It's been a busy year for China's tax system, and more is still to come.
The seventh edition of KPMG's China – Looking Ahead guide shows that all parts of the tax systems in mainland China, Hong Kong and Taiwan are being transformed to align with the OECD's BEPS project. For example, Announcement 6, released in March 2017, completed the package of rules to overhaul the transfer pricing regime and align it with the BEPS Action Plan, albeit with a local flavour.
But China has not limited itself to changes exclusively relating to BEPS. Beyond BEPS, changes are taking place in the individual income tax regime, the availability of research and development incentives, and the opening up of the Chinese economy to foreign investment and talent through a range of measures. Moreover, recent enhancements and further planned changes to the Golden Tax III System are making this system truly golden.
The Belt and Road Initiative is another key driver for many of the changes taking place. Not only are opportunities opening up for Chinese enterprises, but they are being given government support to take the leap of trading abroad. Further, China's commitment to the multilateral instrument (MLI) and the subsequent tax treaty changes mean the opportunities for businesses to expand, both outbound and inbound, are growing.
At the same time, China is beginning to take advantage of digital tools and collaborative global efforts against tax fraud, as well as introducing incentives to stimulate investment and trade. More advancements are planned for 2018 that could help set the global standard for the efficient use of technology, as well as minimise tax leakage in line with President Xi Jinping's vision for a "fully modernised socialist state by 2035".
The 2017 Year of the Red Fire Rooster has seen China make meaningful advancements to its tax system. Given the rapid pace of developments, the coming Year of the Dog is likely to see the government build on the groundwork laid so far and take action on some key tax measures. We hope that the seventh edition of KPMG's China – Looking Ahead will be a valuable tool in guiding you through the changes.
Editor
International Tax Review