New China law targets tax avoidance offshore
The mainland has stepped up its participation in the G20's fight against international tax avoidance by passing a law cracking down on indirect sale of assets outside the country to avoid tax.
The mainland has stepped up its participation in the G20's fight against international tax avoidance by passing a law cracking down on the indirect sale of assets outside the country to avoid paying taxes.
The law would affect investment companies, analysts said, adding it would also have a significant impact on Hong Kong, a major hub for cross-border deals involving the mainland.
To strengthen global cooperation against tax avoidance, a law on tax on gains from the indirect sale of assets by offshore companies took effect last Tuesday, the State Administration of Taxation said on Friday.
"This announcement is the latest policy of the taxation administration's proactive participation in the G20 base erosion and profit shifting action plan [against tax avoidance]," it said.
Liu Jinghua, a Beijing-based tax partner at Baker & McKenzie, an international law firm, said the new rules "clearly indicate China will focus more on cross-border anti-avoidance enforcement".
Christopher Xing, a KPMG China tax partner, described it as a major development.
"Even the IMF [International Monetary Fund] and OECD [Organisation for Economic Cooperation and Development] have recently recognised such rules as valid instruments to combat double non-taxation," he said.