New rules from China’s tax regulator signal that the country is actively participating in the global battle against tax avoidance and evasion, and Chinese companies with offshore VIEs (variable interest entities) are the main targets of the authorities.
On 18 March, the State Administration of Taxation of China (SAT) published the SAT Announcement No. 16 on Enterprise Income Tax Issues concerning Payments by Enterprises to their Offshore Affiliates.
The decreasing tolerance of the international community towards tax avoidance in any jurisdiction forms the backdrop of this announcement.
“The G20 has requested the Organisation for Economic Co-operation and Development [OECD] to work on the Action Plan on Base Erosion and Profit Shifting [BEPS], which aims to form joint international efforts against transfer pricing and other tax-avoiding activities by multinationals,” Zhang Jida, a Beijing-based partner at DaHui Lawyers, told China Business Law Journal.
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