Peer Review Report Combined: Phase 1 + Phase 2: People'S Republic of China

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES

Peer Review Report
Combined: Phase 1 + Phase 2
PEOPLES REPUBLIC OF CHINA
Global Forum
on Transparency
and Exchange
of Information for Tax
Purposes Peer Reviews:
Peoples Republic
of China 2012
COMBINED: PHASE 1 + PHASE 2
June 2012
(reflecting the legal and regulatory framework
as at April 2012)
This work is published on the responsibility of the Secretary-General of the
OECD. The opinions expressed and arguments employed herein do not
necessarily reflect the official views of the OECD or of the governments of its
member countries or those of the Global Forum on Transparency and Exchange
of Information for Tax Purposes.
This document and any map included herein are without prejudice to the status
of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.
ISBN 978-92-64-17825-0 (print)
ISBN 978-92-64-17826-7 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)
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OECD 2012
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OECD (2012), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
Reviews: People's Republic of China 2012: Combined: Phase 1 + Phase 2, OECD Publishing.
http://dx.doi.org/10.1787/9789264178267-en
PEER REVIEW REPORT COMBINED PHASE 1 AND PHASE 2 REPORT THE PEOPLES REPUBLIC OF CHINA OECD 2012
TABLE OF CONTENTS 3
Table of Contents
About the Global Forum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Information and methodology used for the peer review of China. . . . . . . . . . . . .11
Overview of China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 74
B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 81
C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . . 92
C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . 96
C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 97
4 TABLE OF CONTENTS
Summary of Determinations and Factors Underlying Recommendations. . . .103
Annex 1: Jurisdictions Response to the Review Report . . . . . . . . . . . . . . . . . 107
Annex 2: List of All Exchange-of-Information Mechanisms in Force . . . . . . 108
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . .113
Annex 4: People Interviewed During On-Site Visit . . . . . . . . . . . . . . . . . . . . . 120
ABOUT THE GLOBAL FORUM 5
About the Global Forum
The Global Forum on Transparency and Exchange of Information for Tax
Purposes is the multilateral framework within which work in the area of tax
transparency and exchange of information is carried out by over 100 jurisdic-
tions which participate in the Global Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review
of the implementation of the international standards of transparency and
exchange of information for tax purposes. These standards are primarily
reflected in the 2002 OECD Model Agreement on Exchange of Information
on Tax Matters and its commentary, and in Article 26 of the OECD Model
Tax Convention on Income and on Capital and its commentary as updated in
2004, which has been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably
relevant information for the administration or enforcement of the domestic tax
laws of a requesting party. Fishing expeditions are not authorised but all fore-
seeably relevant information must be provided, including bank information
and information held by fiduciaries, regardless of the existence of a domestic
tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by
the Global Forum as relevant to its work, are being reviewed. This process
is undertaken in two phases. Phase 1 reviews assess the quality of jurisdic-
tions legal and regulatory framework for the exchange of information, while
Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined Phase 1 plus
Phase 2 reviews. The Global Forum has also put in place a process for
supplementary reports to follow-up on recommendations, as well as for the
ongoing monitoring of jurisdictions following the conclusion of a review. The
ultimate goal is to help jurisdictions to effectively implement the international
standards of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and
they thus represent agreed Global Forum reports. For more information on
the work of the Global Forum on Transparency and Exchange of Information
for Tax Purposes, and for copies of the published review reports, please refer
to www.oecd.org/tax/transparency and www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report
1
summarises the legal and regulatory framework for
transparency and exchange of information in the Peoples Republic of China
2
(the terms PRC and China are interchangeably used) as well as the prac-
tical implementation of that framework. The international standard, which
is set out in the Global Forums Terms of Reference to Monitor and Review
Progress Towards Transparency and Exchange of Information, is concerned
with the availability of relevant information within a jurisdiction, the compe-
tent authoritys ability to gain timely access to that information, and whether
that information can be effectively exchanged with the jurisdictions exchange
of information partners.
2. China has transformed from a planned economy to a socialist market
economy. Since the introduction of market-based economic reforms in 1978
and the governments openness toward foreign direct investment, China
has become the worlds second-largest economy. As a rapidly developing
and industrialising global power, exchange of information for tax purposes,
although relatively new to China, has been instrumental in Chinas tax com-
pliance management. China fully endorses the international standards for
transparency and exchange of information for tax purposes and has been
an active member of the Global Forum on Transparency and Exchange of
Information for Tax Purposes since its creation.
3. China has developed a comprehensive network of bilateral agree-
ments that provide for exchange of information in tax matters. Currently,
China has a network of 97 Double Taxation Conventions (DTCs), 95 of which
are in force, and two agreements
3
in force containing provisions concerning
1. This document and any map included herein are without prejudice to the status
2. The following territories were not included as part of this assessment: Hong Kong
Special Administrative Region (Hong Kong SAR), Macau Special Administrative
Region (Macau SAR) and Chinese Taipei.
3. With Hong Kong Special Administrative Region (Hong Kong SAR) and Macau
Special Administrative Region (Macau SAR).
8 EXECUTIVE SUMMARY
information exchange. In addition, China has entered into Tax Information
Exchange Agreements (TIEAs) with eight jurisdictions (Argentina, The
Bahamas, the British Virgin Islands, Bermuda, the Cayman Islands,
Guernsey, the Isle of Man, and Jersey), seven of which are in force. Chinas
agreements cover its major trading partners and China has not refused to
enter into an exchange of information agreement with any Global Forum
member seeking to do so. The large majority of Chinas agreements meet the
international standards. China is also actively seeking to expand its exchange
of information network and is currently engaged in negotiations to establish
new agreements as well as renegotiations of its older agreements.
4. The main types of entities in China include limited liability com-
panies, joint stock companies, and partnerships. Chinas system of multiple
public registries, registers of shareholders maintained by public and private
companies, and private registries maintained by Chinas tax authorities ensure
that accurate and adequate current information concerning the ownership
and control of legal entities and arrangements is readily accessible to Chinas
competent authority. Chinas corporate and anti money laundering laws also
ensures that bank information and accounting records are effectively main-
tained and accessible in a timely fashion. Additionally, there is a variety of
penalties under Chinas laws to ensure that information required to be main-
tained is, in fact, maintained. Several of Chinas exchange of information
partners who provided input regarding the review of China noted that over the
past three years China has been able to provide ownership information and
accounting records (including underlying documentation) for all types of legal
entities and arrangements as well as bank information in response to specific
requests for exchange of information.
5. Chinas tax authority (the State Administration of Taxation (SAT))
has broad powers to obtain bank, ownership, identity, and accounting infor-
mation and have enforcement measures to compel the production of such
information. The ability of the SAT to obtain information for exchange of
information purposes is derived from general access powers under the Tax
Collection and Administration Law and the SAT Protocol for International
Exchange of Tax Information coupled with the authority provided under the
relevant exchange of information agreements. The SAT authorities have
rights to make enquires, inspect documents, and search and seize informa-
tion when necessary. No bank secrecy or other provisions in Chinas laws
and regulations unduly prevent the SAT authorities from obtaining, directly
or indirectly, account information maintained by banks or other financial
institutions for tax purposes.
6. Chinas competent authority (the Director of the Global Co-operation
and Compliance Division of the International Taxation Department of the SAT
(GCCD)), when requested by a foreign counterpart, can access information
EXECUTIVE SUMMARY 9
with the assistance of the SAT officials at or below provincial level, who have
the necessary powers to access information from taxpayers and third parties
in China. The co-ordination procedures between Chinas competent authority
and the SAT are clearly defined and effective in practise.
7. Over the past three years, the volume of specific requests for exchange
of information both to and from Chinas exchange of information partners has
increased considerably. Chinas competent authority reports that it expects the
number of inbound requests to continue to grow in future years. Understaffing
at the GCCD may consequently result in longer response times, especially if
large quantities of requests are received in a short time. It is therefore recom-
mended that China devote additional personnel resources to the GCCD to
ensure effective management of Chinas EOI program.
8. All of Chinas significant exchange of information partners, as well
as most of its top trading partners, provided input to this review. The infor-
mation received confirms that, notwithstanding some imperfections, Chinas
practices with respect to exchange of information in tax matters are of a very
high standard.
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of China
4
9. The assessment of the legal and regulatory framework of the Peoples
Republic of China (the terms PRC and China are interchangeably used)
and the practical implementation and effectiveness of this framework was
based on the international standards for transparency and exchange of infor-
mation as described in the Global Forums Terms of Reference to Monitor
and Review Progress Towards Transparency and Exchange of Information,
and was prepared using the Global Forums Methodology for Peer Reviews
and Non-Member Reviews. The assessment was based on the laws, regula-
tions, and exchange of information mechanisms in force or effect as at April
2012, other information, explanations and materials supplied by China during
the on-site visit that took place on 12-14 December 2011, and information
supplied by partner jurisdictions. During the on-site visit, the assessment
team met with officials and representatives of relevant Chinese government
agencies, including the State Administration of Taxation, the Securities
Regulatory Commission, the Banking Regulatory Commission, the State
Administration for Industry and Commerce, the Ministry of Justice, and the
Ministry of Finance (see Annex 4).
10. The Terms of Reference breaks down the standards of transparency and
exchange of information into 10 essential elements and 31 enumerated aspects
under three broad categories: (A) availability of information; (B) access to
information; and (C) exchange of information. This combined review assesses
Chinas legal and regulatory framework and the implementation and effective-
ness of this framework against these elements and each of the enumerated
aspects. In respect of each essential element, a determination is made regarding
Chinas legal and regulatory framework that either: (i) the element is in place;
(ii) the element is in place but certain aspects of the legal implementation of the
4. This document and any map included herein are without prejudice to the status
12 INTRODUCTION
element need improvement; or (iii) the element is not in place. These determi-
nations are accompanied by recommendations for improvement where relevant.
In addition, to reflect the Phase 2 component, recommendations are also made
concerning Chinas practical application of each of the essential elements. As
outlined in the Note on Assessment Criteria, following a jurisdictions Phase 2
review, a Rating will be applied to each of the essential elements to reflect
the overall position of a jurisdiction. However, this rating will only be published
at such time as a representative subset of Phase 2 reviews is completed. This
report therefore includes recommendations in respect of Chinas legal and regu-
latory framework and the actual implementation of the essential elements, as
well as a determination on the legal and regulatory framework, but it does not
include a rating of the elements.
11. The assessment was conducted by a team which consisted of two
assessors and two representatives of the Global Forum Secretariat: Ms. Silke
Vo of the Federal Ministry of Finance of Germany; Ms. Shauna Pittman of
the Canada Revenue Agency; and Mr. Stewart Brant and Mr. Rmi Verneau
from the Global Forum Secretariat.
Overview of China
12. The PRC was founded on 1 October 1949 with Beijing as its capital.
China is located in eastern Asia, bounded by the western shore of the Pacific
Ocean. It has a land area of approximately 9.6 million square kilometres.
Chinas territory is comprised of 34 provinces, autonomous regions, munici-
palities and special administrative regions. As at the end of 2010, China had
a population of 1.3 billion.
5
The major cities are the capital Beijing, which is
the political and cultural centre, and Shanghai, which is the largest industrial,
commercial and financial centre. China is a multi-ethnic nation consisting of
56 ethnic groups. The official language is Chinese. All Chinese citizens over 18
years of age have the right to vote and stand for election (Constitution Art. 3).
13. China has transformed from a planned economy to a socialist market
economy. It has become one of the worlds largest economies since the intro-
duction of market-based economic reforms in 1978. Chinas gross domestic
product (GDP) was approximately 47.2 trillion Chinese Yuan Renminbi
(CNY) (EUR 5.57 trillion) in 2011 (an increase of 9.2% from the preced-
ing year).
6
Its economy is dominated by industry (46%) and services (44%);
agriculture represents 10%.
7
Foreign direct investment in China reached
approximately CNY 730 billion (EUR 86.1 billion) in 2011 (an increase of
5. 2010 Sixth National Population Census Data Gazette [1] (No. 1).
6. China Statistical Yearbook 2010.
7. www.worldbank.org/.
INTRODUCTION 13
9.7% from the preceding year).
8
Chinas major trading partners are (in order)
the European Union; the United States; Japan; ASEAN
9
member states; Hong
Kong China; the Republic of Korea; Chinese Taipei; Australia; Russia; and
India.
10
Chinas currency is the Chinese Yuan Renminbi (CNY) (CNY 8.48
= EUR 1 as at 29 February 2012).
11
14. China is a member of the United Nations (Security Council), Group
of Twenty Finance Ministers and Central Bank Governors (G20), Asia Pacific
Economic Cooperation (APEC), Financial Action Task Force, the Asia-
Pacific Group on Money Laundering, and the Eurasian group on combating
money laundering and financing of terrorism. China has been an active
member of the Global Forum on Transparency and Exchange of Information
for Tax Purposes, its Steering Group and Peer Review Group.
General information on legal system and the taxation system
15. The Chinese state has a functional division among the legislative,
executive and judicial bodies. The Constitution is the fundamental law of
China. The existing Constitution was adopted by the National Peoples
Congress (NPC) on 4 December 1982.
16. The NPC is Chinas legislative body (parliament) and the countrys
highest authority of state power (Constitution Art. 57). The NPC elects all
executive (administrative), judicial and prosecutorial departments of the state
(Art. 3). It also has authority over the local peoples congresses which exist
at all levels of local government. When the NPC is between sessions, the
Standing Committee of the NPC (Standing Committee) executes the NPCs
powers. Both the NPC and its Standing Committee exercise the power to
enact national legislation (Art. 58). The NPC is empowered to amend Chinas
Constitution and supervise its enforcement, and to enact and amend laws
(e.g. the criminal law, civil law and law on state institutions) (Art. 62). The
Standing Committee is empowered to interpret the Constitution and laws,
supervise the Constitutions enforcement, and enact and amend laws other
than those which should be enacted by the NPC.
8. hhttp://english.mofcom.gov.cn/aarticle/statistic/foreigninvestment/201202/
20120207948411.html.The top ten countries/jurisdictions investing in China in
2010 were: Hong Kong, China; Chinese Taipei; Japan; Singapore; United States;
the Republic of Korea; United Kingdom; Germany; France; and the Netherlands.
9. The Association of Southeast Asian Nations (ASEAN) has 10 member states:
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
Thailand and Vietnam.
10. http://english.mofcom.gov.cn/aarticle/statistic/ie/200901/20090105999698.html.
11. www.xe.com/.
14 INTRODUCTION
17. Chinas executive body is the State Council (Constitution Art. 85).
The State Council is led by the Premier, who leads the Ministers and
Commissioners who are in charge of the various ministries and commissions.
The State Council is empowered to formulate administrative legislation and
regulations in accordance with the provisions of the Constitution and laws
(Art. 89). Additionally, departmental regulations can be issued by the minis-
tries and commissions of the State Council. The State Council is responsible
to the NPC.
18. The judicial framework comprises two departments: the Peoples
courts and the Peoples procuratorates (Constitution Art. 135). The Supreme
Peoples courts and the Supreme Peoples procuratorates are directly respon-
sible to the NPC and its Standing Committee (Art. 128). The national judicial
departments are elected by the NPC, report to the NPC and are under the
NPCs supervision. The Supreme Peoples Court (SPC) and the regional
peoples courts are the state departments of adjudication, and independently
determine on criminal, civil, administrative and state compensation cases.
The Supreme Peoples Procuratorate (SPP) and the regional people procura-
torates are the state departments of public prosecution and legal supervision.
