First, the methods of tax avoidance for foreign-invested enterprises
1. Use related parties to evade taxes through transfer pricing.
(1) Transfer profits by setting up holding foreign-funded enterprises. Some foreign businessmen have taken advantage of China's preferential coastal policies to transfer some production activities to coastal areas and set up "two-headed" manufacturing and processing enterprises. These enterprises have no independent purchase and sale network, and their purchase and sale activities must rely on overseas affiliates, and most transactions with overseas affiliates adopt internal pricing. When serving overseas affiliated companies, enterprises transfer profits by paying more labor fees, huge technical guidance fees and service fees, or use their production and management rights to increase the import price of raw materials and reduce the export price of products, resulting in false losses to avoid taxes.
(2) Raise the equipment price and increase the investment cost. Some foreign businessmen hide the technology transfer price in the equipment price to avoid paying withholding tax on franchise. There are also some foreign businessmen who use their knowledge of international market information to raise the quotation of investment equipment, which is several times higher than the international market price, and even quote obsolete equipment as new equipment. By raising the price of equipment, foreign investors not only increased their shares in the joint venture, but also increased the depreciation of equipment, increased production costs and reduced corporate profits, thus evading China's taxes.
2. Take advantage of the differences in China's tax system to avoid tax.
(1) Use the preferential conditions of the tax law to avoid tax. China's tax law stipulates that "two exemptions and three reductions" will be implemented for productive foreign-invested enterprises "from the first profit-making year", and foreign-invested enterprises can enjoy the tax preference of carrying forward losses for five consecutive years. Some foreign businessmen artificially adjust their profits by choosing accounting methods to avoid national taxes. In order to pursue more profits, some foreign businessmen, after enjoying the preferential period of "two exemptions and three reductions", either changed the name of the factory, moved the site, or set aside the main factory to turn an old factory into several new factories, but the product varieties and sales channels have not changed, but they demanded to regain the tax concessions of "two exemptions and three reductions".
(2) Transfer of engineering labor costs. According to China's tax law, contracted engineering operations can be taxed after deducting part of the material price. Therefore, some foreign businessmen try their best to raise the material price, reduce the labor cost, and transfer the labor cost to the material price, so as to expand the material tax allowance and reduce the tax payment. There are also some foreign businessmen, under the guise of a third party, who actually contract and subcontract materials to reduce tax burden.
(three) the use of preferential policies in the bonded area to avoid taxes. China implements different preferential tax policies in different places. Foreign businessmen set up their business premises in the bonded area, and their production sites in high-tax areas where raw materials and manpower are relatively concentrated, and enjoy tax concessions in low-tax areas according to law.
(4) Falsely reporting property losses and evading taxes. China's tax law stipulates that the net profit and loss of an enterprise's transfer or disposal of property shall be included in the profit and loss of the current year. Foreign businessmen use this provision to falsely report property losses, scrap them in advance or charge the losses before tax, but don't record the processing income to reduce tax revenue.
(5) Reduce share financing and expand loan financing. According to the provisions of China's tax law, dividends obtained by shareholders through share investment belong to the distribution of after-tax profits of enterprises and cannot be deducted in advance from the taxable income of enterprises. However, the interest earned by investors in the form of loans can be classified as financial expenses and deducted from taxable income. In order to avoid tax, foreign enterprises use the tax difference between the two financing forms to convert the funds that should have been invested in the form of shares into loans, artificially increasing the cost of enterprises and reducing the taxable profits of enterprises.
3. Take advantage of loopholes in China's tax collection and management to avoid tax.
(1) Use some provisions of international tax agreements to avoid taxes. China's tax law stipulates that resident taxpayers have unlimited tax obligations; Non-resident taxpayer's tax liability is limited. Some foreign businessmen live in different areas of our country by underreporting their residence time or taking advantage of the lack of close ties between different areas in our country, thus becoming non-resident taxpayer and achieving the goal of only having limited tax obligations.
(2) Using permanent institutions to avoid taxes. Because China does not implement the principle of proportion, the income obtained by foreign enterprises that have no connection with the above-mentioned institutions in setting up permanent institutions in China is not included in the taxable income of permanent institutions. Some foreign-funded enterprises that set up permanent offices in China or directly purchase raw materials and sell goods by bypassing the permanent offices; Or although the raw materials are purchased through the representative office, the expenses incurred during the period are not shared, and all of them are borne by the representative office to offset its operating profits and evade taxes.
Second, the reasons for foreign tax avoidance
The internal motivation of foreign tax avoidance is to pursue high profits or implement global business strategy. External reasons are:
1, the local government is too indulgent. The assessment of foreign investment by local governments only pays attention to quantity rather than quality, and also gives a "green light" to those projects with no development prospects, laying a hidden danger for foreign investors to avoid taxes and withdraw funds in the future. There are also some local governments that the preferential treatment for foreign investors is tax preferential treatment, which can not be strictly enforced, thus seriously affecting the investment environment in China, resulting in foreign investors' lack of confidence in tax avoidance.
