by enterprises, the State Administration of Taxation has issued the Announcement on Issues Related to the "Beneficial Owners" in tax treaties and the Announcement on Several Issues Concerning the Implementation of the Tax Treaties, further improving the "beneficial owners" rule, and further clarifying the relevant matters such as permanent establishments, maritime and air transport, entertainers and athletes clauses in the tax treaties, and the application of tax treaties to partnership enterprises, so as to facilitate taxpayers to enjoy the treatment of tax treaties. Original title: Avoid repeated tax collection for enterprises to "go out" to reduce the burden