All of these courts and procuratorates can hear tax cases. The Ministry of
Public Security (MPS) and the local public security departments are the
state departments of criminal investigation. The Ministry of Public Security
(MPS) is responsible to the State Council (Art. 89).
19. China adopts a civil law system. The Constitution of China has the
highest legal authoritative power (Constitution Preamble). No laws, admin-
istrative regulations, or regional laws and regulations should conflict with
the Constitution. The hierarchy of laws is as follows (in descending order):
Constitution, laws, national administrative regulations, ministerial decrees
and local regulations. Laws and local regulations are enacted by the NPC
and by local Peoples Congresses, respectively. Ministerial decrees and local
governmental rules are enacted by the ministries under the State Council
and by the local executive authorities (Peoples governments), respectively.
National administrative regulations may be referred to as rules, regulations
or measures.
20. The NPC has the right to amend or revoke inappropriate laws made
by the Standing Committee and to revoke specific regulations that are
approved by the Standing Committee but which do not comply with the pro-
visions of the Constitution and the Legislation Law (Constitution Art. 62).
The Standing Committee has the right to revoke administrative regulations
that conflict with the Constitution and laws. The State Council has the right
to amend or revoke inappropriate departmental and local governmental
regulations.
INTRODUCTION 15
21. At various levels, the executive branches exercise administrative
power in accordance with the Constitution and related laws. The State
Council is in charge of formulating administrative regulations and has the
power to make decisions on government administrative affairs that have
national implications (Constitution Art. 89). Administrative regulations deal
with administration by the executive. There are more than 40 departments
which exercise specific administrative powers within their respective area
under the State Council, such as industry and commerce, taxation, finance,
customs, foreign exchange and banking sectors.
22. Tax treaties with foreign jurisdictions are concluded by the State
Administration of Taxation but require the approval of the State Council.
Treaties have the full force and effect of law in China and must be faithfully
observed. From a tax perspective, international agreements, such as double
taxation conventions (DTCs) and taxation information exchange agreements
(TIEAs) override domestic laws but not the Constitution in the case of con-
flict (Tax Collection and Administration Law Art. 91).
The tax system
23. The administration of Chinas tax system is under the general juris-
diction of the State Administration of Taxation (SAT), consisting of local
state taxation bureaus (LSTBs) and local taxation bureaus (LTBs) at the pro-
vincial level. The LSTBs, LTBs and their local branches at various levels are
responsible for collecting and administering the taxes based on the substance
of revenue allocation respectively (Tax Collection and Administration Law
(Arts.5, 10). The chart below illustrates the organisation structure of the SAT.
16 INTRODUCTION
24. The current tax system in China has specific tax laws, rules, circu-
lars and regulations for different types of taxes and all are binding from a
tax perspective. State organisations that have the authority to formulate tax
regulations within their administration include: The NPC and its Standing
Committee, the State Council, the Ministry of Finance (MOF), the SAT, the
Tariff and Classification Committee of the State Council, and the General
Administration of Customs.
25. There are four tax laws in China: the Enterprise Income Tax Law
(EITL), the Individual Income Tax Law (IITL), the Tax Collection and
Administration Law (TCAL), and the Vehicle and Vessel Tax Law (VVTL).
There are also several provisional regulations, including the Value Added Tax
(VAT) Provisional Regulation, the Business Tax (BT) Provisional Regulation,
and the Consumption Tax (CT) Provisional Regulation. In addition, there are
circulars/rules and local regulations/rules to provide guidance, implementa-
tion details and clarifications on different tax issues as they evolve.
26. Chinas tax system consists of income, goods, and services taxes, as
well as other taxes. Income taxes include enterprise income tax (EIT) and
individual income tax (IIT). Goods and services taxes include VAT, BT, and
CT. Local taxes include stamp duty (SD) and real estate tax (RET).
27. A PRC tax resident entity (i.e. an entity incorporated in China or an
entity incorporated outside of China but with its place of effective manage-
ment in China) is subject to EIT on its worldwide income at a statutory rate of
25% (unless specific preferential treatment applies) (EITL Arts.2, 3, 4). The
EITL contains a foreign tax credit (FTC) mechanism for taxes paid on foreign
income.
12
Non-resident taxpayers are generally subject to withholding tax on
their China sourced income at a statutory tax rate of 20%, which is reduced
to 10% by the State Council (or lower if a DTC rate applies) (EITL Arts.3, 4;
the Implementation Rules of EITL Art. 91). Non-residents having a permanent
establishment (PE) in China are subject to EIT of 25% to the extent of net
taxable income attributable to such PE. The EITL also contains special rules,
such as a general anti-avoidance rule and a number of specific anti-avoidance
regimes, such as controlled foreign company rules and transfer pricing rules.
28. Chinese nationals who are domiciled in China are resident for tax
purposes. Resident individual taxpayers are generally subject to the IITL on
their worldwide income (special rules apply to expatriates). Non-tax resident
individuals are subject to IIT in respect of their China-sourced income (IITL,
Art. 1). Wages and salaries are taxed at progressive rates ranging from 3% to
45%. Business income is taxed at progressive rates ranging from 5% to 35%.
Other income is taxed at 20%.
12. Circular Caishui [2009] No. 125 and Circular SAT Announcement [2010] No. 1.
INTRODUCTION 17
29. The TCAL and its Implementation Rules contain provisions for mat-
ters that are common and fundamental to tax collection in China. Articles
dealing with procedural matters, such as the tax registration (Chapters II), tax
audit (Chapters IV), and penalties and legal liabilities (Chapter V) make up
the majority of the TCAL, but general provisions on maintaining accounting
books, tax reporting requirements and collecting, and on other areas are also
included.
30. All taxpayers in China (including residents and non-residents, except
for government authorities and individuals) are required to register with the
SAT under the Taxation Registration Administrative Rules (TRAR Art. 2).
With a view to promoting and facilitating foreign direct investment, spe-
cific laws on different forms of Foreign Invested Enterprises (FIEs) were
promulgated by the NPC. FIEs in China may take three major forms: equity
joint ventures (EJVs), co-operative joint ventures (CJVs) and wholly foreign-
owned enterprises (WFOEs). These companies are purely Chinese resident
companies and are consequently subject to the same taxation rules as apply
to Chinese owned companies. In terms of foreign companies, there are vari-
ous tax regulations which require a non-resident company to complete tax
registration with the SAT as long as it has China sourced income (CITL Art. 2,
TCAL Art. 2).
31. China has various types of special economic zones in order to attract
foreign investment. The zones are classified as special economic zones, open
coastal cities and economic and technology development zones, open coastal
economic zones, high-and new-technology development zones, and free
trade zones or bonded zones. Since 2008, most of the tax incentives granted
to these zones have been abolished. Certain non-tax incentives are available,
which generally include more liberal regulations for foreign exchange control,
labour management, land use, and provision of utilities. In terms of registra-
tion requirements or availability of information, companies located in these
zones are subject to the same disclosure requirements as apply to companies
established outside these zones.
International exchange of information for tax purposes
32. Chinas framework relevant to exchange of information for tax
purposes is presided over by the SAT. Administration of the exchange of
information under Chinas treaty network is the responsibility of Chinas
competent authority, being the Director General, the Deputy Director General
of the International Taxation Department, and the Director of the Global
Co-operation and Compliance Division (GCCD) of the International Taxation
Department. In practice, the GCCD is responsible for managing and respond-
ing to all of Chinas exchange of information requests.
18 INTRODUCTION
33. China has a comprehensive network of bilateral agreements that pro-
vide for exchange of information in tax matters, and is currently engaged in
negotiations to establish new agreements as well as renegotiations of its older
agreements. China signed its first DTC with Japan in 1983. Currently, China
has a network of 97 DTCs, 95 of which are in force, and two agreements con-
taining information exchange requirements. In addition, China has entered
into eight TIEAs, with Argentina, The Bahamas, the British Virgin Islands,
Bermuda, the Cayman Islands, Guernsey, the Isle of Man, and Jersey, seven
of which are in force.
34. China also exchanges information through specific requests and
on automatic and spontaneous basis on more than 10 000 cases a year.
Further, with the aim of identifying and curbing international tax avoidance,
China participates in the Joint International Tax Shelter Information Centre
(JITSIC) along with Australia, Canada, France, Japan, the Republic of Korea,
the United Kingdom and the United States.
Overview of the financial sector and relevant professions
35. Most financial activities are domestic and most of the key financial
institutions are owned by the Chinese government, either fully or by a major-
ity stake.
Banking sector
36. The PBOC (Peoples Bank of China) was established in December
1948. In 1949, the central government of the PRC conferred on the PBOC the
status of a national bank. It is the governments central bank and is entrusted
with the independence and autonomy to make decisions regarding monetary
policies. It reports its decisions to the State Council.
37. The CBRC (China Banking Regulatory Commission) took over the
regulatory function of the banking sector from the PBOC in 2003. The CBRC
is a ministerial-level organisation under the State Council. It is entrusted with
regulation and supervision of banking institutions, asset management compa-
nies, trust companies and non-bank financial institutions.
38. The following table sets out the types of entities in Chinas banking
sector.
13
13. There are also three policy banks founded and capitalised by the government:
China Development Bank, China Import and Export Bank of China, and China
Agricultural Development Bank. They participate in financing and business sec-
tors or projects that are in-line with the state policies.
INTRODUCTION 19
Banking institutions (domestic and foreign)
Commercial Banks
Credit co-operatives
and credit unions Non-bank institutions
State owned
commercial banks
Joint stock commercial
banks
City commercial banks
Rural commercial
banks
Rural co-operative
banks
Foreign-invested
banks
City credit
co-operatives
Rural credit
co-operatives and
credit unions
Financial asset
management
companies
Trust companies
Enterprise group
financial companies
Automobile finance
companies
Post savings
Financial leasing
companies
Wholesale foreign
exchange and CNY
money brokers
39. As at the end of 2010, the total assets of the domestic banks was
CNY 91 473 billion (EUR 10 787 billion) while the total assets of non-bank
financial institutions was CNY 2 090 billion (EUR 246 billion). The total
assets of the foreign banks was CNY 1 742 billion (EUR 205 billion).
14
Securities sector
40. The CSRC (China Securities Regulatory Commission) is a ministry-
level unit under the State Council authorised to regulate Chinas securities
and futures markets.
15
Chinas securities sector is comprised of three main
types of institutions: securities organisations, futures institutions, and fund
institutions. Securities organisations are institutions that provide intermedi-
ary services to security market participants. The following table sets out the
various types of securities institutions:
14. Appendix 8-1 to 2010 Annual Report, China Banking Regulatory Commission.
15. See further: www.csrc.gov.cn/pub/csrc_en/about/.
20 INTRODUCTION
Securities institutions (domestic and foreign)
Securities
organisations Futures institutions Funds institutions
Securities companies
Stock and futures
exchanges
Securities registration
and settlement
institutions
Futures companies Fund management
companies
Fund custody banks
Fund sales agencies
41. There are currently two stock exchanges in China: the Shanghai
Stock Exchange and the Shenzhen Stock Exchange. Both are for listing of
domestic companies (A shares for domestic investors only while B shares
are permitted for foreign investments). As on 12 March 2012, there were
2 369 listed companies in domestic A shares; there were 108 listed compa-
nies in domestic B shares which have been permitted for foreign investment.
Additionally, there were 170 companies listed in the Hong Kong, China Stock
Exchange (overseas H shares).
Insurance sector
42. The CIRC is the government body authorised to regulate Chinas
insurance sector. Chinas insurance sector includes four types of institutions,
as set out in the following table:
Insurance institutions (domestic and foreign)
Domestic-invested insurance companies and foreign-invested insurance
companies
Representative offices of foreign insurance institutions
nsurance intermediaries
nsurance asset management companies
Relevant professions
43. Accountants in China are generally only authorised to perform audit
and related services (Law on Certified Public Accountants, Art. 15). As of
December 2011, China had 97 510 registered certified public accountants and
7 976 registered public accounting firms.
44. As of October 2011, China had 200 000 licensed lawyers and more
than 17 000 registered law firms. The Ministry of Justice is responsible for
licensing and supervising lawyers. Lawyers are required to obtain a legal
practice certificate issued by the provincial judicial administrative authority.
INTRODUCTION 21
Lawyers who intend to establish a law firm must submit an application to the
provincial judicial administrative authority (Law on Lawyers, Arts.4, 15). The
judicial departments examine lawyers and law firms annually for compliance
with rules relating to legal practice, internal management and professional
ethics. Lawyers are also supervised by the All China Lawyer Association
(ACLA) which is the legal sectors national self-regulatory organisation.
Lawyers are required to join their local lawyers association (Art. 36).
45. In China, notaries are required to operate on a non-profit basis. They
may verify the legality, objectivity and authenticity of documents and trans-
actions, hold funds in escrow, or handle funds on behalf of other persons or
entities. As at June 2011, China had 3 182 notary offices, with 19 389 notaries.
Establishment of a notary office is subject to the approval of the Ministry of
Justice. Notaries who have passed the national judicial examination, satis-
fied the qualification stipulated by the Ministry of Justice, and served a full
years internship and passed exam after receiving pre-service training may be
licensed by the Ministry of Justice to perform notary services.
46. Authorised trust investment companies are the only businesses in
China that are permitted to administer business trusts (Regulations on Trust
Investment Corporations). No other financial institutions, lawyers, accountants
or other professionals are permitted to engage in this activity as a business.
Trust investment companies are treated as non-bank financial institutions
and are covered by the Anti-Money Laundering Law (AMLL) and Anti Money
Laundering Rules (AMLR) as described in part A of this report.
Recent developments
47. China signed a TIEA with the Cayman Islands and a new DTC with
the United Kingdom in 2011. Chinas agreements with Argentina (TIEA),
Bermuda (TIEA), the Czech Republic (DTC), Guernsey (TIEA), the Isle of
Man (TIEA), Jersey (TIEA), Malta (DTC), Syria (DTC) and Zambia (DTC)
entered into force in 2011.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 23
Compliance with the Standards
A. Availability of Information
Overview
48. Effective exchange of information requires the availability of reliable
information. In particular, it requires information on the identity of owners
and other stakeholders as well as information on the transactions carried
out by entities and other organisational structures. Such information may
be kept for tax, regulatory, commercial or other reasons. If such informa-
tion is not kept or the information is not maintained for a reasonable period
of time, a jurisdictions competent authority
16
may not be able to obtain and
provide it when requested. This section of the report describes and assesses
Chinas legal and regulatory framework for availability of information. It also
assesses the implementation and effectiveness of this framework.
49. The main forms of business organisations in China include limited
liability companies and joint stock companies. China relies primarily on
business and tax registration, corporate record keeping requirements, and
statutory tax filing requirements to ensure the maintenance of information on
the legal ownership of companies. Companies are obliged to register with the
relevant State Administration for Industry and Commerce (SAIC) and State
Administration of Taxation (SAT) authorities before carrying on business
16. The term competent authority means the person or government authority des-
ignated by a jurisdiction as being competent to exchange information pursuant
to a double tax convention or tax information exchange.
24 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION
activities in China. Ownership information of companies, including foreign
invested enterprises, is disclosed in the registration process. Joint stock
companies are obliged to maintain up-to-date shareholder registries contain-
ing ownership information for all registered shareholders. China Securities
Register and Settlement Institution and Securities Depository and Settlement
Centres at local level maintain ownership information for unregistered shares
in China.
50. Foreign companies conducting business in China are obliged to
register with the SAIC authorities and are subject to the same tax filing
requirements as domestic companies under the Enterprise Income Tax Law
(EITL) as regards Chinese-source income. A foreign company is deemed a
PRC-resident company for tax purposes if its place of effective management
is in China. Under such circumstances, foreign companies are obliged to reg-
ister ownership information with the responsible SAT authorities to the same
extent as domestic companies.