Eight, the principle of relevance
The principle of relativity means that the costs, expenses and losses that taxpayers can deduct must be directly related to the taxable income, that is, expenses unrelated to taxpayers' taxable income are not allowed to be deducted before tax. According to the principle of relativity, first, the costs, expenses and losses directly related to obtaining non-taxable income and tax-free income are not allowed to be deducted before tax, such as the expenditure on buying and selling government bonds; Second, expenses unrelated to the production and operation of the enterprise are not allowed to be deducted before tax. For example, the non-public welfare sponsorship fees of enterprises, the personal income tax paid by enterprises for employees, and the building depreciation fees sold to employees. Third, personal consumption expenses are not allowed to be deducted before tax, such as personal entertainment expenses of senior managers of enterprises. Fitness expenses, family consumption, etc. Non-related expenses of taxable income are still widespread in the pre-tax deduction of enterprise income tax in China, and there is still great potential to reduce non-related deductions.
Nine, the principle of rationality
Rationality principle means that a cost or expense can be deducted before tax only if it is reasonable in content and amount, otherwise it will be adjusted. Rationality principle often appears in tax adjustment involving related party transactions. When unrelated parties trade at a fair price in pursuit of their own best interests, the final negotiation result is generally a fair market price. However, if the related party collects or pays the price or expenses at a price higher or lower than the fair trade according to the business dealings between independent enterprises, it is deemed to violate the principle of rationality, and the tax authorities have the right to make reasonable adjustments. It is necessary for China's enterprise income tax law to add anti-tax avoidance clauses to make reasonable tax adjustment.
X. Principle of legality
The principle of legality refers to whether the expenses are true, clear, relevant, necessary and reasonable when calculating the taxable income. If it is illegal expenditure, even if it has been charged as an expense according to the financial accounting system, pre-tax deduction is not allowed. For example, fines, fines, late fees and property losses confiscated by the government, kickbacks and bribery expenses illegally paid to individuals, etc. Those paid in violation of laws and administrative regulations are not allowed to be deducted before tax. It should be noted that the principle of legality is mainly aimed at the deduction of costs and expenses. As for income, the author thinks that it should not be limited by legality, that is, all income should be included in the total income of enterprises, whether it is legal income or illegal income, which can partially correct the imperfection of the judiciary.
XI。 principle of historical cost
The historical cost principle of enterprise income tax means that all the property of an enterprise should be measured according to the actual cost when it is acquired, and deducted according to the historical cost when calculating the taxable income. The so-called historical cost is the actual cash and its equivalent paid by an enterprise to obtain a certain property, that is, the actual cost. Although price changes will affect the market value of real estate. Unless otherwise stipulated in the tax law, an enterprise may not adjust the book value or taxable cost of property. Historical cost is based on original documents, which is more objective. It is verifiable and easy to obtain, so it is used for enterprise income tax calculation.
After the taxable value of each property is determined according to the historical cost, if the property is impaired, an enterprise shall not make provision for impairment of short-term investments, entrusted loans, inventories, long-term investments, fixed assets, intangible assets and projects under construction when calculating the taxable income, except for the provision for bad debts and bad debts allowed to be deducted according to the provisions of the tax law. Only in the case of real loss, permanent or substantial damage to various properties can historical costs be deducted or amortized before tax.
After determining the taxable value of each property according to its historical cost, if each property is assessed for appreciation or its fair value disposal income, the enterprise can re-determine the taxable cost of the property according to the assessed appreciation and fair value only after the assessed appreciation and disposal income are included in the tax office: income tax has been paid; Otherwise, the enterprise shall not adjust the book value of its various properties by itself, and shall be taxed at historical cost.
Twelve. The principle of distinguishing income expenditure from capital expenditure
This principle means that when calculating taxable income, enterprises should reasonably divide the boundaries between revenue expenditure and capital expenditure, and any expenditure whose revenue covers only one tax year should be regarded as revenue expenditure. Allow pre-tax deduction in the expenditure year; If the expenditure benefit extends to more than two tax years, it should be regarded as capital expenditure, and it is not allowed to be deducted directly before tax in that year, but should be amortized year by year through depreciation and other items before tax.
If the enterprise is calculating the taxable income. There is no correct division between income expenditure and capital expenditure. What should have been included in capital expenditure is included in income expenditure. Timing difference, who underestimates assets and current income, leads to over-calculation of current expenditure, resulting in a decrease in taxable income in the current period, and deferred payment of enterprise income tax: what should have been included in income expenditure is included in capital expenditure. Will overestimate the assets and current income, resulting in underestimating the current expenditure of timing difference, resulting in an increase in taxable income in the current period, and pay enterprise income tax in advance. Capital expenditure of enterprises. Including fixed assets, intangible assets and long-term deferred expenses. Expenditure on investment assets is not allowed to be deducted directly before tax in the current year.
