BEPS China Profile

July 2016


1) Has China implemented any BEPS recommendations? If so, which Action Items? 
China has implemented some BEPS recommendations in the revision and upgrade of local tax regulations; however, not all BEPS recommendations will be implemented.  The discussion draft "Implementation Measures of Special Tax Adjustment" (upgrade of Guoshuifa [2009] No. 2) accounted for the following BEPS Action Items:
  • Action 3 – CFC rules
  • Action 8-10 – Aligning TP outcomes with value creation
  • Action 13 – TP documentation and country-by-country reporting
The following BEPS recommendations have been introduced and implemented in China’s domestic tax laws and regulations:
  • Action 5 – Harmful tax practices
  • Action 7 – Permanent establishment
2) What is China’s expected timeline for implementing country-by-country reporting? 
The discussion draft "Implementation Measures of Special Tax Adjustment" (upgrade of Guoshuifa [2009] No. 2, the existing China TP rules) issued on September 2015 introduced country-by-country reporting requirements.  These regulations have not yet been finalized.  The final draft is expected to be issued during FY 2016 and come into effect on January 1, 2016.
3) What measures are multinationals in China taking to prepare for country-by-country reporting?  
Multinationals in China have been studying the draft regulations, either on their own or with the help of their advisors.  Many have also started to coordinate with their affiliates to form an initial work plan for country-by-country reporting.
4) Are China’s taxing authorities taking any measures to prepare for any changes brought about by BEPS (e.g., changes in staffing, increases in budgets)? 
The Chinese tax authorities have actively participated in the BEPS project and formed a BEPS task force when the project was launched back in 2013.  To prepare for the changes brought by the BEPS project, the Chinese tax authorities will take the following actions:
  • Localize the BEPS plan on an as-needed basis;
  • Adjust the international tax administration divisions with tax authorities;
  • Establish a nation-wide tax risk monitoring system;
  • Use information technology to facilitate international tax administration.
5) How will country-by-country reporting affect how you provide services to your clients?
The country-by-country reporting requirements will bring us more opportunities regarding both domestic compliance services and BDO inter-office referral projects.