51. Information is available to Chinas competent authority that identifies
the partners in any partnership that has income, deductions or credits for tax
purposes, carries on business in China, or is a limited partnership formed
under PRC law. Such partnerships are obliged to register with the SAIC and
SAT authorities before carrying out business in China. Ownership informa-
tion of partnerships, including foreign invested partnerships, is disclosed in
the registration process.
52. PRC law requires the maintenance of information that identifies
the settlor, trustee, and beneficiaries of trusts. All trusts must be created in
writing in the form of a trust deed and contain the names and addresses of
the settlor, trustee and beneficiary. Trust deeds relating to business trusts
are registered with the Shanghai Trust Registration Centre or the regulatory
agency in charge of public affairs (for public welfare trusts). Trust companies
are subject to stringent record-keeping requirements under the Anti-Money
Laundering Law (AMLL), which requires the maintenance of ownership
information on the settlors and beneficiaries. Resident trustees of foreign
trusts are obliged to maintain ownership information on the settlor and ben-
eficiaries for PRC tax purposes.
53. PRC law requires the maintenance of information that identifies the
founders and members of the foundation council and beneficiaries of founda-
tions established under its laws. Foundations in China are non-profit legal
persons established for public welfare purposes. Foundations are obliged to
register with the Ministry of Civil Affairs and the responsible SAT authorities
before carrying out activities in China. Information that identifies the found-
ers and members of the foundation council and beneficiaries is disclosed in
the registration process.
54. Chinas general legal framework provides that relevant legal entities
and arrangements carrying on business in China are obliged to maintain a
full range of accounting records, including underlying documentation, for a
minimum of five years. This is supplemented by specific legal rules appli-
cable to each type of relevant entity and arrangement and makes accounting
records available in China. Financial institutions operating in China are
obliged to maintain information on all account-holders and related financial
and transactional information.
55. The SAT reports to have few difficulties with respect to issues regard-
ing the availability of ownership and identity information, both for domestic
tax cases and for international assistance in tax matters. Additionally, there are
a variety of penalties under Chinas laws to ensure that information required
to be maintained is, in fact, maintained. The penalties appear to be effective
and dissuasive enough to ensure compliance. Most of Chinas laws provide a
range of penalties, including small to large monetary fines depending on the
level of infraction, and imprisonment in egregious cases.
56. Information received from partner jurisdictions with an exchange of
information relationship with China, as well as quantitative and qualitative
information received from China, indicate that China actively exchanges
bank, ownership, and identity information and accounting records. Based on
peer input received, it is clear that Chinas competent authority has been able
to provide such information for all types of legal entities and arrangements in
response to specific requests for exchange of information.
A.1. Ownership and identity information
Jurisdictions should ensure that ownership and identity information for all relevant
entities and arrangements is available to their competent authorities.
57. In China, a legal person is defined as an organisation that independently
enjoys civil rights and assumes civil obligations in accordance with the law,
from the time that it is established until it is terminated (General Principles of
Civil Law of the PRC Art. 36). In addition to the term legal persons, Chinese
nomenclature also uses the term unit. A unit is a much broader concept than
a legal person. In general, a unit may refer to various organisations, such as
companies, partnerships, trusts, foundations, official (state) organisations, social
organisations, government-sponsored institutions, etc. To conduct business
activities in China, a legal or natural person must register with the appropriate
PRC authorities.
58. The SAIC is the government authority in charge of market super-
vision/regulation and related enforcement of commercial laws through
administrative means. One of the SAICs major responsibilities is to carry
out and administer registration of enterprises (including foreign-invested
enterprises), agricultural co-operatives, entities or individuals engaged in
business operations and resident representative offices of foreign companies.
It is also mandated to investigate and ban unlicensed business operations. All
commercial entities in China must register with the SAIC and submit annual
or tri-annual re-registration documents to the local SAIC office. Any changes
in business scope or ownership structure must also be registered with the
SAIC within a prescribed time, (e.g. 30 days from the time upon which the
changes take place). The Foreign Enterprise Registration Bureau within the
SAIC handles the regulation and registration of foreign representative offices
and companies with foreign investment.
Companies (ToR17 A.1.1)
Types of companies
59. The Company Law of the PRC was enacted by the Standing
Committee of the NPC in 1993 (last amended in 2005) with the aim of revi-
talising domestic enterprises by adopting a modern company structure. The
Company Law provides the general rules for the formation and organisation
of companies, including incorporation procedures, issuance of shares and
bonds, responsibilities and functions of directors and management, finance
and accounting rules, corporate restructuring, and dissolutions and liquida-
tions. Companies in China are legal persons, which have independent legal
personality and can hold property in their own name (Company Law Art. 3).
60. Companies can be categorised by the residency of their investors:
domestic invested enterprises (DIEs) are companies with PRC resident inves-
tors only; and foreign invested enterprises (FIEs) are companies partly or
wholly owned by foreign investors. FIEs can be jointly established by foreign
companies (or enterprises, or other economic organisations or individuals)
in co-operation with Chinese companies (or enterprises or other economic
organisations) or established by foreign investors only (Regulations for the
Implementation of the Law of the PRC on Joint Ventures Using Chinese and
Foreign Investment Art. 16).
61. DIEs are only regulated by the Company Law. In addition to the
Company Law, there are three basic laws on foreign investment that govern
FIEs: Law on Sino-Foreign Equity Joint Ventures (LEJV), Law on Chinese-
foreign Cooperative Joint Ventures (LCJV), and Law on Wholly Foreign-Owned
Enterprises (LWFOE). In case of divergence, the laws on foreign investment
17. Terms of Reference to Monitor and Review Progress Towards Transparency and
Exchange of Information.
will prevail over the Company Law (Art. 18). The Taxation Registration
Administrative Rules (TRAR), Administrative Rules for Company Registration
(ARCR) and Accounting Law apply also equally to DIEs and FIEs established
in accordance with PRC laws and regulations. Consequently, although there are
specific rules that apply to FIEs, registration rules are the same for DIEs and
FIEs (see below).
62. The Company Law provides for two types of DIEs: limited liability
companies and companies limited by shares (joint stock companies) (Art. 2):
joint stock companies can be public or private companies (Art. 78).
Joint stock companies may be incorporated by any person or entity
(except civil servants) by means of sponsorship or share offer
(Company Law Art. 77). The capital of a joint stock company is
divided into equal shares, and the shareholders are liable to the com-
pany to the extent of their respective shareholdings (Art. 126). Joint
stock companies may have from 2 to 200 initial shareholders. Joint
stock companies that issue shares to the general public must follow
special rules issued by the securities regulatory institution of the
State Council (Art. 129). As at the end of 2011, there were more than
205 000 joint stock companies registered in China; and
any person or entity (except civil servants) may incorporate a limited
liability company which cannot have more than 50 members. All mem-
bers are liable for the companys debts to the extent of their respective
capital contributions (Company Law Art. 3). As at the end of 2011, there
were 9 500 000 limited liability companies registered in China.
63. Amongst FIEs, Equity Joint Ventures (EJVs) and Wholly Foreign-
Owned Enterprises (WFOEs) are companies with limited liability and legal
personality. Cooperative Joint Ventures (CJVs) may or may not have legal
personality, depending on the intention of the contracting parties as laid down
in the CJV agreement. The ratio of distribution of income of a CJV may differ
from the ratio of capital contributions of the contracting parties. The foreign
party may have disproportionate superior rights to dividends until they have
recovered the initial capital contribution. All CJV terms are based on negotia-
tion by the parties. The ratio of capital in all three forms of FIEs is expressed
in the percentage of interest of the investment, there are no shares issued
to any parties unless the FIE is approved as foreign-invested joint stock com-
pany.
18
As at the end of 2011, there were 446 000 FIEs registered in China,
among them approximately 52% were WFOEs, 40% EJVs and 8% CJVs.
64. From a tax perspective, companies are categorised as PRC-resident
companies and non-resident companies. PRC-resident companies are those
18. By the end of 2011, there were 6 833 foreign-invested joint stock companies approved.
that are established in accordance with PRC laws and regulations, or those
that are established under foreign law but whose place of effective man-
agement is located in China. Non-resident companies are those that are
incorporated in foreign jurisdictions, not having a place of effective manage-
ment in China, but with a permanent establishment in China, or deriving
income from China without permanent establishments in China (EITL Art. 2).
Ownership information on domestic companies
Business registration with the State Administration for Industry and
Commerce (SAIC)
65. Companies incorporated under the Company Law (including both
DIEs and FIEs) are obliged to register with the SAIC before carrying out busi-
ness activities in China. A company is not considered formally established in
China until it obtains SAIC approval in the form of a business registration cer-
tificate (business license). The Administrative Rules for Company Registration
(ARCR) regulates the registration process.
66. Registration for limited liability companies (including FIEs) is
completed by registering inter alia the following information with the SAIC
(ARCR Art. 20):
registration application form signed by the legal representative;
companys articles of association;
identification document of members (such as identity card or passport);
identification document of the legal representative;
name and address of the companys directors, supervisors and man-
agers; and
verification report of the companys registered capital.
67. Members of a limited liability company are obliged to sign the arti-
cles of association (Company Law Art. 25). The articles of association must
include each members name, amount of the members contribution, the con-
tribution method and the date of the contribution (Art. 25). The identity card
of a PRC resident contains the persons permanent address.
68. Registration for joint stock companies is completed by registering
inter alia the following information with the SAIC authorities (ARCR Art. 21):
registration application form signed by the legal representative;
companys articles of association;
identification document of initiators (such as identity card or passport);
identification document of the legal representative;
name and address of the companys directors, supervisors and man-
agers; and
verification report of the companys registered capital.
69. The articles of association for joint stock companies must specify the
initial shareholders names, amount of each shareholders contribution, the
contribution method and the date of the contribution (Company Law Art. 82).
70. Limited liability companies and joint stock companies are obliged to
complete alteration registration with the SAIC when there are any changes to
the information they originally registered (ARCR Art. 26). Limited liability
companies are obliged to complete alteration registration within 30 days of
transfer of membership rights or change of members name or title (ARCR
Art. 35). Joint stock companies are obliged to complete alteration registration
and make a public announcement when they successfully complete a new
share offer (Company Law Art. 137). In the event of a share transfer, both
publicly-listed and private joint stock companies are obliged to register the
shares transferred as well as identity information of buyers, including names,
addresses, identity document numbers, with Chinas Securities Depositary
and Settlement Centre (or local depositary centres) upon the share transfer
(Measures for the Administration of Securities Registration and Settlement
Arts.2, 29, see further developments under section A.1.2). This obligation
applies irrespective of the number of shares transferred and is supported by
effective sanctions (see below paragraph 112). The SAIC maintains registra-
tion information for an indefinite duration.
71. The SAIC reports that contents of the business registry are accurate
and reliable because: it verifies whether registered documents are in the pre-
scribed form and that their formulation is in accordance with PRC laws; those
who fail to register or intentionally register false information are punished
(ARCR Arts.68, 69); and registration applicants are obliged to submit docu-
ments necessary to investigate the contents of the application (ARCR Art. 2).
The SAIC does not, however, routinely verify the accuracy of information
contained in an application for registration, but will do so by verifying the
identity of individuals concerned and the bona fides of the application where
it has reason to believe that the company has not provided all the necessary
information as required by law. In cases where the SAIC comes to know
about a person who has failed to meet his/her registration obligations which
subjects them to fines, the SAIC may directly impose such fines.
72. In practice, in 2011, the SAIC concluded 13 207 cases for register-
ing false information with more than CNY 1.1 billion (EUR 119 million) in
fines collected and almost 310 000 cases for non-compliance with registration
requirements with more than CNY 2.6 billion (EUR 308 million) in fines
collected. These statistics cover all types of enterprises, i.e. companies and
partnerships.
Ownership information kept by companies
73. Article 72 of the Company law provides that the stock rights of
shareholders of a limited liability companies may be transferred among the
shareholders and in the event that the rights are transferred to a non share-
holder, this transfer requires the prior consent of a majority of the other
shareholders. To this extent, notice of the transfer must be given and all share-
holders have 30 days to consent or disagree. Considering this, shareholders in
limited liability companies always have knowledge of the identity of the other
shareholders.
74. In addition, limited liability companies are obliged to prepare and
maintain a membership register that records: the name and address of each
member; the capital contribution made by each member; and the serial number
of the capital contribution certificate (Company Law Art. 33). Following the
transfer of a membership interest, limited liability companies are obliged to
record the name and address of the transferee in the membership register
(Art. 74). The membership register must be maintained and be made available
for inspection at the companys registered office (Art. 33).
75. Joint stock companies are also obliged to prepare and maintain a
shareholder register that must be kept at the companys registered address
(Company Law Art. 97). This requirement applies to both publicly-listed
companies and unlisted companies. Upon issuance of registered shares, the
shareholder register must record: the name and address of each shareholder,
the number of shares held by each shareholder, the serial numbers of stock
certificates held by each shareholder, and the date on which each shareholder
acquires their shares (Art. 131). Following the transfer of registered shares,
joint stock companies are obliged to record the name and address of the trans-
feree in the shareholder register (Art. 140).
Tax registration with the State Administration of Taxation (SAT)
76. Upon obtaining a business license, both joint stock companies and
limited liability companies are obliged to complete tax registration with
the SAT within 30 days (Tax Collection and Administration Law (TCAL)
Art. 15). Articles 13 and 14 of the TRAR (Administrative Rules for Tax
Registration) provide that companies are obliged to register, inter alia, the
following documents: business license, articles of association (containing the
names of shareholders/members), organisation identity code certificate, legal
representatives identification card or passport, and tax registration applica-
tion form. Those who fail to register are punished (TCAL Art. 60, TCALIR
Art. 92).
77. Further, the SAT has reported that according to Article 17 of the
TCAL, taxpayers engaged in production or business operations are obliged
to submit their certificate of tax registration to banks or other financial
institutions when opening accounts. Taxpayers are further obliged to report
all of their bank or financial account numbers to the SAT authorities. Banks
and other financial institutions must record tax registration numbers in the
accounts opened by taxpayers and render assistance to the SAT authorities
when they inquire about the accounts of taxpayers (Art. 17).
78. Companies are further obliged to disclose ownership information
concerning their shareholders/members to the SAT in the tax registration
application form, including their: name, nationality (for foreign shareholder/
member) or address (for Chinese shareholder/member), status (e.g. foreign
company, Chinese company, natural person), business license number in
cases where the shareholder/member is a legal entity, and identity card
number if the shareholder/member is a natural person. The SAT is obliged
to maintain tax registration information for 10 years (Regulations on Tax
Collection and Records Management).
79. Companies are further obliged to notify the SAT of any changes to
previously registered information, including changes to the companys own-
ership within 30 days of alteration registration with the SAIC(TCAL Art. 16;
TRAR Arts.18, 19).
80. Article 29 of the TCALIR provides that companies are obliged to
keep tax related information for at least 10 years, which includes the tax
registration certificate and relevant tax registration documents. This general
requirement applies to all types of companies (Art. 29).In practice, SAT reg-
istration authorities verify whether registered documents are in the prescribed
form and that the information they contain is in accordance with PRC laws;
those who fail to register or intentionally register false information are pun-
ished (TRCR Art. 44, TCAL Art. 60).