Thirteen, accounting methods shall not be changed in the tax year.
This principle means that the accounting method of an enterprise should be consistent in each period before and after a tax year and cannot be changed. This is because the enterprise income tax is calculated on an annual basis. If accounting methods such as cost calculation method, indirect cost allocation method and inventory valuation method change in a tax year, it will directly affect the result of taxable income. If an enterprise can change its accounting methods at will in a tax year, it can make tax planning by changing its accounting methods, achieve the purpose of tax avoidance or tax saving, and even evade taxes.
If enterprises really need to change accounting methods. Then enterprise income tax management will be allowed in the next tax year. The enterprise shall explain the contents and reasons of the change, the change of accounting methods, the cumulative impact of the change, etc. When filing tax returns, the documents approved by the shareholders' meeting or the board of directors, the manager (factory director) meeting and other similar institutions shall be attached. The tax authorities should focus on the reasons and procedures for taxpayers to change their calculation methods, whether the connection before and after the change of calculation methods is reasonable, and whether there are calculation errors and other related matters. When filing the taxpayer's annual tax return, the reasons for the change of accounting methods were not explained. Can't provide relevant information, or change without reasonable business and accounting needs. As well as the unreasonable connection before and after the change of calculation method and the existence of calculation errors, the competent tax authorities should make tax adjustments to the taxable income reduced by taxpayers due to the change of calculation method to make up the tax. China should supplement this principle in the new enterprise income tax law.
Fourteen, the principle of corresponding adjustment
The principle of corresponding adjustment of enterprise income tax refers to the same transaction or event between enterprises. If the pre-tax deduction is made in the enterprise that spent the money, it should be taxed as income in the enterprise that obtained the income; If the enterprise that obtains income has been taxed as income, the enterprise that allows spending money is allowed to make corresponding pre-tax deduction. The purpose of this principle is to avoid double taxation and double non-taxation on the same income.
For example, when the borrower pays interest, if the interest rate stipulated in the tax law is met, the interest expense is allowed to be deducted before tax; Accordingly, the lender should include the interest income in the taxable income for tax payment. For another example, if an enterprise invests in foreign countries with some non-monetary assets obtained from its business activities, including corporate shareholders of a joint-stock company buying shares from a joint-stock company with some non-monetary assets obtained from its business activities, it should be divided into two economic businesses, namely, non-monetary assets and investment, and the income tax should be treated with fair sales value. And calculate and confirm the gains or losses of asset transfer according to regulations; For the above-mentioned non-monetary assets accepted by the invested enterprise, the cost of related assets can be determined according to the value after evaluation and confirmation, and depreciation can be accrued.
Some provisions of China's current tax system are not adjusted according to this principle. For example, according to the provisions of the pre-tax deduction method for enterprise income tax, enterprises can treat accounts receivable that have not been recovered for more than three years as bad debts; However, the current enterprise income tax policy does not follow the corresponding adjustment principle, stipulating that accounts payable overdue for more than 3 years should be adjusted to taxable income. The author suggests that in the new enterprise income tax legislation, the tax system should be strengthened according to the principle of corresponding adjustment, so that the enterprise income tax can be more coordinated and reasonable as a whole.
2. Poor management of foreign direct investment. First of all, the internal management of the joint venture is very poor. China handed over the right to purchase and sell overseas, which failed to effectively curb foreign businessmen and gave them an opportunity; Second, the relevant administrative departments of the state, especially the tax authorities, are ineffective in managing foreign businessmen and objectively condone foreign tax avoidance.
3. The provisions of China's foreign-related tax law are not perfect. The essence of tax avoidance is that taxpayers reduce or evade their tax obligations in some form that is not illegal. Imperfect tax law is a prerequisite for taxpayers to avoid tax, and tax avoidance by foreign-invested enterprises is relatively common, which reflects the imperfection of China's foreign-related tax law.
4. Imperfect foreign exchange control in China leads to tax avoidance. As transnational investors, foreign investors should arrange investment and sales activities from a global perspective and allocate funds flexibly across borders. Because the reform of China's foreign exchange management system is not fully in place, RMB is not freely convertible, and there are various restrictions on foreign businessmen's remittance of profits, which makes foreign businessmen feel extremely inconvenient in income remittance, thus providing them with opportunities for tax avoidance. Foreign investors use transfer pricing to transfer funds, which objectively leads to the reverse tax avoidance result of "cost inflow and income capital outflow".
