Research On Provisions On Passive Income In Tax Treaties Between China And Countries Along The Belt And Road

The "Belt and Road" initiative has been proposed for more than five years.As economic and trade relations between countries along the line become increasingly close and capital flows become more frequent,the impact of cross-border taxation on investors is increasingly apparent.In this context,cross-border tax coordination is indispensable.Bilateral tax treaties are the most important way of international tax coordination,which have important functions such as eliminating double taxation,distributing tax rights,preventing tax evasion,and promoting foreign direct investment.At present,China has signed tax treaties with 54 of the 64 countries along the line.The existence of a tax treaty can provide tax certainty for enterprises which invest in foreign countries on the one hand,and reduce the tax burden in the host country on the other hand.Because China is mostly a net exporter of capital to countries along the line,tax coordination on investment income is more important.Since the agreement with the countries along the line was signed in the 1980s and 1990s when China was still in the early stage of ’reform and opening-up’and was a net importer of capital.Therefore,the negotiations were based on the position of the capital importing country.Nowadays,under the background of the "Belt and Road" and the global tax reduction,the passive income terms in the existing agreements and their related provisions are outdated.Through the research,this paper finds that there are the following mismatches:First,the position of the capital importing country does not match the status of the net exporting country;secondly,the withholding tax rate for passive income is too high,the method of restricting the tax rate is unclear;and the third,there are too few subjects with interest tax exemption;the fourth is that the tax exemption&deduction system is not perfect;the fifth is the lack of anti-abuse regulation on passive income;and the sixth is that the dispute resolution mechanism is imperfect.On this basis,combining with the development trend of passive income and related provisions in the agreement signed by China and the relevant trends of international taxation,this paper proposes amendments to the passive income and related provisions are proposed,and proposes the idea of strengthening tax coordination among countries along the "Belt and Road" in the future.