China Issues New Guidelines to Help Minimize Tax Uncertainty

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May 8 – The State Administration of Taxation (SAT) published a notice regarding the “Working Guidelines on Replying to Specific Tax Matters (Trial) (guoshuifa [2012] No. 14, hereinafter referred to as ‘Guidelines’)” on February 10, 2012, which took effect from March 1, 2012.

China’s taxation system is rapidly developing, and with the increasingly complex economic environment, tax disputes are inevitable. Allowing taxpayers to interact with Chinese tax authorities and obtain replies on specific tax matters help minimize and mitigate tax controversies. The Guidelines set out a working guidance to standardize the internal procedures for the Chinese tax authorities to provide replies on specific tax matters.

A “reply on a specific tax matter” refers to a reply made by the tax authorities as to how to apply tax laws, regulations, rules or circulars on a specific tax matter undertaken by a specific tax administration counterpart.
A tax authority cannot issue a tax ruling opinion if:

  • The tax authority is not competent in respect of the relevant tax matter
  • The opinion would be contrary to the rules of a higher authority
  • The opinion would be obviously unfair to other taxpayers in a similar situation

If the tax matter resolved in the reply is applicable generally, it should be published in the form of a tax circular. Tax matters requiring permission and approval (e.g. application for tax incentives, application for tax clearance certificate for outbound remittance) do not fall within the scope of replies.

Replies must be made in the name of the tax authority, rather than any internal division within a tax authority.

Issuance procedure
The Guidelines provide for a series of complicated procedures for the issuance of a reply, which involve the co-ordination and co-operation among different levels of tax authorities and various divisions. A request for reply must be registered by the general office of the authorized tax authority before being dispatched to the in-charge division.

The tax authority making the reply is required to publicize the same in the government bulletin, newspaper or official website within 30 days upon the issuance of the reply; or publicize in the bulletin boards or equivalent within five days.

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