Architecture

The US Congress and the US-China Economic and Security Review Commission in its report 2016, has recommended strengthening of the American procedures of a labor dispute and the legislation for counteraction of China of "refusal to support the liabilities of the World Trade Organization".

In 2015, the American trade deficit of goods with China increased by 6.5 percent to record 367.2 billion US dollars. Last year the United States had essential, but much more a smaller positive trading balance with China in services of 29.5 billion US dollars. The commission says that China continues to brake on liberalization of key sectors in which the United States are competitive in the world market on services.

Also, the Commission specified that "within the last 20 years, anti-dumping (AD) and the countervailing duty (CVD) were often pushed against China, about more than 1000 cases of AD initiated against China around the world since 1995. The Commission also considered demand of China, about its provision on market economy (ME) till December 11 of this year, and also the Commission confirmed that the US Commerce Department is now responsible for determining "whether is a country ME (market economy)."

So, as China is not currently an ME and is not on the path to become one in the near future, the Congress should pass legislation requiring its approval, that China is a country, which is the whole or separate sector, or the legal entity, providing the status as ME by the United States.

Author: Sergey Panov

managing partner Finance Business Service

Tax Resources in China

China confirmed that the new system of taxation of Natural Resources what worked on an experimental basis, has been extended.

As part of the reforms, China becomes the basis for the taxation of natural resources from the system based on the amount to ad-valorem system (based on value).

The Chinese government is primarily distributed worldwide new resource tax in November 2011, since the tax resources such as oil and natural gas, coal and rare earths have changed.

Currently, seven types of resources are subject to the tax on resources: crude oil, natural gas, coal and other crude non-metallic ores, crude ores of nonferrous metals, ore and crude salt. According to the August 29 broadcast in English first bet on June 27, 2016, from this moment the government began to deploy resources tax reform "comprehensive way".

Inside confirmed that "efforts will be made to make the collection of taxes on water as on an ad valorem basis."

The Government believes that the resources tax reform in full will improve the pricing mechanism of resources products, taking into account differences between countries producing regions of China; promote coordination and enhanced regional development; and include environmental conservation and exploitation of resources.

It is assumed that tax rates should take into account the resources involved in the production of each mineral so that the overall tax burden on the company's production should not be increased.

According to the State Administration of taxes and fees, income tax resources grew by an average of 27 percent per year since the tax was introduced to achieve up to RMB103.5bn (USD15.5bn) in 2015, representing 1.8 percent of the local tax revenues.

Author: Sergey Panov

managing partner Finance Business Service

Real Estate in China

Chinese minister of finance Lou Jiwei pointed out that the prioritet of the next tax government will be go into force long time waited local and rigional property tax.

State Council of China claimed about approving a new property tax in the structure of his financial plans of economic politic claimed in March of this year. This frames as expect, will be differ in different cities and towns depend on conditions.

This announce was claimed after long time break in government plans to extand tax schemes on property, which acting in Shanghai and Chongqing, which first was set up in 2011 year. First created to keep the rising of Chinese price on property will under control, shemes prevented to some extant with absent of concrate system of property registration.

In spite of the fact that the market of property in country stay more weak, the government still think that the change of property tax can support income of local governemnt. However, speaking on the last G20 the minister of finance and directors of banks also pointed out that the desidion will long several time and at the same time collecting the information about property, draft reform and legislation in large part can't provide in the next year and need to wait untill 2018 year.

Existing property tax in China is differ because it can be tax on with differ rates according to local government. Now they include property tax in cities and towns, a city maintenance and construction tax, a land appreciation tax, and a house property tax.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

China expands reform

From 1 July, 2016 foreign tourists who plan visit to Chinese Guangdong province be available to get VAT refund for them purchases made in certain store if they departing from Guangzhou's Baiyun International Airport and Nansha Port or from Zhuhai's Jiuzhou Port.

Foreign tourists including all from Hong Kong, Makau and Taivan also be available for this VAT refund if they will stay on the Mainland less than 183 days. They must spend at last RMB500 (USD75) for certain items in any store in one day to be able to claim an 11 percent refund where less a two percent handling charge. The refund is able if the purchases made during 90 days before departure.

The measure has been taken in a further effort to boost inbound tourism and consumption. Guangdong province is the nearest geographically to Hong Kong and Macau, and receives the vast majority of inbound tourists to the Mainland.

Hainan provided scheme of this refund in 2011, with Beijing and Shanghai being authorized to begin offering VAT refunds to tourists on July 1, 2015. From January of this year this scheme also able for foreign visitors in such Chinese provinces as Tianjin, Liaoning, Anhui, Fujian, Xiamen, and Sichuan.

Author: Sergey Panov

managing partner Finance Business Service

Income tax expense. China

The taxpayers will pay VAT instead of tax on profits and that will reduce the burden on enterprises. The Chinese government has made certain changes in the procedure for taxation of companies: now companies are exempted from the need to pay income tax, but they will be required to pay value added tax. Tax reform is accompanied by the spread of the circular of the State Council and shall enter into force on 1 May 2016.

For effective implementation of the new program administrations must interpreted new tax rules correctly. In turn, the companies are required to pay prescribed amounts of tax on time, refraining from evasion.

According to preliminary data, the transition to the new system will affect about 10 million taxpayers who will be required to pay VAT (mostly working in construction and real estate, finance and the service sector). The authors of the bill believe that the innovation will facilitate the tax burden on many businesses.

Li Keqiang, Premier Wu Yi said that the ongoing reform will have a positive impact on the profitability of companies by reducing the size of obligatory deductions to the treasury (more than 500 billion yuan for the whole of the current year) will be able to increase its productivity.

Replacing income taxes in favor of the VAT - one of the reforms that the authorities were promised to balance the different sectors of the economy. As experts explain, despite the increase in rates from 5.5%, which was the profit tax - up to 11% value-added tax, the total load will fall as the tax base becomes smaller.

It should be noted that such a step of the Chinese government will entail an increase in the budget deficit to 3% of GDP. Keqiang summarized that the global economy is not recovering enough dynamically, and also there was a decline in China's growth rate, it is necessary to pay attention to methods of expansionary fiscal policy.

Author: Sergey Panov

managing partner Finance Business Service

New Zealand. Reports

Revenue Minister of New Zealand, Michael Woodhouse, has said that recently signing agreement on the report exchange between countries will be increase country's tax collection capability.

This agreement that provide country-by-country exchange of financial reports was recently signed by officials from New Zealand, Canada, China, Iceland, India, and Israel, totally 39 countries.

Woodhouse also said that some large multinationals often use some difficult financial scheme, what helps them to escape of paying tax, called base erosion and profit shifting. This new country-by-country reporting agreement is on the centre of financial activity, allow to participants exchange information of multinationals activity.

«Under that agreement, large multinationals will have to provide information relating to economic activity, including the global allocation of income and taxes paid," the Revenue Minister said. "Each revenue authority collecting this information to exchange with other countries. This also will show us a full picture of every multinational financial activity. According to this agreement it will be easier to control any tax wrongdoing».

The agreement can ensure us that large multinationals pay their fair share of tax.

Author: Olena Kutova

senior lawyer of the Finance Business Service company