On 30 September 2015, China Daily has reported that China will be at the forefront of embracing the emerging international tax rules to combat base erosion and profit shifting, known as BEPS, as it shifts toward becoming a "capital-export" country.
China Daily has reported that the country is expected to be proactive in ensuring international tax rules that combat base erosion and profit shifting. The modernization of the tax system would not only would it encourage additional inbound investment, but it would even encourage outbound investment from Chinese companies. Therefore it is expected China will embrace these new principles.
"Certainly for China outbound investment becomes a bigger factor. Chinese companies will also have to follow rules implemented by governments in Southeast Asia, Africa and so on. That clarity and consistency will be important for Chinese companies as well,".
China is expected to embrace BEPS as under the existing tax regimes, companies have been routinely shifting income from locations of their operations to low-tax havens. Activities like manufacturing that take place in their jurisdictions escape the tax net as most value creation, such as research and development, happened in developed countries. Multinationals in China carry out R&D and testing, but technology gained from these activities is generally not patented in the country. Intellectual property companies are incorporated in low-tax jurisdictions.
Sources: China Daily
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