Key takeaways for the year ahead in this edition include, amongst others:
- VAT: Looking to the world of 2025, digitalisation is anticipated to: (i) drive VAT and GST systems to morph into ‘in substance’ retail sales taxes, (ii) lead indirect taxes to be managed and administered nearly entirely through technology, and (iii) enable expansion of the tax base for indirect taxes. In China, these trends are turbo-charged by the rapid adoption of mobile payments and e-platforms, and by the authorities’ rapid progress with tax digitalisation.
- International Tax: 2017 saw continued China roll out of BEPS changes, newly proposed foreign investment incentives, and greater use of information exchange and big data in enhanced enforcement. New rules and guidance on PE, treaty abuse, CFC, hybrids, foreign tax relief, and dividend reinvestment incentives are anticipated for 2018.
- TP: In 2017 China’s multi-year TP legislation overhaul was finally completed, and China’s new TP documentation requirements entered into effect. 2018 will see continued rebalancing of MNE corporate structures in line with their substance and greater enforcement driven by CBC reporting.
- Outbound investment: China’s growing outbound investment along the “Belt and Road” (BRI) is leading to increasing numbers of tax disputes overseas, for which SAT MAP assistance is being invoked.
- Digital Economy: The disparity between China’s rapidly evolving digital economy and its largely traditional economy based tax administration and regulatory systems is becoming increasingly evident. A multitude of issues are arising with income tax characterisation and recognition for new business models, tax invoice management, and the navigation of forex and customs rules.