《国际税务评论》——《中国的展望》（第五版）

China Looking Ahead - 5th Edition

Foreword

The Year of the Sheep, drawing to a close, has been marked by significant economic and fiscal developments in China. In 2014, China surpassed the United States as the world's largest economy in terms of purchasing power parity. It also became the world's largest recipient of foreign direct investment (FDI). Remarkably, while China remains the leading recipient of FDI, Chinese outbound direct investment (ODI) is projected to overtake FDI for the entire year of 2015, making China a net exporter of capital. Projections suggest that China will overtake the United States in terms of ODI within a few years, solidifying its position as the world's premier source of ODI.

China's increasing centrality in the global economic order is evident as the country shifts its economic focus from investments, exports, and heavy industries to a more consumption-driven model. This transformation underscores China's growing importance on the global stage.

Key Areas of Focus

1. Global BEPS Implementation

   • China's Role: China is positioned as a leader in implementing the G20/OECD Base Erosion and Profit Shifting (BEPS) proposals, particularly as it assumes the presidency of the G20 in 2016.
   • Recent Regulations: Recent and upcoming regulations and guidance are aligning Chinese tax laws and practices with global BEPS standards.

2. Transfer Pricing Guidelines

   • New Guidelines: The SAT's public discussion draft on 'Special Tax Adjustments' is set to significantly change transfer pricing guidance, with the draft yet to be finalized.
   • Impact: These changes are expected to impact evolving Chinese transfer pricing enforcement practices.

3. M&A Tax in China

   • Enhancements: 2015 saw enhancements to China's restructuring tax relief rules, the introduction of challenging new indirect offshore disposal rules, and developments in financial instrument tax classification.
   • Revised Procedures: The revamped tax treaty relief procedures are also key areas of focus.

4. FATCA and CRS

   • Progress: The progress and challenges in rolling out FATCA and CRS technology and platforms in Hong Kong and Chinese financial institutions are highlighted.
   • Implications: This includes the ongoing efforts to improve fiscal disclosure and compliance.

5. Tax Risk Management

   • Changing Environment: The changing Chinese tax administrative environment and the shifting responsibility to taxpayers are key considerations.
   • Increased Scrutiny: Greater tax authority scrutiny is also a notable aspect.

6. Indirect Taxes in China

   • Future Expansion: Potential expansion of the VAT base, modernization of rules and systems to better capture cross-border dealings in intangibles and services, and the deployment of big data analytics by tax authorities are discussed.
   • Key Themes: These themes are explored in detail in the chapter.

7. Income Tax Law Enforcement

   • Enhanced Enforcement: Drivers and nature of increased income tax enforcement efforts by the Chinese tax authorities are considered.
   • Key Factors: These include changes in the administrative environment and increased taxpayer responsibility.

8. R&D Incentives

   • Super Deduction Policy Trends: Global R&D super deduction policy trends and their potential application in China are reviewed.
   • Economic Growth: The paper sets the scene for innovation and inclusive economic growth, followed by a comparison of China's R&D incentives with those of other jurisdictions.

9. Customs Opportunities and Risks

   • E-commerce: Changing customs duty implications for e-commerce enterprises, the impact of new free trade zones, and China's expanding network of free trade agreements are discussed.
   • Emerging Trends: The chapter highlights new customs opportunities and risks.

10. Hong Kong and Taiwan

    • Hong Kong: Enhanced tax exemptions for offshore private equity funds, improvements in intellectual property and treasury center incentives, expansion of Hong Kong's tax treaty network, and automatic exchanges of information are the focus.
    • Taiwan: The chapter discusses Taiwan's attractiveness as an investment location and the benefits of the new Cross-straits Agreement between Taiwan and the People's Republic of China.

Conclusion

China's tax system continues to evolve rapidly, driven by both domestic and international factors. The fifth edition of KPMG's China – Looking Ahead guide provides valuable insights into these changes, offering a comprehensive overview of key areas such as transfer pricing, M&A tax, FATCA and CRS, and R&D incentives. As China becomes increasingly central to the global economic order, monitoring these changes is crucial for businesses operating in or with China.