Foreign exchange registration with the Administration of Foreign
Exchange
81. In addition to registration with the SAIC, FIEs are obliged to register
with the relevant foreign exchange administrative authority (SAFE) within
30 days of obtaining their business license (Foreign Exchange Registration
of FIEs Interim Measures Art. 4). During the foreign exchange registration,
the company is obliged to disclose inter alia the following information to the
SAFE or its local offices (via an application form along with a FIF Foreign
Exchange Information Registration Form) (Foreign Exchange Registration of
FIEs Interim Measures Annex 1):
name and nationality of the foreign investor;
foreign investors registered address; and
name and nationality of the ultimate shareholder
19
.
82. Where there is any change in the items registered by a foreign enter-
prise, the foreign enterprise shall apply to the original Registration Authority
within 30 days to change its registration (Art. 10 of the Measures).
Ownership information on foreign companies 20
Business registration with the SAIC
83. Foreign companies are obliged to register with the SAIC authorities
before carrying out business activities in China (Administrative Measures
for the Registration of Enterprises of Foreign Countries (Regions) Engaged
in Production and Business Activities within the Territory of China Art. 2).
Registration for foreign companies is completed by registering inter alia the
following information with the SAIC (Arts.5, 6):
company name and address;
identification document of the responsible person of the project in
China; and
certificate of incorporation/business registration certificate issued
by the government authorities of the foreign jurisdiction where the
company is located.
84. The SAIC authorities are obliged to maintain registration information
during the period a registered entity is in operation. After the entity is de-
registered, the SAIC authorities are further obliged to maintain registration
information before it is passed to the local archive centre for a permanent
record (SAIC Corporate Registration Records Management Approach).
19. Web link for a sample of the application form and the registration form (PDF attached sepa-
rately): http://tianjin.pbc.gov.cn/publish/fzh_tianjin/2910/2011/20110830145733944892556/
20110830145733944892556_.html.
20
.
According to the Terms of Reference, where a company or body corporate incor-
porated in one jurisdiction has a sufficient nexus to another jurisdiction including
being resident there for tax purposes (for example by reason of having its place
of effective management or administration there), that other jurisdiction will also
have the responsibility of ensuring that ownership information is available.
Tax registration with SAT
85. Article 2 of the EITL provides that a foreign company is deemed a
PRC-resident company for tax purposes if its place of effective management
is in China, even though it is not incorporated within China. Under such
circumstance, foreign companies are obliged to fulfil their EIT obligations
in line with the EITL and relevant rules (as applied to PRC-resident compa-
nies), including registering their annual returns and necessary supporting
documentation. Ownership information is disclosed in the registration pro-
cess to the same extent as for PRC-resident companies. Article 4 of the EITL
Implementation Rules provides that place of effective management refers to
an establishment that exercises, in substance, overall management and control
over the production and business, personnel, accounting, properties, etc. of an
enterprise.
86. A non-resident PRC company without a place of effective manage-
ment in China is subject to PRC tax on China sourced income. To this extent,
this foreign company must register with the tax authorities, file tax returns
and pay taxes. Additionally, non-PRC resident companies engaged in con-
tract engineering operations or providing labour or other services in China
must apply for temporary tax registration with the responsible SAT authority
where the project is located or the service is provided within 30 days from the
date the contract is signed (The SAT Order [2009] No. 19 Art. 5). To complete
the tax registration process, non-resident companies are obliged to disclose
inter alia the following information to the responsible SAT authorities (via a
tax registration form and an explanation letter (Art. 13):
name of the foreign company;
name and passport number of the foreign companys legal representative;
name of the foreign companys shareholder(s);
nationality of the foreign companys shareholder(s);
shareholders status (e.g. foreign company, natural person);
shareholders business license number or company registration number
if the shareholder is a legal entity; and
shareholders passport number if the shareholder is a natural person.
Ownership information held by service providers
87. China has several anti-money laundering laws and regulations which
apply to financial institutions and certain non-financial institutions. These
include the Anti-money Laundering Law (AMLL), Rules for Anti-money
Laundering by Financial institutions (AMLRFI), the Administrative Rules for the
Reporting of Large-Value and Suspicious Transactions by Financial Institutions,
the Administrative Rules for the Reporting of Suspicious Transactions related
to the Financing of Terrorism By Financial Institutions, and the Administrative
Measures for Identifying the Financial Institutions Clients and Retaining Their
Identity Information and Transaction Records (ARCIV).
Financial institutions
88. All financial institutions in China are obliged to verify and maintain
records of the identities of their clients (AMLL Arts.16, 19). Financial institu-
tions are prohibited from providing services to any client whose identity is
unclear. The term financial institutions refers to policy banks, commercial
banks, credit cooperatives, saving institutions, trust and investment compa-
nies, securities firms, futures brokerage companies, and insurance companies
(AMLL Art. 34).
89. Article 16 of the AMLL provides that when establishing business
relationships with customers, or providing customers with one-time finan-
cial services including cash remittance, cash conversion and acceptance and
payment of notes exceeding the specified amount, financial institutions must
request the clients to present their real and valid identification certificates
or other supporting documents for verification and registration purpose.
Article 7 of the ARCIV provides that the threshold for verifying a customers
identity for a one-off transaction at the financial institution is CNY 10 000
(EUR 1 179). Article 8 of ARCIV provides that where the customer with-
draws an amount above CNY 50 000 (EUR 5 896), the financial institution is
required to verify the customers identity and require the customer to present
his/her identification document.
90. According to the ARCIV, financial institutions are obliged to properly
preserve their clients identity information and their transaction records and
ensure that every transaction can be adequately reproduced, so as to pro-
vide the necessary information for identifying their clients, monitoring and
analysing the circumstances of their transactions, investigating suspicious
transactional activities, and investigating and prosecuting money-laundering
cases. Where the client is not a natural person (e.g. a legal person or other
organisation), the records kept by financial institutions must contain the fol-
lowing information (ARCIV Art. 33):
name;
address;
business scope;
organisation identification code;
tax registration certificate number;
business license (or other types of license which allows the entity to
conduct operation) number;
name and identification document of the clients actual controlling
shareholders/members/beneficiaries; and
name and identification document of the clients legal representative.
91. For each transaction conducted, financial institutions must keep such
records as are reasonably necessary to enable the transaction to be readily
reproduced (ARCIV Art. 3). Financial institutions are required to update the
information they have on the client when there is any change. Client identity
data must be kept for at least five years from the date the business relation-
ship terminates and transaction records must be kept for at least five years
from the date the transaction terminates. In case of bankruptcy and winding-
up, financial institutions are obliged to transfer their records to an agency
designated by the relevant department of the State Council (AMLL Art. 19).
92. In practice, companies incorporated in China typically have accounts
with financial institutions in China. This is because all companies are obliged
to have registered capital upon incorporation. Article 10 of the Administrative
Provisions on the Registration of the Registered Capital of Companies
provides that the registered capital of a limited liability company cannot be
less than CNY 30 000 (EUR 3 538), whereas the registered capital of a joint
stock company cannot be less than CNY 5 million (EUR 589 623). In addi-
tion, the capital contribution of a companys registered capital must consist
of no less than 30% cash. Article 12 of the Administrative Provisions on the
Registration of the Registered Capital of Companies provides that the cash
contribution must be deposited into a bank account opened by the company
in full amount.
93. Further, the SAT reports that in practice taxpayers are obliged to
open a bank account to pay their tax liabilities. According to Article 17 of the
TCAL, a taxpayer engaged in production or business activities is required to
submit all of its bank or other financial account numbers to tax authorities
and banks and other financial institutions must register a clients tax ID upon
the opening of an account. Those who fail to register are punished (TCAL,
Art. 60, TCALIR, Art. 92).
94. Chinas Financial Intelligence Unit reports that financial institutions
in China are aware of their obligations under the AMLL.
Non-financial institutions
95. The Anti Money Laundering Law does not contain any specific rules
requiring designated non-financial businesses and professionals (e.g. lawyers,
accountants, notaries) to have knowledge of their clients.
96. Lawyers and notaries in China are obliged to conduct limited
customer due diligence on their clients. For clients who are legal persons,
lawyers are required to determine whether the legal person is a legal estab-
lishment or legal existence, its current conditions, the scope of its business
as confirmed in its business license and its actual major business scope. For
customers who are natural persons, lawyers are required to determine their
nationality, residence, vocation and other natural conditions (Work Rules on
Legal Counsel for Lawyers Art. 11). Lawyers are required to keep a working
diary of legal services provided (Work Rules on Legal Counsel for Lawyers
Art. 21). Lawyers engaging in securities work are required to keep their
working papers for 10 years (Administrative Rules on Lawyers Engaging in
Securities Business Art. 17). However, the required content of these records
is not specified.
97. When performing notarial acts, notaries are required to examine the
identity of the person concerned (Notarisation Law Art. 28). No further cus-
tomer identification, verification or due diligence requirements are specified.
These legal requirements do not ensure accurate ownership information is
kept by these professionals.
Ownership information held by nominees
98. Article 18 of the Administrative Measures for Securities Measures
and Settlement provides that shares must be registered under the name
of their real owner, unless otherwise specified by laws and regulations.
Currently, China only permits nominal shareholding in the following limited
situations under specific laws and regulations:
qualified foreign institutional investors (QFIIs) are obliged to open
securities accounts at Chinas securities registration organisation,
and the accounts may be opened in the name of nominees. Nominee
account holders are obliged to report to the CSRC and stock exchange
at the end of each quarter on the name and address of the actual
shareholder (Measures for the Administration of Securities Investment
within the Territory of China by Qualified Foreign Institutional
Investors Art. 16); and
B shares (shares listed in the domestic China exchanges that provide
restricted approval for foreign investors to trade) are also permitted
to register the share under the name of the nominee shareholder.
Any change in the beneficial shareholder must be disclosed to the
Securities Registration and Settlement Institution (SRSI). (Rules on
Foreign Shares of Domestic Listed Companies Art. 22).
99. Furthermore, all nominees are required to know the ultimate indi-
vidual owner of the shares and provide such information to the SRSI upon
request (Administrative Measures for Securities Measures and Settlement
Art. 18). In practice, the SAT is able to verify whether the legal shareholder
and the nominee shareholder are the same person by checking the share-
holders securities account information, IP address (if the share transaction is
performed online), telephone number (if the share transfer request is made via
telephone) and make inquires with the person/company under investigation
or involved in the transaction. These requirements also apply to non-publicly
listed securities (Art. 2). These legal requirements are supported by effective
sanctions (see below paragraph 112).
100. There is no information from input received from Chinas peers
showing that China has not been able to respond to an international exchange
of information request as a result of information not being maintained by
nominee shareholders.
Conclusion
101. Chinas legal framework ensures the availability of the following
ownership information in relation to companies:
limited liability companies must disclose the identity of their members
upon registration with the SAIC. Any alteration to this information
must be updated in the register maintained by this authority. The same
rule applies to joint stock companies though only the identity of their
initiators must be disclosed upon registration.
all companies must keep a register of members where details of all
shareholders and members are recorded. This information must under
the law be kept updated;
foreign companies must register with the SAIC, although no own-
ership information has to be disclosed for registration (but these
companies are subject to comprehensive tax requirements, see below);
all domestic companies must register with the SAT, provide upon
registration the names of their shareholders/members and update this
information within 30 days of alteration. The same obligations apply
to foreign companies where they have their seat of effective manage-
ment located in China. Foreign companies not having their seat of
effective management in China must also apply for registration (or
temporary registration in certain case) with the SAT and disclose the
identity of their members/shareholders upon registration;
information in relation to nominees is available in China as nominees
are required to know the name of the ultimate owners of the shares
and provide such information to the SAT upon request.
Bearer shares (ToR A.1.2)
102. Almost all enterprises in China were wholly owned by the State until
1978 when the Chinese government introduced the Open Door Policy. In
early 1980s, a small number of state owned companies started to convert
themselves to joint stock companies and began to access the capital market
by way of issuing shares. At the beginning, such trial shares were issued
to employees only and employees were obliged to deposit their shares in
authorised securities operation institutions. Share transfers were first per-
missible on 5 August 1986. The Shanghai Stock Exchange was set up in
Shanghai in 1990. The Shenzhen Stock Exchange, the second stock exchange
in China, was formally approved on 3 July 1991. With the setting up of the
two exchanges, Chinas stock market began to take shape.
103. Any company that issues stock certificates in registered form shall
prepare a shareholders register where all particulars in relation to holders of
such shares must be recorded (s. 131). Since 1992 joint stock companies have
been permitted to issue shares in bearer form (Company Law Art. 130).
21
Any
joint stock company that issues stock certificates in unregistered form must
record the amount, serial numbers and date of issue of the stock certificates
(Art. 130).
104. While it is not possible to disclose the exact figures on bearer shares
in this report, Chinas authorities have advised that the number of securities
issued in bearer form is strictly limited.
Foreign investors
105. Specific rules apply to foreign investors. Foreign investors, who
purchase qualified domestic company shares
22
, are obliged to open foreign
exchange accounts and specific foreign-invested security trading accounts in
authorised institutions, i.e. a Securities Registration and Settlement Institution
(see below) to purchase qualified domestic shares (Arts.25 and 27 Detailed
Implementation Rules for the Order 18, Circular ZWF [1996] No. 9). Foreign
21. As at the end of 2011, there were 205 000 joint stock companies registered in China.
22. Qualified domestic company shares refers to B shares which are foreign shares
listed in China domestically. See paragraph 41.
investors approved to purchase domestic shares must provide identity infor-
mation and their qualification certificate for purchasing shares in the Chinese
domestic market (Art. 4 Order 18).
106. Further, according to Article 22 of this Order, foreign shareholders
who hold Chinese domestic shares must disclose all related transactions and
beneficial ownership information to the PBOC (before 1992) or the CSRC
(after 1992) making ownership information in relation to foreign investors
available at all time in China.
107. In addition, once a single foreign investor directly or indirectly
owns 5% or more of a companys total listed foreign-invested shares, he/she
needs to report to the CSRC, the security market and the company about the
investment purpose and related investment information (Art. 38 Detailed
Implementation Rules for Order 18, Circular ZWF [1996] No. 9).
Registration of securities
108. Chinas Company Law provides that all transfers of shares by a share-
holder shall be carried out via a lawfully established stock exchange or by any
other means prescribed by the State Council (Art. 139). The State Council has
prescribed that such transfers may also occur by way of local depository centres.
109. To trade securities, either listed or non-listed, registered or in bearer
form, a shareholder must have a specific securitised trading account regis-
tered in a relevant Securities Registration and Settlement Institution (SRSI)
or a local depository centre:
for listed securities, an electronic system of securities was first intro-
duced in 1991. By the end of 1992, both the Shanghai and Shenzhen
stock exchanges adopted the system. This means that starting from
1992, in China; all listed shares have been electronically registered
in the government sponsored registers. To better control the security
market and maintain the ownership information, SRSIs were estab-
lished in 2001. They took over all registration and clearing business
previously handled by the Shanghai and Shenzhen Stock Exchanges;
and
for non listed securities, in 2001, the CSRC issued the rules to delegate
the handling of non-listed securities registration to local depositary
centres.
110. Rules for securities registration are currently governed by the Measures
for the Administration of Securities Registration and Settlement (Order of the
China Securities Regulatory Commission No. 65) (the Measures), introduced
in 2006 and revised in 2009. Under these Measures, the functions of SRSI
and local depository centres include: (i) the establishment and management
of securities accounts and settlement accounts; (ii) the keeping and transfer of
securities; and (iii) maintenance of a roster of securities holders as well as the
registration of securities holders rights and interests.
111. Both SRSI and local depository centres maintain electronic securities
registration, detailing detailed identity information, including the name and
address, of every shareholder irrespective of the number of shares held.
