China Establishes Multilateral Tax Cooperation Mechanism Under The Belt And Road Initiative Tax Administration

; posted on
April 23rd, 2019

China has launched the Belt and Road Initiative (BRI) Tax Administration Cooperation Mechanism, intended to facilitate cross-border trade and investment along BRI routes by helping resolve tax disputes, increasing transparency, streamlining compliance, digitizing filing and building a growth-friendly tax environment which fully respects the sovereignty, territorial integrity, and tax laws of each participating jurisdiction.

BRITACOM

To implement the Belt and Road Initiative proposed by Chinese President Xi Jinping and the G20/OECD international tax agenda, the Belt and Road Initiative Tax Administration Cooperation Mechanism (BRITACʘM) was officially launched at the first Conference of the Belt and Road Initiative Tax Administration Cooperation Forum (BRITACOF) on 18 April 2019.

Tax authorities from 34 countries and regions including those from Kazakhstan, Uruguay, United Arab Emirates (UAE) and Nigeria signed a memorandum of understanding and become council members of BRITACOM. 22 tax administrations or finance departments, including those from the G7 countries, as well as international organizations signed up to be the Observers. In addition, 11 world-recognized tax experts signed up to be the Members of the Advisory Board. The diversity of jurisdictions and expertise enriched the discussions of the BRITACʘM.

Collaboration

During the meeting, the BRITACOM members are calling for a new approach in the next two years to resolve the lack of clarity and frequent changes of basic tax rules that confuse cross-border taxpayers and to jointly resolve tax disputes, especially as technology-driven and digital business models are emerging.

Other key issues of concern for the members include multinational companies seeking ways to shift profits to low tax-rate areas or to avoid paying taxes; transfer pricing activities - companies and subsidiaries shifting goods and services among each other to create tax benefits - which increasingly trigger tax disputes; and double taxation, which adds to the costs of cross-border trade and investment.

To tackle this problem, during the meeting an action plan was formed, and a new vehicle was established for coordinating work under a unified system in the countries involved in the initiatives to limit the negative effects of complex tax related issues. In particular, the initiatives are detailed into five majors:

  1. Provide solutions that raise awareness of tax laws to ensure compliance.
  2. Develop mechanisms to resolve tax disputes and by increasing predictability and consistency in the application of tax laws, tax treaties and administrative practices.
  3. Support capacity building in tax authorities in BRI countries by establishing joint training centres to coach employees in these departments, where four centres have been announced as a first stage, located in Macau, mainland China, and Kazakhstan, and providing training is in three languages: Chinese, English, and Portuguese.
  4. Facilitate compliance for taxpayers by reducing the number of documents required and providing information.
  5. Develop tax systems by automating them.

BRITACOM, according to its statement, supports and reinforces prevailing international tax standards, including the existing OECD, United Nations and International Monetary Fund models to solve international tax issues.

Sources: China Daily, Chinese Government

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