International Tax Planning of China

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By Li Tingting. November 18th, 2014.

In the afternoon of Nov. 17th, 2014, Senior Zhou gave us a wonderful lecture named “International Tax Planning of China” in Room 410 at the Second Teaching Building of Guoding Campus. Senior Zhou, a member in the Shanghai Representative Office of Chinese Tax Group, is not only the master of Economic Law of China University of Political Science and Law, but also the master of International Tax Law of Leiden University. In addition, Senior Zhou has published several professional articles in national and foreign publications, for example, “Tax Notes International”, “World Journal of VAT/GST Law” and “Foreign–related Tax”. He has abundant academic knowledge. And he amazingly passed six exams of Certified Public Account for just one time, which is very difficult for many students. Senior Zhou is working in Baker&Mckenzie at present, which is one of the largest international law firms in the world and in the lead of the international tax planning. The lecture lasted for nearly two hours.

In the beginning, Senior Zhou introduced the basic form of indirect equity transform with graphics to us. He took the example of the present law suit about Wal-Mat Stores, the giant American retailer, which acquired Trust-Mart, a famous supermarket chain, to vividly illustrate how indirect equity happens. Trust-Mart had 65 subsidiaries in China’s mainland, however, Wal-Mart acquired its parent company in Hong Kong instead of the 65 subsidiaries in mainland owing to the Hong Kong’s low taxes. If Wal-Mart directly acquires the 65 subsidiaries, it will have to pay more taxes which can be avoided through taking related reasonable legal commercial measures. In this example, we can conclude that reasonable commercial aims don’t always conform to legal tax principles. In the opinion of Senior Zhou, he thought that legal tax rules were taken to guide taxpayers to pay tax correctly and effectively. As for the reasonable commercial aims, as long as they were legal and in favor of the development of economy, they were feasible in commerce.

During the second part, Senior Zhou made an elaborate interpretation on statutory for software transaction. He took Apple for example. Nowadays more and more Chinese consumers download various APPs in Apple APPs store to read novels, watch videos or just listen to the music. Frankly speaking, Apple make money mostly by selling their software, which represents the intellectual property rights, not by selling telephones. Many small telephone parts are made in Chinese factories. However, they only get few profits. Many of telephone parts are transferred to the countries which own intellectual property rights.

In the third part, Senior Zhou listed several basic principles of taxing anti-avoidance and reasonable tax-avoidance. In the term of taxing anti-avoidance, we should pay attention to three principles. First, the essence overweighs the form. Second, tax should comply with good commercial aims. Third, tax principles should in accordance with the essence of economy. As for the reasonable tax-avoidance, legal tax and taxpayers’ tax planning are all of great importance. Senior Zhou pointed out that tax was closely related to law. When they handled with tax affaires, they would take advantage of Economic Law or Company Law to evaluate whether the result conformed to the reasonable commercial principles. Then Senior Zhou told us about the rules of international tax and tax rights in all kinds of countries. On temporary, the distributional rules of international tax are built by developed countries (the capital exporting countries). Under this unfair rule, many large multinational companies such as Apple and Starbucks are paying less tax than they were supposed to, which leads to tax law suits in many countries. On November 6th, 2012, around twenty countries required to put the plan of OECD “Addressing Base Erosion and Profit Shifts” into practice to avoid bad tax behaviors. Senior Zhou suggested that we had better set up neutral tax rules to secure the development of economy as well as the commercial interests.

Before the ending of the lecture, Senior Zhou shared his valuable experience of being an intern and working in Baker&Mckenzie. He also communicated with students. He advised that if we wanted to have an internship in a law firm, we’d better post our resumes to law partners instead of HRs, because HRs can’t make a relative evaluation to applicants. When we get a chance, we should work hard and always be careful and responsible.

Through Senior Zhou’s lecture, students benefited a lot. They got a good command of tax and law. The lecture ended up with students’ warm applause.

Published：2014-11-23 Hit：495