23
112. Shareholders trading their securities without permission or otherwise
than through an authorised institution are subject to a fine of between 1 to 5 times
the amount of the illegal revenue (Security Law Art. 179). Where there is no ille-
gal revenue or where the illegal revenue is less than CNY 300 000 (EUR 35 377),
a fine of between CNY 300 000 (EUR 35 377) and 600 000 (EUR 70 755) can
be imposed. To ensure compliance with these obligations, the CSRC has set up
38 regional offices
24
(including two supervising offices established in Shanghai
and Shenzhen stock exchanges) to identify any non-compliant trading activity.
From January 2001 to February 2012, 475 administrative penalties in relation to
non-compliance with the CSRC regulations concerning the trading or issuance
of securities have been imposed by the CSRC. Further, according to the PRC
Supreme Peoples Court, 28 criminal cases for issuing shares without permission
and/or trading shares privately were prosecuted over the same period.
Registration of listed securities
113. Article 17 of the Measures provides that an investor must hold secu-
rities through a securities account and the securities account must record
the balance of securities held by the investor as well as information on the
securities transaction. To open a securities account, an investor must file an
application with a SRSI (for listed) and provide all his/her particulars, includ-
ing name, identity number, address, contact etc. (Art. 19).
114. Companies issuing listed securities must entrust an SRSI to handle
the registration of the securities (Measures Art. 26). The SRSI must confirm
the details of persons holding securities (including name and address of every
shareholder) and register them in the roster of securities holders (Art. 28).
23. The securities registration information in the electronic system includes at least
the following: the names or titles of the securities holders, the account numbers,
valid identity certificate document numbers, the correspondence addresses of the
securities holders, the names of the holding securities, the quantity of holding
securities, the securities trusteeship organisations and the situations concerning
the restricted sales, and the securities holding status such as the judicial freeze
and pledge registration.
24. www.csrc.gov.cn/pub/csrc_en/about/organ/#. Some of Chinas 32 regions have
established more than one office to deal with this specific topic.
Registration of non-listed securities
115. An investor and a seller must trade the shares with an authorised
securities institution and must hold securities through a securities account
opened in a local non-listed shares depository centre (Company Law
Art. 139). To fulfil this obligation:
investors selling securities must register with a local depository
centre. This obligation is the result of Article 32 of the Chinese
Securities Law and Article 139 of Company Law which clearly stipu-
late that all shares (listed and non-listed), corporate bonds and other
securities shall be quoted and traded on authorised stock exchange
institutions or other means prescribed by the State Council
25
; and
an investor who wants to buy securities in non-listed companies (in
registered or bearer form) is also obliged to hold these securities in a
securities account maintained by a local non-listed share depositary
centre and must therefore open an account to purchase these shares
(irrespective of the number of shares held).
116. According to the Measures for the Administration of Securities
Registration and Settlement and the Security Ownership Information
Registration Rules, upon registration with a local depository centre, the own-
ership information, including name, identity number and address shall be
registered.
117. By the end of December 2010, of Chinas 32 regions, 30 had issued
their respective local non-listed shares depositary rules and established
regional depositary centres. Chinas authorities have reported that in practice,
joint-stock companies located in the two other regions (Tibet and Ningxia)
are also effectively covered by neighbouring depositary centres. Chinese
authorities have also advised that by the end of 2011, there were 1 646 joint
stock companies (with only 4 being foreign invested joint stock companies)
registered in these two regions (less than 1% of joint-stock companies incor-
porated in China - 1 646 joint stock companies out of more than 205 000 such
companies across China).
Conclusion
118. Since 1992 joint stock companies have been permitted to issue shares
in bearer form. Foreign investors are prohibited from holding bearer securi-
ties. All securities, including bearer securities, must be held in a registered
account (the holder of which must be identified when the account is opened)
25. The State Council has prescribed that such transfers may also occur by way of
local depository centres.
and cannot be transferred anonymously. To trade such securities, both sellers
and purchasers must register with a SRSI or a local depository centre and
provide upon registration their particulars. These institutions are required
under Chinas laws to keep rosters of shareholders, making ownership infor-
mation pertaining to holders of bearer securities available in China. Although
in practice all regions are covered by such centres, two of them have not yet
issued any legal rules for registration of such shares and China should ensure
the availability of ownership information pertaining to such shares in all
instances.
Partnerships (ToR A.1.3)
Types of partnerships
119. Partnerships in China are primarily governed by the Partnership Law
(revised 2006) and its regulations. Partnerships may be established within
China by natural persons, legal persons and other organisations (Art. 2).
Wholly state-owned companies, state-owned enterprises, listed companies,
institutions for public welfare purposes and social groups are prohibited from
becoming general partners. There are four types of partnerships recognised
in China: general partnerships, special general partnerships, limited partner-
ships, and foreign invested partnerships (FIPs).
120. Partnerships can only be set up by written agreement (Partnership
Law Arts.4, 14 and 60). General partnerships comprise general partners
who bear unlimited joint and several liability for the debts of the partnership
(Partnership Law Art. 2.). The Partnership Enterprise Law also provides for
a special type of general partnership known as a special general partnership.
Professional service institutions offering services requiring professional
knowledge and special skills can form special general partnerships (Art. 55).
In a special general partnership, a partner or a group of partners bear
unlimited liability or unlimited joint liability for the debts incurred to the
partnership due to their wilful misconduct or gross negligence. Other part-
ners bear limited liability to the extent of their capital contributions (Art. 57).
Rules that apply to general partnerships similarly apply to special general
partnerships, except otherwise provided by law.
121. A limited partnership comprises general partners and limited part-
ners. General partners are jointly and severally liable for the debts of the
partnership and limited partners are liable only to the extent of their capital
contributions (Partnership Law Art. 2). Rules that apply to general partner-
ships similarly apply to limited partnerships, except as otherwise provided by
law.
122. As of 1 March 2010, it is possible to establish a FIP in China based
on the Administrative Measures on Registration of FIP under SAIC Order
No. 47 (2010). A FIP can be set up by two or more foreign enterprises or indi-
viduals or between foreign enterprise(s) or individual(s) and a PRC natural
person(s), legal person(s) or other organisation(s) (Art. 2). In addition to the
Partnership Enterprise Law, FIPs are subject to the Administrative Measures
on Registration of FIP and Chinas foreign investment industry guidelines
(Art. 3).
123. Partnerships in China do not file tax returns or pay tax as they do
not have distinct legal personalities and are treated as pass-through arrange-
ments for Chinese tax purposes. Partners are taxed on the basis of the profits
or losses allocated to them under the partnership agreement (Partnership Law
Art. 6). Partners that are legal persons are subject to CIT and individual part-
ners are subject to IIT on their allocable share of partnership income (Issues
Concerning the Income Tax Levied on Partners of a Partnership Enterprise
Art. 2).
Ownership information on partnerships
Business registration with the SAIC
124. Partnerships are administered by and must register with the respon-
sible SAIC authority before they are allowed to carry out business activities
in China. Partnerships are provided a business license from the SAIC after
successfully completing the registration requirements. The registration pro-
cess is regulated by the Administrative Rules on Registration for Partnership
Enterprises (ARRPE) (Arts.1, 2, 3). Articles 7 and 8 of the ARRPE provide
that, among other things, the following information must be submitted to the
responsible SAIC authority upon registration:
names and domiciles of the partners, methods for assuming liabili-
ties, and amount of financial contributions as subscribed or actually
paid, time limit for financial contributions, and method of financial
contributions;
identity certificate of all partners;
partnership agreement (in the form of a written document);
principal business address; and
name of the managing partner(s) i.e. partner for dealing with part-
nership affairs.
125. The SAIC is obliged under Article 45 of the SAIC Order No. 47
(2010) to record the same registration information for a FIP in its Registration
Book. Information maintained by the SAIC is available for the general public
to review and make copies.
126. The managing partner is required to notify and make alteration regis-
tration with the original responsible SAIC authority of any amendment to the
originally registered information within 15 days of the date of making such
alteration or after the decision of alteration is made (ARRPE Art. 11).
127. Partnerships are also required to submit documents to the responsible
SAIC authority for inspection on an annual basis (Measures for the Annual
Inspection of Enterprises Art. 4). A copy of the annual inspection report must
be provided and must, among other things, include the status of the registered
items (Arts.7, 9). Responsible SAIC local offices inspect whether partnerships
have completed alteration registration (if applicable) (Art. 13). In practice, in
2011, the SAIC concluded 13 207 cases for registering false information with
more than CNY 1.1 billion (EUR 119 million) in fines collected and almost
310 000 cases for non-compliance with registration requirements with more
than CNY 2.6 billion (EUR 308 million) in fines collected. These statistics
cover all types of enterprises i.e. companies and partnerships.
Tax registration with the SAT
128. Partnerships are obliged to register with the SAT authorities within
30 days of obtaining a business license from the SAIC (TRAR Art. 10).
During the tax registration, partnerships are obliged to submit, among
other things, a tax registration form, partnership business license, partner-
ship agreement, and the identity cards or passports of the partners (Art. 13).
Additionally, partnerships must record the name, nationality, identity card/
passport number, and the permanent addresses of all the partners in the tax
registration form (Art. 14).
129. Articles 18 and 19 of the TRAR provide that when any of the regis-
tered partnership information changes, partnerships are obliged to make an
alteration registration with the SAT authorities within 30 days of making
the alteration registration with the competent SAIC local office. The SAT is
obliged to maintain tax registration information for 10 years (Regulations on
Tax Collection and Records Management). In practice, the SAT registration
authorities verify whether registered documents are in the prescribed form
and that their formulation is in accordance with PRC laws; those who fail
to register or intentionally register false information are punished (TRCR,
Arts. 44, TCAL, ART. 60).
Information held by service providers
130. Financial institutions covered by the AMLL are required to undertake
customer due diligence when establishing a relationship with a partner acting
on behalf of a partnership (see above, section A.1.1 of this report).
Information held by the partnership or partners
131. The Partnership Law (Arts.22, 60) provides, in relation to general
partnerships and general partners in limited partnerships, that the transfer
of all or part of an interest in a partnership to a person other than another
partner is subject to the unanimous consent of all the partners. Any limited
partner wishing to transfer its interest in a limited partnership to any person
other than the partners must, prior to the transfer, inform all the partners by
way of notice (Art. 73). This notice is to be sent 30 days prior to the effective
transfer. These obligations ensure that the partners identity is known by the
other partners at any time. Further, this information can be accessed by the
SAT (see section B.1.1 of this report).
Conclusion
132. Ownership information in relation to partnerships must be disclosed
upon registration with the SAIC and the SAT. This information must further
be updated with these two authorities when it is altered ensuring that this
information is available in compliance with the Terms of Reference.
Trusts (ToR A.1.4)
Types of trusts
133. Chinese law allows the creation of domestic express trusts. The Trust
Law (2001) regulates trust relations and the rights and interests of the parties
to a trust. Financial institutions that engage in trust business are additionally
regulated by the Administrative Rules for Trust Companies (ARTC) (Arts.1,
2).
134. The Trust Law applies to all trusts where the civil, business or chari-
table trust activities are carried out within Chinas boundaries (regardless of
whether the trust is governed by foreign trust law) (Art. 3). It covers all trust
activities in China irrespective of the residence of the settlor or beneficiaries,
or the location of the trust assets, provided the trust activities are performed
in China. Thus, provided the trust activities are carried out in China, the
Trust Law applies equally to trusts established under PRC law, Chinese or
foreign trusts which are administered in China, and Chinese and foreign
trusts which have a trustee resident in China whether the trustee is acting by
way of business or not.
135. Article 2 of the Trust Law defines trust as the act whereby the sett-
lor, on the basis of confidence in the trustee, entrusts property rights to the
trustee and allows the trustee to administer or dispose of such property in the
interest of a beneficiary or for any specified purpose. Article 24 provides that
a trustee must be a natural or legal person with full civil capacity. Article 19
provides that a settlor can be a natural person, a legal person or an organisa-
tion with full civil capacity. Trust assets must be identifiable and legitimately
owned by the settlor (Art. 7). Article 43 provides that beneficiaries can be
natural persons, legal persons or organisations. Where the trustee is also the
beneficiary of a trust, the trustee cannot be the only beneficiary under the
same trust (Art. 43).
136. A trust for public welfare purpose is a trust created for one of the
following charitable purposes: help the poor; help disaster victims; assist the
disabled; education, technology, culture, art and physical education devel-
opment; medical and sanitation development; environmental protection; or
for the benefit of the society (Trust Law Art. 60). The assets and profits of a
public welfare trust cannot be used for non-public welfare purposes (Art. 63).
Creation of a public welfare trust is subject to the approval of the regulatory
agency in charge of public welfare affairs (Art. 62). Article 64 of the Trust
Law provides that a public welfare trust must have a trust protector. The
name of the trust protector may be contained in the trust deed. Where the
trust deed does not contain the name of the trust protector, the trust protec-
tor should be appointed by the relevant governmental authority. There is no
specific requirement under the Trust Law which requires other trusts to have
a trust protector.
137. Under the Trust Law, all Chinese trusts must be created using a writ-
ten trust document (i.e. the trust deed), which must contain inter alia the
following information (Arts.8 and 9. See also ARTC Art. 32):
the purposes of the trust;
names and addresses of the settlor, the trustee and the beneficiaries;
the scope, type and status of the trust property; and
the ways and methods by which the beneficiary receives the trust
proceeds.
138. Chinas authorities reported that the Trust Law was promulgated
primarily to govern the professional management of assets and for modernis-
ing Chinas financial infrastructure. Its applicability is, however, not limited
to trusts in the financial and investment context. Where the trust activity
consists of managing assets, trusts are typically formed by trust companies.
Authorised trust companies are the only entities in China that are permitted
to act as trustees by the way of business. As at the end of June 2011, there
were 63 registered trust companies in China.
139. Trust companies are regulated financial institutions subject to the
approval of and supervised by the CBRC (ARTC Arts.2, 5, 7). The ARTC is
the primary regulation regarding the establishment and operations of trust
companies. A trust company can take the form of a limited liability company
or a joint stock company (Art. 6). To establish a trust company, the following
conditions must, amongst others, be satisfied (Art. 8):
the companys articles of association are in compliance with the
Company Law and the provisions of the CBRC;
it has shareholders/members who meet the capital contribution quali-
fication as prescribed by the CBRC;
it has the minimum registered capital prescribed by the ARTC
(CNY 300 million (EUR 35.38 million) (ARTC 10);
it has directors and senior management personnel with employment
qualifications prescribed by the CBRC and other personnel qualified
to engage in trust activities;
it has a sound organisational structure, trust business operational
guidelines and a risk control system in place; and
its business establishment, safety measures and other relevant facili-
ties comply with the requirements.
140. According to the Measures for Administration of Commissioned
Overseas Wealth Management Business undertaken by Trust Companies,
domestic entities or resident individuals can entrust trust companies to invest
and manage their assets in overseas financial markets. Only qualified and
authorised trust companies are allowed to engage in the trust business for
overseas wealth management.
26
Registration requirements for trusts
141. When provided by law, trusts must register with the relevant gov-
ernment regulatory agency. Business trusts are obliged to register with the
Shanghai trust registration centre. Public welfare trusts are obliged to register
26. See Chapters I and II of the Circular of the China Banking Regulatory Commission
and the State Administration of Foreign Exchange on the Issues Concerning
Promulgation of the Tentative Measures for Administration of Commissioned
Overseas Wealth Management Business Undertaken by Trust Companies.
with the regulatory agency in charge of public welfare affairs and obtain rel-
evant approval (Trust Law Art. 62).