5. The power of foreign-related tax collection and management is weak. China's foreign-related tax personnel have low professional quality, weak personnel strength, backward collection and management methods and insufficient information exchange. Moreover, the collection, management and investigation of foreign-related taxes are mutually restricted, and the coordinated operation mechanism of mutual cooperation has not yet been formed. There are loopholes in the collection and management work, which are easy to be used by foreign businessmen.
Third, the anti-tax avoidance measures in China
1, improve our laws and regulations.
(1) Improve China's foreign-related tax laws and reduce and eliminate tax loopholes. Tax law is a legal norm that taxpayers and taxpayers abide by together. A sound tax law is the basis for reducing and eliminating tax avoidance. In view of the above tax avoidance methods, some imperfect clauses in China's tax law should be revised: ① Correct determination of tax preferences. Tax incentives should be conducive to the realization of China's goal of attracting foreign investment without affecting its own interests; (2) Revise the registration procedures of foreign-invested enterprises to prevent foreign businessmen from pretending to be newly established enterprises to defraud tax reduction or exemption, and the law should make special provisions for old enterprises to set up independent legal person enterprises; (3) gradually unify the two tax systems of domestic and foreign investment, change the "general preferential principle" into the "special preferential principle", give special preferential treatment to foreign investment in some industries, and guide foreign investment into infrastructure areas such as energy and transportation that China urgently needs; (4) stipulate the ratio of capital to debt. In view of foreign investors' tax avoidance behavior of "weakening capital", the ratio of capital to debt should be clearly defined. The interest borne by excess debt cannot be deducted before tax, and personal income tax should be levied.
(2) Improve anti-tax avoidance legislation. Perfecting anti-tax avoidance legislation is the fundamental measure to prevent and combat tax avoidance, and it is also the common practice of anti-tax avoidance in the world. At present, the phenomenon of foreign-funded enterprises avoiding tax through "AG low price" transfer pricing is more prominent. Therefore, we should focus on controlling transfer pricing and strengthen China's anti-tax avoidance legislation. In dealing with tax disputes, in order to avoid passivity, it should be clearly stipulated that taxpayers have the obligation to report and provide evidence, and that if taxpayers cannot provide evidence to the contrary, they should be dealt with according to the decision of the tax authorities. Ensure that the tax authorities have sufficient disposal power in legislation and promote the effective and orderly development of tax collection and management. In addition, in order to prevent foreign businessmen from using the protection of international tax agreements to evade China's taxes, legislation should be adopted to limit the scope of activities of representative offices and affiliated service institutions established by foreign enterprises in China. Beyond the prescribed scope, it shall be recognized as a "permanent establishment" of a foreign-invested enterprise, and shall exercise the right to tax according to the provisions of the tax law. At the same time, we should increase the punishment for tax avoidance in legislation.
2. Strengthen collection management. The struggle between tax avoidance and anti-tax avoidance involves a wide range of methods. In addition to establishing and perfecting anti-tax avoidance laws and regulations, there should be sound law enforcement agencies and well-trained high-level tax collectors to carry out tax collection and management.
(1) Improve the quality of collection and management. China's foreign-related taxation started late and lacked experience, so it is necessary to improve the quality of tax collectors. It is necessary to improve the recruitment standards of tax personnel and pay attention to the professional training of on-the-job personnel, so that tax personnel can be familiar with tax law, financial accounting, international trade, international finance and international taxation, thus improving the quality of tax collection and management and reducing tax loss.
(2) Strengthen the audit work. Tax audit is a powerful weapon to combat tax avoidance. We should learn from foreign anti-tax avoidance experience and attach importance to the audit of multinational companies. By establishing a high-quality audit team, we can find out tax avoidance behaviors such as improper declaration and incorrect accounting treatment in time, safeguard the normal tax revenue of the country and safeguard the rights and interests of the country.
(3) Establish a national tax information base. The business activities of multinational corporations spread all over the world. Only by relying on bilateral and multilateral cooperation and information exchange between tax authorities at home and around the world can we better receive the effect of anti-tax avoidance. In order to do this work well, a national tax information database should be established as soon as possible, which is responsible for collecting relevant international commodity price information, foreign personal income level, foreign and foreign staff's cross-regional business activities and housing migration information, so as to facilitate the tax authorities in relevant regions to verify and collect.
(4) Strengthen the management and supervision of foreign businessmen. Establish and improve the containment mechanism for foreign businessmen within enterprises. When signing the contract, pay attention to safeguarding the interests of China and ensure China's right to participate in decision-making in the operation of the joint venture. At the same time, it is necessary to strengthen the cooperation with foreign management departments and the management of foreign businessmen, and intensify the crackdown on illegal tax avoidance. Strict sanctions, such as exposure, high fines and reduction of preferential treatment, are imposed on foreign businessmen who take illegal tax avoidance by means of concealment and deception, which makes foreign businessmen afraid of illegal tax avoidance and dare not take any chances.