Simplifying tax administration efforts in China: a review

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Simplifying tax administration efforts in China: a review

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Lewis Lu of KPMG China discusses the country’s recent measures to enhance taxpayer services.

The Chinese tax authorities have for 10 years been conducting an ongoing "Spring Breeze Campaign for Tax Convenience" to rationalise tax administration and improve taxpayer services. A total of 620 measures have been implemented, including online tax filing systems, electronic invoicing, mobile tax services, and a reduction of paperwork and unnecessary requirements. Several measures introduced in 2023 include:

  • Expanding and improving the network of tax treaties to provide greater tax certainty for taxpayers engaged in cross-border operations. Through the BEPS 1.0 multilateral instrument (MLI), 53 Chinese tax treaties have been updated. To facilitate interpretative certainty for taxpayers, the Chinese tax authorities have published English and Chinese synthesised texts – the most recently released synthesised versions cover the treaties with Bulgaria, Indonesia, Mexico, Romania, Russia, and South Africa;

  • With foreign businesses and individuals in mind, the authorities offered a nationwide bilingual platform for non-resident enterprises. This facilitates dealing with Chinese tax matters (such as tax calculations and tax payments) remotely, without the need to appoint a tax agent in China or come to China physically, which was the historic requirement;

  • For Chinese businesses investing overseas, improvements have been made to the tax authorities’ existing tax guides, particularly in relation to Belt and Road Initiative countries;

  • Simplifying tax filings further with one-click zero tax filing and a simplified stamp duty declaration process;

  • Standardising tax administrative penalty benchmarks across China regions. This covers declaration, invoices, registration, accounting records, collection, and inspection; and

  • Greater centralised management of taxpayer data across different government departments means that the tax authorities can update taxpayer records without always needing further (duplicative) information from the taxpayers themselves. In the latest measure, where a taxpayer changes registration particulars with the market supervision department (e.g., a change to the shareholders of a company) this will be directly relayed to the tax authorities. There is no need for the taxpayer to separately notify the tax authorities.

China is also accelerating its ongoing work to put existing tax rules on a legislative basis (several have long existed in the form of State Council regulations). The State Council legislative work plan for 2023 aims at progress in the year on the draft tariff law, the draft consumption tax law and the draft revision of the tax collection and management law. In parallel, the draft VAT law will undergo a second review by the National People’s Congress (NPC). It was submitted to the NPC for first review in December 2022. On conclusion of this review the VAT law would be finalised and come into effect.

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