142. The Shanghai Trust Registration Centre is the only institution
approved by the CBRC that is responsible for registration of business trusts
in China. Trusts must be registered with the centre within 10 business days
of their establishment. The trust deed which, among other things, contains
the names and addresses of the settlor, trustee and the beneficiary must be
disclosed to the centre (Trust Law Art. 9). The Shanghai Trust Registration
Centre maintains all registered information for 10 years (The Administrative
Rules on the Coverage and Retention Period of Archive Files, Annex, 8.7.4).
In addition to the trust deed, trusts are obliged to register inter alia the fol-
lowing information with the Shanghai Trust Registration Centre (Art. 24):
documents on creation of the trust submitted to the supervisory insti-
tution (if any);
ownership document of the trust assets (if any);
any other information/document required by the Shanghai Trust
Registration Centre.
143. Public welfare trusts are also obliged to register their trust deeds with
the regulatory agency in charge of public welfare affairs and obtain relevant
approval (Trust Law Art. 62).
144. There are also other strict registration requirements imposed on trust
companies, i.e. trust companies are obliged to register with the CBRC, SAIC,
and SAT authorities upon their establishment. In particular, trust companies
administering trusts must register with the CBRC and obtain its approval
before they commence operations of the trust business (ARTC Art. 7). The
CSRC is responsible for verifying all material provided by trust companies
(Administrative Measures of Trust Company Art. 9) and also carries out
inspections on operations of trust companies either on a regular or random
basis (Administrative Measures of Trust Company Art. 47). The trading
license of a trust company will be revoked by the CBRC in case it provided
false information during the registration process. (Administrative Measures
of Trust Company Art. 56).
Tax obligations
145. Trustees and beneficiaries fall under the general scope of Chinas
income tax laws and regulations, whereby they are required to report and file
tax returns with the SAT authority on the taxable income they receive from
the trust.
146. Chinese individual tax residents are subject to IIT in respect of their
worldwide income (IITL Art. 1; IITL Detailed Implementation Rule Art. 6).
Where the trustee or beneficiaries are natural persons, the unit or individual
that makes payment to the natural person is obliged to act as a withholding
agent (i.e. withhold and pay the IIT on the beneficiaries behalf) (Art. 8). The
IIT taxable income calculation method differs depending on the nature of the
income. Article 6 provides that where the nature of the income is dividend or
interest, the taxable income is the gross income; where the income is on the
transfer of assets, IIT is imposed only on the gain. Service income is subject
to deduction rules and varying rates depending on the nature of activities
(Art. 6).
147. PRC-resident companies are subject to EIT on their worldwide
income (EITL Art. 3) and are required to file annual tax returns with the local
SAT authority (EITL Art. 54). A resident entity that acts as the trustee of a
foreign trust is also required to file tax returns with the SAT on income it
receives in connection with the trust (EITL Art. 3 in conjunction with Art. 54).
148. Trust deeds are regarded as a relevant tax documents as they con-
tain the entitlements of the respective beneficiaries and trustees. The SAT
is empowered under the TCAL to inspect taxpayers relevant tax documents
(Art. 54) and taxpayers are obliged to provide the relevant documents to the
SAT upon request (Art. 56). Under the TCAL, trust deeds must be retained in
China. Where trust activities are carried out outside China, there is no spe-
cific regulation which prohibits a Chinese person from acting as a trustee.
However, Chinas income tax law applies to trustees whether they manage a
domestic or a foreign trust. Consequently, resident trustees of foreign trusts
are obliged to maintain the trust deed, which contains particulars on the
ownership of the foreign trust (Trust Law Art. 33). The SAT reports that, in
practice, the availability of information on trusts has not posed any problems
for exchange of information purposes.
Ownership information held by trustees and trust service providers
149. Trustees are required to maintain a complete record of the trust
activities, including the trust deed (Trust Law Art. 33). Trustees are obliged
to report the management, utilisation and disposition of the trust property and
the income and expenses to the settlor and beneficiary regularly every year
(Art. 33).
150. Article 15 of the ARCIV further provides that when a trust company
sets up a trust, it must understand the source of the trust assets, keep a copy
of the settlors valid identity document, and register the settlors and ben-
eficiarys basic information, including: name, nationality, address, contact
details, type of identification document, effective date of the identification
document, and identification document number. The CBRC is empowered to
inspect the business activities of trust companies either periodically or on a
random basis (ARTC Art. 47).
151. In addition, trust companies are considered financial institutions
under the AMLL and are required to know their customers and to keep their
identification and transaction information. When a financial institution enters
into a trust arrangement with a customer it must verify and register the ben-
eficiarys identification documents (AMLL Art. 16).
Conclusion
152. All trusts, whether created under Chinas law or not fall under the
scope of Chinas Trust Law where they carry out activities within the Chinese
territory. To fulfil the requirements set out by these laws, trustees of such
trusts must keep documents and records and in particular trust deeds where
information in relation to beneficiaries and settlors of trusts must be detailed.
Finally, trustees of both foreign and Chinese trusts, have reporting obliga-
tions with the SAT when paying income to beneficiaries and must make any
documents relevant for tax purposes available to revenue authorities. This
includes trust deeds of trusts they manage.
153. Business trusts can only be managed by trust companies. Before
operating, they must register with the Shanghai Trust Registration Centre
and provide ownership information upon registration (names of the settlors
and beneficiaries). Trusts companies are also relevant entities under the
Anti-Money Laundering Law and must perform CDD and have knowledge of
beneficiaries of trusts they manage.
Foundations (ToR A.1.5)
Types of foundations
154. Foundation is a recognised concept in China and the Foundation
Administrative Rules (FAR) provides the legal framework surrounding
foundations established in China. Foundations in China are non-profit legal
persons established for public welfare purposes (Art. 2). There are two types
of foundations: public foundations (foundations that are allowed to raise
funds from the general public) and private foundations (foundations that are
prohibited from raising funds from the general public) (Art. 3). In addition,
foreign foundations are permitted to set up a representative office in China
(Art. 6). As at October 2011, there were 19 representative offices of foreign
foundations registered in China.
155. In addition to foundations formed under the FAR, there are public
foundations formed and funded by the PRC government (e.g. the National
Natural Science Foundation of China). These foundations also accept dona-
tions from the general public in addition to government funding.
Registration with the Ministry of Civil Affairs (MCA)
156. The Ministry of Civil Affairs (MCA, at central government level) and
its subordinate offices (at provincial levels) (collectively referred to as MCA
authorities) are responsible for the registration of foundations in China (FAR
Art. 6). The MCA administers registration for the following foundations and
representative offices of foundations:
public foundations operating at national level with an initial fund of
no less than CNY 8 million (EUR 0.976 million);
foundation with a non-PRC resident as a legal representative;
private foundations with an initial fund of no less than CNY 20 mil-
lion (EUR 2.44 million), and the initiators have filed application for
the establishment to the MCA; and
representative offices established by overseas foundations.
157. The subordinate offices of the MCA at provincial level are respon-
sible for administering the registration of foundations that fall outside of the
scope of the conditions listed above (FAR Art. 6).
158. Foundations are obliged to register with the responsible MCA author-
ity and have to obtain its approval in the form of a registration certificate
before carrying out activities in China (FAR Arts.11, 12, 13). Information that
must be submitted to the MCA authority upon registration includes inter alia
(Art. 9):
names of the foundations legal representative, council members, and
secretary, and documents verifying their identities (e.g. identity card
or passport);
capital verification report of the initial funding (which contains the
identities of founders and the amount they contributed to the foundation);
address information; and
approval letter from the responsible authorities.
159. Foundations are further obliged to notify the MCA authorities of any
changes made to their originally registered information by performing an
alteration registration with the MCA (FAR Art. 15).
160. Article 36 of the FAR provides that foundations and representative
offices of overseas foundations must submit annual work reports to the
original MCA authority. This annual work report has to be published after
the annual inspection via authorised media (FAR Art. 38). It must include the
following information (Art. 36; Administrative Measures for the Information
Disclosure of Foundations Arts.4 and 5):
financial statements;
audit report issued by a certified public accountant;
donation activities performed;
Welfare funding projects undertaken by the foundation;
donations received;
how the fund is spent; and
changes to the foundations structure or personnel, etc.
161. The audit report (included in the annual work report) must contain
inter alia the following information (Foundation 2010 Annual Audit Report
[demonstration version]):
name of the foundations legal representative(s);
name of the foundation council member(s);
name of person(s) whose donation accounts for more than 5% of the
total donation received by the foundation in that particular year; and
names of person(s) who received funds from the foundation which
amount to 1% (or more) of the total funds paid out by the foundation
for that particular year.
162. The MCA is the authority responsible for keeping the registration
records of foundations, including the documents submitted to the MCA
for initial registration, alteration registration, deregistration, and annual
inspection. The registration records are maintained indefinitely (Social
Organization Registration Records Management Approach Art. 11). The
records are maintained by the MCA for 10 years after a foundation is liq-
uidated, and subsequently they are transferred to the State Archive Centre
(Art. 12).
Tax registration with the SAT
163. After completing registration with the MCA authority, foundations
are obliged to conduct tax registration with the responsible SAT author-
ity (FAR Art. 14). For tax registration, foundations are obliged to submit,
amongst other things, a tax registration form, an approval letter from the
relevant responsible MCA authority, articles of association, and the identity
card or passport of the legal representative (TRAR Art. 13). The tax registra-
tion form must include the name, nationality, identification card/passport
number, and the permanent addresses of the foundations legal representative
(Art. 14). Articles 18 and 20 of the TRAR provide that foundations are obliged
to make alteration registration with the responsible SAT authority within 30
days of any change to previously registered information.
164. Article 26 of the EITL provides that qualified not-for-profit organi-
sations are exempt from income tax. To qualify for the EIT exemption,
foundations are obliged to submit inter alia the following information to the
responsible SAT authority:
the foundations articles of association (which contain the names
of the foundation council members and legal representative) (FAR
Art. 10);
financial statements and audit report issued by a qualified agency;
a statement of the foundations source of income and spending; and
annual inspection report issued by the responsible MCA authority
(Circular on Issues Relating to the Recognition and Administration
of Tax-exemption Qualification of Non-profit Organizations Art. 3).
165. Information concerning the members of the foundation council has
to be clearly specified in the foundations articles of association (FAR Art. 10).
The identity of the founder is reported in the capital verification report which
the foundation must prepare and submit to the MCA during the initial registra-
tion (Art. 9). For tax purposes, foundations are required to complete annual
Enterprise Income Tax returns. Foundations are obliged to maintain accounting
records, vouchers, tax returns and other relevant information (TCAL Art. 24).
The capital verification report and articles of association are part of the original
supporting documents/vouchers that must be kept for tax purposes.
Information maintained by the foundation
166. To comply with the registration, annual inspection, and record keep-
ing requirements specified under the FAR, Measures for the Information
Disclosure of Foundations, and TCAL, foundations are obliged to maintain
the names, addresses and identity card numbers of the foundations founders
and council members, people who make donations to the foundation, and
people who receive funds from the foundation (i.e. beneficiaries) (FAR Arts.9,
10, Measures for the Information Disclosure of Foundations Arts.4, 5; TCAL
Art. 24).
167. Article 20 of the FAR provides that a foundation must have a council
consisting of 5 to 25 members. The head of the foundation council is respon-
sible for ensuring that the foundation is in compliance with applicable PRC
laws (FAR Arts.20, 43). Accordingly, the head of the foundation council will
have knowledge and access to the aforementioned identity information.
Information held by service providers
168. Financial institutions covered by the AMLL are required to undertake
customer due diligence when establishing a relationship with a representative
(e.g. foundation council member) acting on behalf of a foundation (see above
section A.1.1 of this report)).
Conclusion
169. Chinas legal framework ensures the availability of ownership infor-
mation in relation to foundations. Foundations are non-profit organisations set
up for charitable purposes that are highly monitored by government authority.
Upon registration with the Ministry of Civil Affairs or its subordinate office,
foundations must provide the names of their founders and council members.
This information is also required to be disclosed in the annual audit report.
The same information must be provided to the SAT for registration and
documentation including the identity of beneficiaries must be kept for tax
purposes.
Enforcement provisions to ensure availability of information
(ToR A.1.6)
170. The existence of appropriate penalties for non-compliance with key
obligations is an important tool for jurisdictions to effectively enforce obliga-
tions to retain identity and ownership information.
Companies
171. The Company Law provides a variety of penalties to ensure that accu-
rate information is maintained on the legal ownership and control of companies
in China. Article 199 of the Company Law and Article 69 of ARCR provide that
a company which obtains a business license by submitting false materials or
concealing important facts by other fraudulent means can be subject to a fine
of between CNY 50 000 (EUR 5 896) and CNY 500 000 (EUR 58 962). In
serious cases, the companys business license can be revoked (ARCR Art. 69).
Article 212 of the Company Law and Article 73 of ARCR provide that if a
company fails to make alteration registration with SAIC authorities of any
changes to previously registered information (including changes in ownership),
the company is subject to a fine of between CNY 10 000 (EUR 1 179) and
CNY 100 000 (EUR 11 792). Foreign companies are subject to the same penal-
ties (Registration of Enterprises of Foreign Countries (Regions) Engaged in
Production and Business Activities within the Territory of China Art. 17; see
also Detailed implementation Rules Art. 63). In 2011, the SAIC concluded more
than 13 000 cases for registering false information with more than CNY 1.1 bil-
lion (EUR 119 million) in fines collected; and concluded close to 310 000
cases for non-compliance with registration requirements with more than
CNY 2.6 billion (EUR 308 million) in fines collected. These statistics cover all
types of enterprises i.e. companies and partnerships.
172. If the articles of association for a company are not submitted to the
relevant PRC government bodies (SAIC and SAT local tax offices), neither
business nor tax registration will be approved for the company (Procedures
for the Administration of Tax Registration Arts.13, 14).
173. Article 158 of the Criminal Law provides that whoever, when apply-
ing for company registration, obtains registration by deceiving the SAIC
authorities through falsely declaring the capital to be registered with falsi-
fied certificates or by other deceptive means can, if the amount of the falsely
registered capital is large, be sentenced to fixed-term imprisonment of not
more than three years or criminal detention and/or be fined between 1% and
5% of the capital falsely declared for registration. The Chinese authorities
report that in practice, the amount of the fine is determined on the basis of
the nature, circumstance and consequence of the crimes. Between 2002 and
2011, China Peoples Courts concluded 2227 cases involving the provision of
false register information, including 285 cases in 2011. Additionally, where
a unit commits the crime as described in Article 158, it can be fined, and the
persons who are directly in charge and the other persons who are directly
responsible for the crime can be sentenced to fixed-term imprisonment of not
more than three years or criminal detention.
174. Shareholders trading their securities without permission or not
through an authorised institution are subject to a fine of between 1 to 5 times
the amount of the illegal revenue (Security Law Art. 179). Where there is
no illegal revenue or where the illegal revenue is less than CNY 300 000
(EUR 35 377), a fine of between CNY 300 000 (EUR 35 377) and 600 000
(EUR 70 755) can be imposed. To ensure compliance with these obligations,
the CSRC has set up 38 regional offices
27
(including two supervising offices
established in Shanghai and Shenzhen stock exchanges) to closely monitor
these activities. From January 2001 to February 2012, 475 administrative
penalties in relation to non-compliance with the CSRC regulations concern-
ing the trading or issuance of securities have been imposed by the CSRC.
27. www.csrc.gov.cn/pub/csrc_en/about/organ/#.
