August 30, 2014 Draft Guidance on the General Anti-Avoidance Rules Released for Public Comments Since January 1, 2008, China has introduced the general anti-avoidance rules ( GAAR ) as a part of the new enterprise income tax regime. In 2009, the State Administration of Taxation ( SAT ) promulgated Guoshuifa [2009] No.2 ( Circular 2 ) covering a variety of tax avoidance arrangements and directing the local tax authorities to use the substance over form principle to tackle them. Later in the same year, the SAT released the Guoshuihan [2009] No. 601 and Guoshuihan [2009] No. 698 ( Circular 698 ) to address beneficiary ownership and indirect equity transfer respectively. Despite the wide application of the GAAR, the underlying procedural mechanism has been missing for so long. On July 3, 2014, the SAT released draft guidance on the GAAR ( Draft Guidance ) for public comments. The Draft Guidance is seeking to prescribe a practical clarity for identification and investigation of tax avoidance. The public comment period closed on August 1, 2014. Applicable Scope Under the Draft Guidance, the major characteristics of a tax avoidance arrangement are as follows: Its sole or primary purpose is to obtain tax benefits, such as tax reduction, tax elimination, and tax deferral; and It is technically compliant with tax laws but inconsistent with economic substance. To take on tax avoidance arrangements, the Draft Guidance lays out some well-known legal principles, including reasonable commercial purpose, economic substance, and substance over form. Unfortunately, no effort is made to elaborate the details of these principles. Nor any administrative case or example is offered to dispel the vagueness of these principles. The Draft Guidance authorizes the Chinese tax authorities to conduct several adjustment measures, including the following: 1
To re-characterize the whole or part of the transaction; To disregard the existence of a party to the transaction, or treat multiple parties to the transaction as one single entity; To re-characterize the income, deductions, tax incentives, and foreign tax credits, or reallocate these tax attributes between the parties; and Other reasonable measures. While the Draft Guidance is generally designed to target tax avoidance arrangements lack of reasonable commercial purpose, it will not apply to the following scenarios: (i) arrangements between Chinese resident enterprises not involved in cross-border transactions or payments; (ii) outright tax-related violations such as tax evasion, tax delinquency, tax cheating, or tax violence; and (iii) indirect equity transfer as referred to by Circular 698. In addition, the Draft Guidance is supposedly applied in deference to (i) Circular 2 with respect to transfer pricing, cost sharing arrangement, controlled foreign corporation, and thin capitalization and to (ii) applicable double taxation agreements as to beneficiary ownership and limitation of benefits. Procedural Mechanism The Draft Guidance seeks to provide broad authority to the Chinese tax authorities, particularly the SAT, in launching and concluding an investigation of tax avoidance arrangements. The local tax authorities must receive approval from the SAT on such investigation from the beginning to the very end. While such practice has been longstanding since the emergence of the GAAR, the Draft Guidance apparently plans to make it official. The local tax authorities are authorized to identify taxpayers in suspect transactions and request a sea of information, including the following: Background materials; Materials on commercial purpose; Internal decision-making and management materials of taxpayers, such as board resolutions, memorandums, and emails; Detailed transaction documents, such as contracts, side agreements, and payment receipts; Communications between taxpayers and tax advisors; Communications between all parties to the transactions; Documents to disprove tax avoidance by taxpayers; 2
