A Study On The Income Taxation Regime Of Family Trusts In China

The income taxation system of family trusts is an important part of the trust income taxation system and even the whole income taxation system.At present,the income taxation system of family trusts in common law countries is relatively mature,and the income taxation system of family trusts in many civil law countries or regions is also being improved after the introduction of the trust system.The imperfection of the income tax system has become a major canker on the development of family trusts in China,focusing on problems such as unclear tax subjects,concurrent double taxation and tax avoidance,and insufficient tax incentives.Taking the aforementioned problems as the first guide,this article analyses the causes of these problems from a theoretical perspective,and puts forward suggestions for constructing a family trust income tax system suitable for China’s national conditions,taking into account the experience of overseas family trust income tax systems.This paper consists of five main sections,in addition to an introduction and a conclusion.Part Ⅰ: Theoretical foundations relating to family trusts and the income taxation of family trusts.Theory is the foundation of practice and a study must begin with theory.It is important to trace the roots of a problem and to explore the origins and development of family trusts in China in order to lay the foundation for subsequent research.The study of family trusts,rather than trusts,is inevitable because family trusts have different characteristics from general commercial investment trusts,mainly because they have specific functions,especially the function of family wealth transmission and the function of risk avoidance of family wealth,which cannot be compared with general trusts.In addition,the income taxation of family trusts needs to be guided by certain principles,which is the general keynote for the subsequent writing.Part Ⅱ: The main issues facing the current income tax regime for family trusts in China.The income taxation of family trusts in China is still regulated in general terms by the Personal Income Tax Law and the Corporate Income Tax Law,and some of the regulations are scattered in the taxation documents of the relevant securities investment funds.The irregularity of the legal system has led to the problems of unclear taxation subjects,serious double taxation,tax avoidance and insufficient tax incentives for the income taxation of family trusts in China.This section determines the overall direction and objectives of this paper.Part Ⅲ: Analysis of the causes of the problems of the income tax system of family trusts in China.This part is the theoretical in-depth chapter of this article,which aims to uncover the reasons why the income tax system of family trusts in China is in trouble,the most direct and primary reason being the lack of a normative and relevant legal system,rooted in the misfit of system transplantation brought about by differences in legal and cultural backgrounds.This section also introduces the knowledge of game theory to analyse the game mentality of both the taxing and taxing parties.Part Ⅳ: Experiences from overseas countries or regions.At present,the most mature countries in terms of family trust income taxation are the United Kingdom and the United States,while some civil law countries(regions) are also gradually improving their trust systems after their introduction,with Japan and Chinese Taiwan as typical examples.Although China is a civil law country,the common law system,as the birthplace of the trust system,naturally has a lot of experience worth learning from.Because of the similar legal and cultural backgrounds of civil law countries(regions) and China,the transplantation of the system will be smoother.Part Ⅴ: Suggestions for improving the income tax regime for family trusts in China.This section first analyses the feasibility of the measures proposed in this paper from three aspects: policy,technology and environment.Then,based on the existing problems and the reasons behind the problems,the right remedy is proposed to improve the income tax system of family trusts in China.