Further, according to the PRC Supreme Peoples Court, 28 criminal cases
for issuing shares without permission and/or trading shares privately were
prosecuted over the same period.
Anti-money laundering
175. Failure to comply with anti-money laundering and customer due
diligence obligations under the AMLL and its implementing rules subjects
the offender (e.g. financial institution) to a fine not exceeding CNY 500 000
(EUR 58 962). Moreover a fine not exceeding CNY 50 000 (EUR 60 976) will
be imposed on persons directly responsible for the violation (including directors,
management, and other directly responsible persons). Where the violation con-
stitutes money laundering, fines not exceeding CNY 5 million (EUR 589 623)
may also be imposed on the financial institution and the person responsible
respectively. In addition, trading licenses of financial institutions can be revoked
(AMLL Art. 32).
176. Article 31 of ARCIV provides that the PBOC is empowered to impose
penalties specified under Articles 31 and 32 of the AMLL on the financial
institution and on its directors, senior management and employees directly
responsible. Furthermore, the PBOC may recommend that the CBRC, the
CIRC, and the CSRC revoke the financial institutions trading license, remove
the director, senior management and the responsible employee from their
positions and ban them from working in the financial industry.
177. In 2010, the PBOC received 240 million big transaction reports and
62 million suspicious transaction reports. The PBOC also conducted 2 426
in-field investigations on financial institutions regarding their AML imple-
mentation. Approximately CNY 22 million (EUR 2.594 million) in penalties
was imposed on financial institutions not fully in compliance.
Partnerships
178. Where a partnership operates in China without first registering with
the SAIC local office and obtaining a business license, the SAIC local office
is empowered to impose a fine of up to CNY 50 000 (EUR 5 896) on the
partnership (Administrative Measures for the Registration of Partnership
Enterprises Art. 26). Where a partnership does not complete alteration
registration of any amendment, the SAIC is empowered to impose a fine of
up to CNY 20 000 (EUR 2 358) on the partnership (Art. 28). In practice, in
2011, the SAIC concluded almost 310 000 cases (including all types of enter-
prises) for non-compliance with registration requirements (with more than
CNY 2.6 billion (EUR 308 million) of fines collected. These statistics cover
all types of enterprises i.e. companies and partnerships.
179. Article 93 of the Partnership Law provides that where partnership
enterprise registration was obtained by submission of false documents or by
other fraudulent means, the SAIC can order correction thereof and impose a fine
between CNY 5 000 (EUR 590) and 50 000 (EUR 5 896). In serious circum-
stances, the enterprise registration can be revoked and the SAIC can impose a
fine between CNY 50 000 (EUR 5 896) and CNY 200 000 (23 585 EUR).
Trusts
180. Trust deeds of business trusts must be registered with the Shanghai
Trust Registration Centre. The trust has no lawful effect if registration is not
performed. Under Article 10 of the Trust Law, where the trust property is
required to be registered in accordance with the provisions of laws or admin-
istrative regulations, such property must be registered to give lawful effect to
the entrustment of assets.
Foundations
181. Article 40 of the FAR provides that where a foundation carries out
activities that are not registered with the MCA authorities, the MCA authori-
ties are empowered to confiscate the foundations assets. Additionally, the
MCA authorities are empowered to deregister a foundation (whereby the
foundation will no longer be allowed to carry out its activities in China) if
the foundation does not notify the MCA authorities of any changes to regis-
tered information or does not perform the annual inspection (FAR Art. 42).
The MCA authorities will also notify the responsible SAT authorities and
ask them to request the foundation to surrender any tax incentives received
during the period that the foundation was in violation of the FAR.
182. If a foundation suffers a loss as a result of the foundation councils
misconduct (including not completing the annual inspection), the foundation
council members responsible for such misconduct will be liable for repay-
ing the foundation on the loss incurred (FAR Art. 43). A fine not exceeding
CNY 50 000 (EUR 5 896) can also be imposed on a foundation that does not
maintain the necessary accounting documents/information as required under
the Accounting Law (Accounting Law Art. 42).
Tax
183. Chinas tax laws impose a wide range of civil and criminal penalties
for failure to comply with statutory tax filing, disclosure and registration
requirements. Article 42 of the TRAR and other relevant tax regulations
provide that failure to complete tax registration, alteration registration or
providing false information during the tax registration is subject to penalties
provided under Article 60 of the TCAL (TRAR Art. 42). Article 60 of the
TCAL provides that the SAT authorities can require any person to remedy
any of the following acts within a specified time limit and may impose a fine
not exceeding CNY 2 000 (EUR 236) on the taxpayer (for egregious offenses,
the SAT authorities may impose a fine between CNY 2 000 (EUR 236) and
CNY 10 000 (EUR 1 179)) that:
fails to apply for tax registration, changes or cancels tax registration
within a prescribed time limit;
fails to keep or maintain accounting books, or maintain supporting
vouchers for the accounts and the relevant information in accordance
with the relevant provisions;
fails to provide reports on the financial and accounting systems or
the financial and accounting methods and accounting software to
the tax authorities for possible reference use in accordance with the
relevant provisions;
fails to report all bank account numbers to the SAT as required; and
fails to install and use tax control tools as required, or damages or
alters tax control tools without approval.
184. If a taxpayer fails to accomplish tax registration, the SAT authorities
order the taxpayer to make a correction within a specified time limit. If the
taxpayer fails to respond as scheduled, the SAIC authorities will revoke the
taxpayers business license upon request from the SAT authorities. Further,
if a taxpayer fails to use the tax registration certificate as required or lends,
tampers, damages, buys, sells or forges the tax registration certificate, a
fine between CNY 2 000 (EUR 236) and CNY 10 000 (EUR 1 179) can be
imposed.
185. Article 62 of the TCAL provides that where a taxpayer fails to fulfil
tax filing requirements and submit tax payment materials within a prescribed
time limit, the SAT authorities may impose a fine not exceeding CNY 2 000
(EUR 236) on the taxpayer. For egregious cases, the SAT authorities may
impose a fine ranging between CNY 2 000 (EUR 236) and CNY 10 000
(EUR 1 179) on the taxpayer. The Chinese authorities have reported that in
year 2011, 212 000 cases were audited by the SAT and CNY 92.35 billion
(EUR 11 billion) of tax revenue (including late payment surcharge and fines)
was collected during these audits.
28
186. Article 32 of the Provisional Measures on the Tax Collection and
Administration of Non resident Companies and Individuals Engaging in
Contracted Projects and Provision of Services (NRTPM) provides that the
28. Source: www.ctaxnews.com.cn/syxw/xwxzt/201201/t20120129_1584662.htm.
SAT authority is empowered to impose the penalties specified under the
TCAL on non-resident enterprises. Article 33 of NRTPM provides that where
a PRC-resident entity or individual who engages a foreign company does not
notify the SAT authority of the engagement, they are subject to a fine not
exceeding CNY 10 000 (EUR 1 179).
187. Article 77 of the TCAL provides that where a criminal act is sus-
pected, the SAT authority must transfer the case to the judicial department to
pursue criminal liability. In 2009, there were 3 009 cases transferred to the
judicial department. The cases are posted on the SATs official website. The
Criminal Law provides for various criminal tax penalties. In particular, any
taxpayer who fails to pay or underpays the amount of taxes payable by means
of forging, altering, concealing or destroying account books or vouchers for
the accounts, or overstating expenses or omitting or understating income in
account books, or refusing to file their tax returns after the SAT authorities
have notified them to do so or filing false tax returns will be sentenced to a
fixed-term imprisonment not exceeding three years (Criminal Law Art. 201;
Criminal(Amendment) Law, Art. 7). Where a unit commits a tax crime, it will
be fined, and the persons who are directly in charge and the other persons
who are directly responsible for the crime will be punished in accordance
with the provisions of the Criminal Law (Art. 211.)
188. The SAT authorities report that most individuals and businesses vol-
untarily meet the PRC Governments requirements to provide complete and
accurate information on time. Chinas compliance culture is complemented
by the SAT authoritys broad powers to compel the production of information
from natural and legal persons (see Section B of this report). The SAT author-
ity has powers of discovery and inspection, and can compel production from
taxpayers and third parties of any document deemed relevant.
189. There is a variety of penalties under Chinas laws to ensure that
information required to be maintained is, in fact, maintained. The penalties
appear to be largely effective and dissuasive enough to ensure compliance.
Most of Chinas laws provide a range of penalties, including small to large
monetary fines depending on the level of infraction and imprisonment in
serious cases. In addition, the SAT authority is able to respond to requests for
ownership and identity information for all types of legal entities and arrange-
ments. Information received from partner jurisdictions with an exchange of
information relationship with China confirms this.
Determination and factors underlying recommendations
Phase 1 determination
The element is in place.
Factors underlying
recommendations Recommendations
Not all of the regions in China have
implemented legal provisions that
ensure ownership information in
relation to bearer shares is available.
All of the regions in China should
implement provisions ensuring the
availability of ownership information in
relation to bearer shares.
Phase 2 rating
To be finalised as soon as a representative subset of Phase 2 reviews is
completed.
A.2. Accounting records
Jurisdictions should ensure that reliable accounting records are kept for all
relevant entities and arrangements.
190. The Terms of Reference sets out the standards for the maintenance
of reliable accounting records and the necessary accounting record retention
period. It provides that reliable accounting records should be kept for all rel-
evant entities and arrangements. To be reliable, accounting records should:
(i) correctly explain all transactions; (ii) enable the financial position of the
entity or arrangement to be determined with reasonable accuracy at any time;
and (iii) allow financial statements to be prepared. Accounting records should
further include underlying documentation, such as invoices, contracts, etc.
Accounting records need to be kept for a minimum of five years.
191. The MOF (Ministry of Finance) is responsible for developing Chinese
accounting standards. To exercise this function, the MOF set up the Accounting
Regulatory Department. In addition, and in line with the Certified Public
Accounting (CPA) Law (1993), the MOF supervises and guides the CPA profes-
sion and approves all accounting standards.
General requirements (ToR A.2.1)
192. Entities operating in China are required to maintain accounting
records under the Accounting Law, TCAL (Tax Collection and Administration
Law) and various detailed accounting regulations and accounting standards
specific to particular types of entities (units). The Accounting Law and TCAL
contain provisions requiring the maintenance of accounting records that
correctly explain all transactions, enable the financial position of relevant
units and arrangements to be determined with reasonable accuracy at any
time, and allow financial statements to be prepared. Other specific laws
and regulations, as described below, add to or reinforce the record-keeping
requirements contained in the Accounting Law and TCAL.
Accounting law
193. Article 3 of the Accounting Law provides that all companies, enter-
prises, institutions and other organisations
29
are obliged to set up accounting
books and ensure that they are authentic and complete. Articles 21 and 50
provide that the person responsible for the unit must ensure that accounting
records are correct, orderly, and complete. The responsible person is defined
as the person who is empowered to represent the unit (Art. 50). Article 10 pro-
vides that the following business transactions and operational matters must
be recorded in the accounting books:
receipt and disbursement of cash holdings and valuable securities;
receipt, issuance, additions, reductions and use of money and properties;
creation and settlement of debts and claims;
increases and decreases in capital and funds;
computation of revenue, expenditures, expenses and costs;
computation of financial results; and
other matters subject to accounting procedures and accounting
practice.
194. Article 9 of the Accounting Law provides that every unit must
prepare accounting vouchers, accounting books and financial statements
and reports. Accounting information must be prepared on the basis of the
transactions and events that have actually occurred and should truly reflect
the financial position, operating results and cash flows of the unit. In addi-
tion, accounting treatments must be consistently applied throughout different
accounting periods (Business Enterprise Accounting System Art. 11).
195. Article 42 of the Accounting Law provides that where any unit com-
mits inter alia any of the following acts, the MOF may impose a fine between
CNY 3 000 (EUR 354) and CNY 50 000 (EUR 5 896) upon the unit and
29. Chinas authorities reported that other organisations as specified in Art. 2
of the Accounting Law includes trustees in respect of trusts they manage and
foundations.
between CNY 2 000 (EUR 236) and CNY 20 000 (EUR 2 358) on the per-
sons directly in charge and other persons directly responsible:
no account books are kept in accordance with the law;
account books are kept secretly;
account books are recorded on the basis of accounting vouchers
which are not examined and verified or account books that do not
conform to the provisions are recorded; and
failure to keep accounting documents in accordance with the law,
which results in destruction and loss of such accounting documents.
196. Committing one of the above acts is a crime, and criminal liabilities
may be investigated in accordance with the Criminal Law (Accounting Law
Art. 42). Where accounting personnel commit one of the above acts and the
circumstances are serious, the MOF will revoke the practice qualification
certificates of the accounting personnel found responsible (Art. 42).
197. Article 43 of the Accounting Law further provides that it is a crime
to forge or alter accounting vouchers or account books, or to prepare false
financial and accounting reports. Article 44 also provides that a crime
is committed if the accounting vouchers, account books or financial and
accounting reports that should be kept in accordance with the law are con-
cealed or intentionally destroyed. In these cases, the MOF can impose a fine
between CNY 5 000 (EUR 590) and CNY 100 000 (EUR 11 792) on the unit
and between CNY 3 000 (EUR 354) and CNY 50 000 (EUR 5 896) on the
persons directly in charge and other persons directly responsible.
Tax law
198. Article 19 of the TCAL provides that all taxpayers (including compa-
nies, partnerships, trusts, foundations, individuals) and withholding agents
must retain accounting books in accordance with the administrative rules and
regulations issued by the MOF and the SAT and maintain such records based
on legitimate and valid vouchers and other documentary evidence.
199. Taxpayers engaged in business operations are obliged under the
TCAL to maintain accounting records, vouchers, tax vouchers and other rel-
evant information (Art. 24). Article 29 of the TCAL specifically provides that
taxpayers are obliged to prepare and maintain accounting books, accounting
vouchers, financial statements, invoices, tax payment receipts, export docu-
mentation, and other relevant tax documents (e.g. contracts) for at least ten
years.
200. Failure to keep or maintain accounting books, or maintain support-
ing vouchers for the accounts constitutes a crime leading to the revocation of
the units business license and/or a fine between CNY 2 000 (EUR 236) to
CNY 10 000 (EUR 1 179) (TCAL Art. 60). Where a withholding agent fails
to keep and maintain accounting books for the tax withheld and remitted
or collected and remitted, or fails to maintain supporting vouchers for the
accounts and the relevant information in respect of the tax withheld, the SAT
authorities can impose a fine between CNY 2 000 (EUR 236) to CNY 5 000
(EUR 590) on the withholding agent (Art. 61).
201. Failure to pay or underpay the amount of taxes payable by means of
forging, altering, concealing or destroying without authorisation account-
ing books or vouchers for the accounts or overstating expenses or omitting
or understating income in accounting books constitutes a criminal offence,
subject to a prison term not exceeding 7 years (Criminal Law Art. 201)
202. As mentioned, additional accounting record retention obligations are
imposed in other laws and regulations that add to or reinforce the record-
keeping requirements contained in the Accounting Law and TCAL. These
laws and regulations are specific to particular types of legal entities and
arrangements and are detailed below.
Companies
203. All companies operating in China (including FIEs) must comply with
the accounting and record keeping obligations under the Accounting Law,
TCAL, and Company law (Company Law Arts.18, 164, 165; LWFOE Art. 18;
LEJV Art. 2; LCJV Art. 15). In addition, companies must comply with the
Business Enterprise Accounting System which is formulated based on the
Accounting Law, and is issued by the MOF.
