Research On The Compliance And Optimization Of China’s High-tech Enterprise Tax Preference System Under The Background Of BEPS

Nowadays,with the global technological competition is constantly intensifying,all countries have formulated a series of preferential tax regime for scientific research and development conducted by enterprises in order to attract production factors including talents,funds,technologies to the domestic market and stimulate the innovation potential of enterprises.A preferential tax regime known as "patent box" emerged in Europe,mainly focusing on the preferential income tax treatment on enterprises’ income obtained from implementing,licensing or transferring their intellectual property.Under the background of Innovation-driven Development Strategy,China has also implemented some preferential tax regimes for high-tech enterprises.However,it is easily to distort the flow of production factors artificially and then trigger the problem of transnational tax base erosion and profits shifting.To combat the issues of base erosion and profit shifting,OECD proposed a framework composed of four key standards and other eight auxiliary standards to identify whether a regime is a harmful preferential regime in 1998 report.After the launch of BEPS Plan,the Substantial Activity Requirement and Nexus Approach has become the most significant standard to investigate whether the regime is harmful or not.If a preferential tax regime is deemed harmful tax regime,the tax authorities shall amend the tax system within a given period,otherwise it may face joint sanction.As China is a member of the inclusive framework of the OECD and G20,the formulation and implementation of High-tech Enterprises Preferential Tax Regime shall,to some extent,comply with Substantial Activity Requirement and Nexus Approach.However,the Nexus Approach generated on the basis of the regulation of patent box tax regime and there are distinguished differences between patent box tax regime and China’s Hi-tech Enterprise Preferential Tax Regime,so the compatibility of the Nexus Approach with Hi-tech Enterprise Preferential Tax Regime under Substantial Activity Requirements needs to be further analyzed.Based on the analysis of whether the Hi-tech Enterprise Preferential Tax Regime complies with the Substantial Activity Requirements,this paper further probes into the adaptability of Nexus Approach and the Hi-tech Enterprise Preferential Tax Regime.The author concludes that there are distinguished differences between Nexus Approach and the Hi-tech Enterprise Preferential Tax Regime in terms of examination perspectives,eligible beneficiaries,and the calculation method of relevance degree through comparative analysis.The differences mentioned above illustrates that there are still many problems in the cohesion of Hi-tech Enterprise Preferential Tax Regime and Nexus Approach.In the face of the possible reexamination conducted by FHTP and its potential risks in the future,we still need to further enhance the compatibility of domestic tax rules and international tax rules to reduce the cost and potential risk of integrating China’s preferential tax policies into the international taxation order under the background of transnational tax cooperation.Given that the Nexus Approach is more scientific in logic,the author suggests that we can further improve Hi-tech Enterprise Preferential Tax Regime by constructing correlation formula and strengthening anti-abuse system by means of internalizing related international rules.