Circular of the State Taxation Administration on Regulating and Strengthening International Taxation Administration

GuoShuiHan [2002] No.1153 December 26, 2002

The state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, and Yangzhou Taxation Institute:

The State Taxation Administration has determined in the Experimental Work Proposals of the State Taxation Administration on Accelerating the Information Construction of Taxation Administration and Carrying out the Levy Reform(GuoShuiFa [2001] No.137) the direction of levy reform towards informationization and specialization, and has also clarified in the Circular of the State Taxation Administration on the Relevant Issues concerning the Submission by the Relevant Departments in all Places of Experimental Work Proposals on Accelerating the Information Construction of Taxation Administration and Carrying out the Levy Reform (GuoShuiFa [2002] No.100) the international taxation administration offices of the experimental entities for levy reform and their duties. In order to ensure the implementation of the said two documents, regulate and strengthen the international taxation administration, we hereby give our notice as follows regarding the relevant issues:

I. Work Contents

The main contents of the work of the international (foreign) taxation administration offices in all experimental regions are:

(a) Implementation of taxation agreements, namely, ascertainment of residents and issuance of the identity proof of Chinese residents; ascertainment and administration of permanent offices; ascertainment of restricted tariff rates; determination of taxation jurisdiction; taxation administration; check, ascertainment and administration of overseas tax credits; implementation of special clauses in agreements; research and formulation of administrative measures on implementing taxation agreements; special investigations and punishments on abuse of taxation agreements; and so on.

(b) Carrying out anti-avoidance of tax, namely: actual investigations on anti-avoidance of tax; organizing and carrying out assistant and joint investigations of anti-avoidance of tax; investigations and punishments on various tax avoidance acts; negotiation, conclusion, administration and implementation of subscribed pricing; investigations and punishments on the issues of weakening of capital, tax avoidance at tax avoidance ports and tax avoidance of controlled foreign companies; investigations and punishments on the tax avoidance issues of the global concentrative services by trans-national companies such as cost allocation agreements, intra-group labor service, and so on.

(c) Taxation supervision over foreign residents, namely, regulating, organizing and implementing the taxation administration of the local business offices of foreign companies in accordance with the relevant taxation administration rules; administration of withholding of income tax upon foreign companies that have no offices in but have income from China; issuance and administration of documents on non-trade payment of exchanges and sale of exchanges under some capital; administration of individual income tax of foreign residents; determination of levy and exemption of taxes on permanent representative offices of foreign enterprises and the taxation administration thereof; investigations and punishments on tax evasion by foreign residents.

(d) Information exchange, namely, organizing the implementation of administrative rules on information exchange; collection, transmission, investigation, check, translation and submission of the taxation information involved in automatic information exchange, voluntary information exchange, special information exchange, industrial scope information exchange and authorized representatives' visits; such confidentiality maintenance work as classification, declassification, making, use, preservation and destruction of taxation information according to the rules on maintaining confidentiality for information exchange, etc., simultaneous trans-national taxation inspections.

(e) Cooperation in international taxation administration, namely, organizing the implementation of the relevant taxation administration rules on the income of domestic residents from outside of the territory; providing taxation assistance according to taxation agreements to domestic residents in their overseas business activities; cooperating with foreign taxation administrations in investigations on tax evasion issues of the domestic residents' income from outside of the territory; organizing the implementation of international exchanges and cooperation with international organizations and foreign taxation administrations in the relevant taxation levy and administration matters.

(f) Implementation of present taxation policies involving foreign interest, namely, organizing the implementation of the present taxation laws and regulations for enterprises with foreign investment and foreign enterprises as well as the relevant administrative measures on taxation; dealing with the administrative examination and approval.

II. Work Requirements

(a) The relevant departments in all places shall strengthen the training on specialized administration of international taxation matters, improve their realization of the importance. Facing the trend of economic globalization and China's accession to WTO, China and the countries in the world will have increasing frequent transactions in the fields of commodity, capital, technology and service, etc., which will definitely lead to the complexity of various international taxation matters such as determination of the identities of Chinese and foreign residents and sources of their income, control of trans-national proceeds, international anti-avoidance of tax, coordination in international taxation disputes, etc.. Therefore, we must strengthen the specialized administration of international taxation matters.

(b) The international (foreign) taxation administration offices in all places shall make work schedules and work rules according to the above said work contents; all-roundly regulate and strengthen international taxation administration; and organize the implementation of the present laws, regulations and administrative measures on foreign taxation; stop up the loopholes in international taxation and foreign taxation; make great efforts to arrange income; and maintain the taxation benefits of the state.

(c) Equipping and stabilizing professionals. International taxation administration is a kind of work with strong specialty, thus the relevant departments in all places shall equip the international (foreign) taxation administration offices with enough professionals and keep them stabilized accordingly, pursuant to the work requirement of giving full scope to all the above said duties in international taxation administration, especially the special investigations, inspections and joint investigations on anti-avoidance of tax, which need to be actually carried out.

Where a taxation bureau of a city at the county level in the coastal area, which has a large quantity of international taxation matters, needs to set up a division (section) of international taxation administration, it shall, upon the approval of the State Taxation Administration, strengthen the administration of international taxation matters according to the above said work contents and requirements.

(d) We should actively search for a new mechanism for the taxation administration of large enterprises. The experimental entities under levy reform shall, by following the spirit of GuoShuiFa [2002] No.100, do well in the preparation of concentrative administration of both domestically-funded and foreign-funded large enterprises and trans-national enterprises, and implement the proposals after the State Taxation Administration has determined the work proposals on taxation administration of large enterprises.

Promulgated by The State Taxation Administration on 2002-12-26