Study On Tax Allowances For Financial Derivatives

This dissertation is completed under the guidance of Doctor Li Yin Zhu. I have worked in banking field for many years and obtained some knowledge on the operations of monetary markets. Therefore, I chose the study on tax allowances for financial derivatives. Monetary business is the leading industry and core of the economy. China has opened monetary market and retail banking business to domestic and foreign banks for fair competition. This dissertation aims to explore suitable tax allowances policies to support monetary market development.The study methods included collection of financial derivatives reference books, news and comments from tax experts, relevant laws and regulations, etc. By consolidating the transactions properties, functions, risks and development trend in conducting analysis and study. In addition, the USA and International Accounting Standards, taxation principles and collection treatment of other countries are referenced. This was concluded to apply fair value and mark-to-market approach in recognition of profit and loss on those derivatives deals. This was recommended to adopt combined or separated tax-assessment principles and lower tax rate for hedging-instrument contracts, while applying moderate treatment for speculative transactions to avoid locked-in effect in market development.There are many types of financial derivatives for risk management, while the fictitous and variable properties may be used in tax avoidance. This dissertation has solicited opinions from tax experts that to establish comprehensive taxation system for increasing investigation efficiency and tax collection data-base management centre. The new profits tax law implemented in January 2008, by which the unified tax rate for domestic and foreign enterprises was achieved. China government expressed further expansion of the monetary market. In coming years, there will be suitable tax categories and rates established for proper operations of the monetary market that enhancing China to become one of the active financial centres. The dissertation to study tax allowances for financial derivatives would be a starting. Hoping to have full range study on the monetary market taxation.