On Optimization Of Controlled Foreign Corporation System In China Under Digital Economy

In the past 30 years,some Chinese multinational enterprises have accumulated profits abroad by setting up overseas subsidiaries in low-tax countries(regions),delaying their distribution,or even not distributing them back to China,which has seriously eroded our tax base.To prevent this kind of tax base erosion,the system of controlled foreign enterprises was established in 2008.But at present,there is still an imperfect regulation in this system.Moreover,in today’s digital economy,transnational corporations take advantage of the fluidity of data and the virtuality of intangible assets to further impact the controlled foreign enterprise system established under the traditional economy.Firstly,the paper explains the two core concepts of the digital economy and the controlled foreign enterprise systems.Combined with the characteristics of the digital economy,it analyzes the tax avoidance methods commonly used by transnational taxpayers under the digital economy,as well as the background,advantages,and disadvantages of the controlled foreign enterprise system.Then it discusses the four theoretical bases that support this thesis--the double pillar theory,the tax base erosion,and profit shifting theory,the tax arbitrage theory,and the harmful theory of international tax reduction competition.Secondly,the author of the current controlled foreign generalizes the development process of enterprise system,and the digital economy is controlled by foreign enterprise system existence question has carried on the detailed elaboration,mainly has substantial control standard is difficult to determine,reasonable business need is difficult to determine,income attributable qualitative problems and the imperfect belonging to four questions.The main body of this paper is a case study and design,mainly introducing the multinational companies in foreign architecture,B digital trading,and distribution of profits retained in low-tax countries were not back to the case within the territory of China,the author according to determination and calculation process of controlled foreign enterprises step by step analysis,detailed elaborated the controversy in the concrete that link,Based on the laws and regulations of controlled foreign enterprises and the digital economic situation,the problems in the cases are summarized.Finally,the author puts forward some suggestions to perfect the controlled foreign enterprise system under the digital economy.From the perspective of optimizing the identification rules of controlled foreign enterprises,we should first refine the control standards of controlled foreign enterprises,second clarify the standard rules of "reasonable management needs",third clarify the category of negative income,and fourth refine the attribution method of income.From the perspective of "pillar two",we should draw lessons from the proposal of a "global minimum tax" to protect our tax base as the resident country.This paper mainly carries on the innovation from three aspects: first,the innovation of the research perspective.Through reading the previous literature,it is found that few scholars at home and abroad have studied the controlled foreign enterprise system for the new economic situation of the digital economy.Second,the innovation of the case study method.This article adapts and combines many cases,and by focusing on the problems encountered in the identification process of transnational digital enterprises,as far as possible,it shows the deficiencies of the system of controlled foreign enterprises under the current digital economy.The multi-angle analysis makes the cases more typical.Third,innovation of ideas.Based on the problems of the digital economy situation and the current system,the following countermeasures are put forward: Intangible assets,a key production factor in the digital economy,should be considered when defining the material control standards.For example,whether the key controlling party of intangible assets in research and development is the parent company or not;When determining whether the exemption clause of reasonable business needs is met,the calculation formula of "exclusion based on material Income" in OECD Blueprint Report is introduced to determine the proportion of substantive business activities of controlled foreign enterprises.When confirming the method of attributable income,it shall refer to the relevant provisions in the "Draft for Consultation" and the relevant digital indicators of the EU digital service tax for comprehensive determination;Clarifying the category of negative income when recognizing the nature of each income;To improve the controlled foreign enterprise system of our country,we draw lessons from the "Pillar Two" scheme of OECD double pillars.