Other materials as requested by the Chinese tax authorities. To the extent that taxpayers do not cooperate, the penalty is quite modest and no more than RMB 50,000 in any case. The Chinese tax authorities can directly make tax assessment, absent taxpayers cooperation. It is unclear whether such tax assessment can be expanded to include late payment interest or underpayment penalty. Under the Draft Guidance, the in-charge tax authorities are also empowered to require taxpayer s affiliates, counterparties, and tax advisors to submit relevant documents. From a tax enforcement standpoint, however, the Chinese tax authorities cannot officially inflict any meaningful pains on these persons in connection with non-cooperation. Our Observations If adopted, the Draft Guidance will streamline the administrative process and improve the interactions between taxpayers and the Chinese tax authorities. Despite so, however, the Draft Guidance probably will have to endure substantial revisions. First, the power of information request is overly broad, while the enforcement mechanism is clearly not there. As a result, taxpayers and their affiliates, counterparties, and tax advisors have every incentive not to cooperate with any investigation at light or no costs. Second, the SAT seems to micro-manage the enforcement of the GAAR in the current version. Although such micro-management will bring about competency, uniformity, and consistency, it could also potentially lead to lengthy administrative delay and render the administrative review meaningless. Ultimately, the SAT must balance the interests of both taxpayers and the Chinese tax authorities to make the enforcement process really work. For more information, please contact Hao Jiang at hao_jiang@broadbright.com, or Yanli Yang at yanli_yang@broadbright.com. Hao Jiang is a partner and Yanli Yang an associate, at Broad & Bright. 3
2014 年 8 月 30 日 一般反避税管理规程草案发布征求公众意见 自 2008 年 1 月 1 日起, 作为新实施的企业所得税制度的一部分, 中国引入了一般反避税规则 2009 年, 国家税务总局 ( 国税总局 ) 发布了国税发 2009 2 号文 ( 2 号文 ), 针对形式多样的避税安排, 指导地方税务机关采用 实质重于形式 的原则进行应对 就在同一年, 国税总局随后又发布了国税函 2009 601 号文和国税函 2009 698 号文 ( 698 号文 ) 用以分别解决受益所有人和间接股权转让问题 尽管一般反避税规则适用范围广泛, 但其所依据的程序机制却长期缺位 2014 年 7 月 3 日, 国税总局发布了一般反避税管理规程草案 ( 规程草案 ), 向社会公开征求意见 规程草案试图对避税的确定和调查作出清晰且具有可操作性的规定 公众意见反馈截止时间为 2014 年 8 月 1 日 适用范围 根据规程草案, 避税安排的主要特征如下 : 其唯一或主要目的是为了获取税收利益, 如减少 免除或推迟缴纳税款 ; 及 形式上符合税法规定, 但与其经济实质不符 为处理避税安排问题, 规程草案列出了数项众所周知的法律原则, 包括合理商业目的 经济实质和实质重于形式的原则 遗憾的是, 规程草案并未具体规定上述原则的细节, 也未提供任何行政案例或示例来厘清上述原则的模糊之处 规程草案授权中国税务机关采取多种调整方法, 包括 : 对交易的全部或部分重新定性 ; 否定交易方的存在, 或者将多个交易方视为同一实体 ; 对相关所得 扣除 税收优惠 境外税收抵免等重新定性或在交易各方间重新分配 ; 及 其他合理方法 尽管规程草案旨在一般性地针对缺乏合理商业目的的避税安排, 但其不适用于下述情形 :(i) 与跨境交易或支付无关的居民企业之间的安排 ;(ii) 纯粹的税收违法行为, 如逃避缴纳税款 逃避追缴欠税 骗税或抗税 ; 以及 (iii) 698 号文中所提到的间接股权转让 此外, 在适用规程草案时还应当 (i) 在转让定价 成本分摊协议 受控外国公 4
司和资本弱化上优先适用 2 号文, 以及 (ii) 在受益所有人和利益限制问题上优先适用中国签订的避免双重征税协定 程序机制 规程草案试图在避税安排调查的立案和结案上, 赋予中国税务机关 ( 尤其是国税总局 ) 广泛的权力 对于该类调查, 地方税务机关从开始到结束都应当获得国税总局的批准 尽管该等操作从一般反避税规则出现以来就长期存在, 规程草案显然想将之法定化 地方税务机关有权确定存在避税嫌疑的纳税企业, 并要求提供海量信息, 包括以下内容 : 交易背景资料 ; 商业目的的说明文件 ; 纳税企业的内部决策和管理资料, 如董事会决议 备忘录和电子邮件 ; 详细交易资料, 如合同 补充协议 收付款凭证 ; 纳税企业与税务顾问的沟通信息 ; 各交易方的沟通信息 ; 可以证明不属于避税安排的其他资料 ; 中国税务机关要求的其他资料 然而, 规程草案针对纳税企业不配合的惩罚比较轻微, 任何情况下都不会超过人民币五万元 不过, 中国税务机关在纳税企业不配合的情况下可以直接核定税额 对于是否能将该等税额核定扩大到包括滞纳金或罚息, 尚不清楚 根据规程草案, 主管税务机关还有权要求纳税企业的关联方 交易对方和税务顾问提交相关资料 但是, 从税务执行实践角度看, 中国税务机关无法对这些关联方 交易对方和税务顾问的不配合行为正式施加任何有意义的处罚 我们的观察 规程草案如果获得通过, 将统一规范行政程序, 提高纳税企业和中国税务机关之间的互动 但是, 尽管如此, 规程草案可能仍然需要进行实质性修改 首先, 中国税务机关要求提供信息的权力过于宽泛, 却明显缺乏执行机制 因此, 纳税企业及其关联方 交易对方 税务顾问很有可能不配合任何调查, 而只需负担轻微成本甚至零成本 其次, 在目前的版本中, 国税总局似乎在微观管理一般反避税规则的执行 尽管该等微观管理可以带来更高水平的执法能力, 程序上的统一性和结果的一致性, 但也可能导致冗长的管理延迟, 并且使得后续的行政复议丧失意义 无论如何, 国税总局必须平衡纳税企业和中国税务机关双方的利益, 才能促使执行程序真正发挥作用 5
如需要更多信息, 请联系姜浩 (hao_jiang@broadbright.com ) 或杨燕丽 (yanli_yang@broadbright.com) 姜浩和杨燕丽分别是世泽律师事务所的合伙人和律师 6