Post-BEPS Era On China's Controlled Foreign Company Rules

With the implementation of the “One Belt and One Road” strategy,the pace of “going global” by Chinese enterprises has been accelerating,and the flow of foreign investment has increased rapidly.China has suddenly become a capital exporting country.At the same time,China's resident taxpayers use controlled foreign companies established in regions with significantly low tax burdens to transfer their gains to overseas subsidiaries for tax avoidance.For this reason,in view of the international practice,in 2008,in the New Enterprise Income Tax Law,China first drafted a clause to prevent taxation and control of foreign companies from taxation for resident companies.In the concept of "controlled foreign enterprise" was clearly proposed,and the calculation of the amount of income,the requirement of exemption clauses and the avoidance of double taxation were roughly stipulated.However,compared with developed countries whose controlled foreign companies' tax systems are relatively complete,there are many flaws in the design of controlled foreign company rules in China,and there are also many disputes regarding their applicability.The article first studied the problems in many aspects of the rules of controlled foreign companies currently established in China,followed by an analysis of China's first controlled foreign company anti-tax avoidance case,and finally learned from the advanced experience of other developed countries and international organizations.How to improve the rules of controlled foreign companies in China and improve their operability gives a series of recommendations.The study finds that there are three main problems in the application of controlled foreign company rules in China: First,there are more descriptions in principle in the controlled foreign company rules in China,and the operability in practice is not strong;second,controlled foreign countries in China.Some of the rules of the company's rules are relatively sketchy,the scope of application is limited,and the third is the risk of double taxation,which affects the international competitiveness of the company.In view of the above issues,this article mainly focuses on the following five aspects: the definition of control standards,the determination of "reasonable business needs" criteria,the recognition of controlled foreign company income,the extension of the scope of application of controlled foreign company rules,and the avoidance of double taxation.Put forward specific improvements.