204. Under the Company Law, companies are obliged to set up an account-
ing system and prepare financial reports (Arts.164, 165). Companies must,
after the end of each financial year, draft a financial report and have it audited
by an accounting firm. The financial report must be prepared in accordance
with PRC laws and administrative regulations (Art. 165). All shareholders/
members are entitled to consult and copy the companys accounting records
and financial reports (Art. 34).
205. Where a company falsifies records or conceals any important matter
in materials such as financial and accounting statements submitted to rel-
evant PRC government authorities (e.g. SAIC, SAT), the relevant authority
can impose a fine between CNY 30 000 (EUR 3 538) and CNY 300 000
(EUR 35 377) on the person or persons directly responsible (Company Law
Art. 203). Additionally, any company that maintains any set of accounts that
differs from its statutory accounting books in violation of the Company Law
will be ordered to remedy the defect and also be fined between CNY 50 000
(EUR 5 896) and CNY 500 000 (EUR 58 962) (Art. 202).
206. Article 161 of the Criminal Law provides that it is a criminal offence
for a company to submit false financial and accounting records or reports
concealing important facts to shareholders/members and the general public.
The persons who are directly in charge and the other persons who are directly
responsible for the crime will be sentenced to fixed-term imprisonment of
not more than three years or criminal detention and/or be fined between
CNY 20 000 (EUR 2 358) and CNY 200 000 (EUR 23 585).
Partnerships
207. All partnerships operating in China (including FIPs) must comply
with the accounting and record keeping obligations under the Accounting
Law, TCAL, and Partnership Law (Partnership Law Art. 36). In addition,
partnerships must comply with the Business Enterprise Accounting System
issued by the MOF.
208. Article 36 of the Partnership Law provides that partnerships are
obliged to establish financial and accounting systems in accordance with
PRC laws and administrative regulations. Article 11 of the Administrative
Measures on Registration of FIP provides that FIPs must follow the relevant
PRC laws, administrative regulations and state regulations on accounting and
tax matters, foreign exchanges customs, and immigration issues.
209. Where partnership affairs are executed by one or more partners,
those partners are obliged to regularly report to the other partners regarding
the execution of partnership affairs. The operation and financial conditions
of the partnership and all income from their execution of partnership affairs
belongs to the partnership, and the expenses and losses are borne by the
partnership (Partnership Law Art. 28). For the purpose of understanding the
operation and financial conditions of the partnership, the partners are enti-
tled to inspect and copy financial data including the accounting books of the
partnership (Art. 28).
210. Article 31 of the Administrative Rules on Registration for Partnership
Enterprises provides that partnerships are required to complete an annual
inspection by the relevant SAIC authorities. Among the documents submitted
to the SAIC are audit reports, balance sheets, and income statements.
Trusts
211. Several laws require trustees in China to keep accounting records.
First, the Trust Law contains specific rules dealing with record keeping
requirements. Second, trusts are considered as units and trustees in China
and must consequently comply with the accounting and record keeping obli-
gations under the Accounting Law and the TCAL. Finally, trustees of business
trusts must also comply with the Accounting Rules for Trust Companies
(ARTC) and Accounting Rules for Trust Business (ARTB).
212. Article 29 of the Trust Law provides that a trustee must keep a sepa-
rate account for the trust assets. More specifically, trust assets from different
settlors must be recorded separately (Art. 29). A trustee is also required to
maintain complete records in relation to the operation and management of the
trust, including a record of the income and expenditure of the trust (Art. 33).
213. Article 30 of the ARTC provides that trust companies are obliged to
set up accounts in accordance with PRC laws, prepare separate accounts for
trust business and non-trust business and perform separate accounting for
each trust business. Article 28 provides that trust companies must properly
keep the full record of trust affairs they have handled, and periodically report
to the settlor and the beneficiary on the status of trust property, the manage-
ment and use, and disposal and income and expenditure thereof. The settlor
and the beneficiary have the right to information regarding the management
and use, disposal and income and expenditures of the trust property and to
request the trust company to provide explanations (Art. 28).
214. Article 1(2) of the ARTB provides that each business trust should
be treated as an independent unit for accounting purposes. Article 1(3) pro-
vides that the accounts for a trust must include trust assets, trust liabilities,
trust rights and interests, trust income, trust expenditures, and trust profit.
Article 1(11) provides that the accounting records maintained for trusts must
comply with Administrative Measures for Accounting Files (AMAF).
215. Trust companies, as financial institutions, are also obliged to comply
with the Accounting Rules for Financial Institutions. Article 58 of the
Accounting Rules for Financial Institutions provides that trust companies
are obliged to submit their financial statements annually to the MOF. Annual
financial statements must be audited by an accounting firm (art. 58).
Foundations
216. All foundations operating in China must comply with the accounting
and record keeping obligations under the Accounting Law, TCAL, and FAR
(Accounting Law Art. 2). Foundations must also comply with the Annual
Inspection Measures for Foundations (AIMF) and the Accounting Rules for
Non-profit Social Organisations.
217. Article 36 of the FAR provides that a foundation is required to submit
financial statements and an audit report to the MCA local office each year
for annual inspection. Article 4 of the AIMF provides that the foundations
financial statements must comply with the Accounting Rules of Non-profit
Social Organisations.
218. Article 8 of the Accounting Rules for Non-profit Social Organisations
provides that accounting information must be prepared on the basis that
transactions and events have actually occurred and should truly reflect the
financial position, operating results, and cash flows of the entity. In addition,
accounting treatments must be consistently applied throughout different
accounting periods.
Underlying documentation (ToR A.2.2)
219. Under the Accounting Law and the TCAL, all companies (including
FIEs), partnerships (including FIPs), trusts, and foundations have a statutory
obligation to maintain underlying accounting documentation (Accounting
Law Arts.9, 10; TCAL Arts.24, 29). Underlying documentation required to
be maintained includes accounting books, accounting vouchers, financial
statements, invoices, tax payment receipts, export documentation, and
other relevant tax documents (e.g. contracts) (Accounting Law Art. 9; TCAL
Art. 29). Article 15 of the Accounting Law provides that accounting books
must be recorded based on original accounting vouchers which are examined
and verified.
220. The SAT has also developed non-binding statements of guidance and
principles to assist taxpayers to meet their tax and record keeping obliga-
tions. Such guidance is available on the SAT website as well as at each local
branch/bureau of the SAT. In particular, the information provides guidance
on the types of accounting records and underlying documentation required to
be maintained.
221. Several of Chinas exchange of information partners who provided
input regarding the review of China noted that China has been able to provide
underlying documentation, including receipts, invoices, transaction records,
and contractual agreements, in response to specific requests for exchange of
information.
Document retention (ToR A.2.3)
222. Article 8 of the Administrative Measures for Accounting Files
(AMAF) provides the relevant accounting record retention obligations for all
units.
30
The retention periods for accounting records is fixed (between 5 and
30. Article 1(11) of the Accounting Rules for Trust Business (ARTB) specifically
clarifies that the accounting records kept for business trusts should comply with
the AMAF.
25 years) or indefinite and varies depending on the type of document (Art. 8).
The Chinese authorities specify that the minimum retention periods, as cal-
culated from the end of the relevant fiscal year is, for different accounting
records, the following:
Document type Minimum retention period (years)
Vouchers
Original vouchers 15
Account vouchers 15
Summary vouchers 15
Accounting books
General ledgers 15
Sub-ledgers 15
Journals* 15
Fixed asset registers 5 years after the disposal of the fixed asset
Auxiliary accounting books 15
Financial statements
Annual financial statements ndefinite
Others
Bank reconciliations 5
Bank statements 5
List of stored accounting records ndefinite
List of destroyed accounting records ndefinite
*Cash and bank journals must be kept for a minimum of 25 years.
223. Accounting information must be kept in China. Article 18 of the
AMAF provides that all units operating in China must retain their accounting
records in this country.
224. For tax purposes, Article 29 of the TCALIR provides that account-
ing books, accounting vouchers, financial statements, tax payment receipts,
invoices, exportation documents and other tax related information (e.g. con-
tracts) must be maintained for at least 10 years.
225. Information received from Chinas peers notes that in all cases China
has been able to provide the requested accounting records.
Phase 2 rating
completed.
A.3. Banking information
Banking information should be available for all account-holders.
226. The CBRC, the regulatory authority for the banking sector since
2003 is a ministerial-level organisation subordinated to the State Council. It
is entrusted with the regulation and the supervision of banking institutions,
asset management companies, trust companies and non-bank financial insti-
tutions in China.
227. Commercial banks, by law, are authorised to provide the follow-
ing services: accept public deposits, fund short-term, medium-term and
long-term loans, settle both domestic and overseas accounts, handle bill
acceptance and discount, issue financial bonds, issue and sell government
bonds as agents, buy and sell government bonds and financial bonds, engage
in inter-bank lending and borrowing, buy and sell foreign exchange, provide
bank card services, provide letter of credit service and guarantees, handle
receipts, payments and insurance business as agents, provide safe deposit
boxes, and undertake other business as approved by the banking regulatory
authority under the State Council (Law of the Peoples Republic of China on
Commercial Banks (revised 2003) Art. 3).
228. A commercial bank or financial institution may be established
solely with the approval of the CBRC. Non-compliance will be considered
an offence under criminal law and prosecuted accordingly. Article 174 of
the Criminal Law provides that whoever establishes a commercial bank or
any other banking institution without the approval of the CBRC will be sen-
tenced to a fixed-term imprisonment of not more than three years or criminal
detention and/or fined between CNY 20 000 (EUR 2 358) and CNY 200 000
(EUR 23 584). Under serious circumstances, the offender will be sentenced
to fixed-term imprisonment between three years and ten years and fined
between CNY 50 000 (EUR 5 896) and CNY 500 000 (EUR 58 962).
Record-keeping requirements (ToR A.3.1)
229. The AMLL requires banks and other financial institutions
31
to
perform customer due diligence. To this extent, financial institutions must
verify and maintain the records of the identities and transactions of all their
customers (AMLL, Art. 16 and 19). Article 9 of the AMLRFI provides that
financial institutions must understand their clients aim for carrying out the
transaction and understand the nature of the transaction. Article 3 of ARCIV
also provides that a financial institution must act with due diligence and take
appropriate measures to know its customers and the purpose and nature of the
transaction carried out by them. When the customer is likely to be engaged
in money laundering or terrorism financing, the financial institution must
identify the natural person who is actually controlling the customer (i.e. the
ultimate shareholder where the customer is not a natural person), and persons
actually benefiting from the transaction.
230. Financial institutions must maintain a number of records facilitating
the proper identification of their clients. Records on a customer being a natu-
ral person must contain the client name, nationality, address, contact details,
type of the identification document, effective date of the identification docu-
ment, and identification document number (ARCIV Art. 33). Records on a
legal person or other organisation must contain the name, address, business
scope, organisation identification code, tax registration certificate number,
business license (or other types of license which allows the entity to conduct
operations) number, name and identification document of the clients actual
shareholder with controlling power, and name and identification document of
the clients legal representative (Art. 33).
231. For every transaction conducted, financial institutions must main-
tain such records as are reasonably necessary to facilitate reproducing that
transaction readily (ARCIV Art. 3). Where a customer remits money, finan-
cial institutions are obliged to record remitters name, address and account
number and the receivers name, and address (or the address of the organisa-
tion receiving the transfer) (Art. 10). If a financial institution receives money
remitted from abroad, it should record the name, account number and address
of the person making the remittance. If the person making the remittance
did not open a bank account overseas, the financial institution should record
other information necessary to ensure the transaction can be traced (Art. 10).
232. Financial institutions must maintain customers identity details, data
information, business vouchers and books for all transactions within stipu-
lated periods: client identity details must be maintained for at least five years
31. The term financial institutions refers to policy banks, commercial banks, credit
cooperatives, post and saving institutions, trust and investment companies, securi-
ties firms, futures brokerage companies, and insurance companies (AMLL Art. 34).
from the date the business relationship terminates and transaction informa-
tion must be maintained for at least five years from the date the transaction
terminates (AMLL Art. 19).
233. Failure to conduct anti-money laundering and customer due diligence
obligations under the AMLL and its implementing rules subjects the offender
(e.g. financial institution) to a fine of up to CNY 500 000 (EUR 58 962). In
addition persons who are directly responsible for the violation (including
directors, management, and other directly responsible persons) will be pun-
ished by fine up to CNY 50 000 (EUR 5 896). Where the violation constitutes
money laundering, fines of up to CNY 500 000 million (EUR 58 962) and
CNY 5 million (EUR 589 623) may be imposed on the financial institution
and the person responsible, respectively. In addition, trading licenses of
financial institutions can be revoked (AMLL Art. 32).
234. Article 31 of the ARCIV provides that the PBOC is empowered to
impose penalties specified under Articles 31 and 32 of the AMLL on the
financial institution and on its directors, senior management and employees
directly responsible. Furthermore, the PBOC may recommend the CBRC,
the CIRC, and the CSRC to remove the financial institutions trading license,
remove the director, senior management and the direct responsible employee
from their positions, and ban them from working in the financial industry.
235. Article 176 of the Criminal Law provides that whoever illegally takes
in deposits from the general public or does so in disguised form will be sen-
tenced to fixed-term imprisonment of not more than three years or criminal
detention and/or fined between CNY 20 000 (EUR 2 358) and CNY 200 000
(EUR 23 585). Where a unit commits the crime, it will be fined, and the
persons who are directly in charge and the other persons who are directly
responsible for the crime shall be punished, according to Article 176.
236. There are sufficient legal obligations in place for banks and other
financial institutions to maintain all records pertaining to accounts as well
as to related financial and transactional information in China. Furthermore,
input received from Chinas peers indicates that China is able to exchange
bank records for all types of legal entities and arrangements. China reports
that bank information is maintained for all clients and that its competent
authority has not encountered issues regarding availability of bank informa-
tion, both for domestic tax cases and for providing exchange of information
assistance.
Phase 2 rating
completed.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 73
B. Access to Information
Overview
237. A variety of information may be needed in a tax enquiry and jurisdic-
tions should have the authority to obtain all such information. This includes
information held by banks and other financial institutions as well as infor-
mation concerning the ownership of companies or the identity of interest
holders in other persons or entities, such as partnerships and trusts, as well
as accounting information in respect of all such entities. This section of the
report examines whether Chinas legal and regulatory framework gives the
authorities access powers that cover all relevant persons and information
and whether rights and safeguards are compatible with effective exchange of
information. It also assesses the effectiveness of this framework in practice.
238. Chinas tax authorities (the SAT) have the necessary powers to obtain
bank, ownership, identity, and accounting information and have enforce-
ment measures to compel the production of such information. The ability
of the SAT authorities to obtain information for exchange of information
purposes is derived from their general access powers under the TCAL and
the SAT Notice on Protocol for International Exchange of Tax Information
coupled with the authority provided by the relevant exchange of information
agreements.
239. There is no limitation on the SAT authorities power to obtain infor-
mation either from taxpayers or from third parties in possession or control of
information. The SAT authorities have rights to make enquires, inspect docu-
ments, and search and seize information when necessary. When conducting
tax inspections in accordance with PRC laws and for providing assistance
under Chinas exchange of information agreements, the SAT authorities have
the right to require all units and individuals to disclose tax related informa-
tion, regardless of a domestic tax interest.
240. Chinas competent authority (the Director of the Global Co-operation
and Compliance Division of the International Taxation Department of the
SAT), when requested by a foreign counterpart, can access information with
74 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION
the assistance of the SAT officials at or below provincial level, which have
the necessary powers to access information from taxpayers and third parties
in China. The co-ordination procedures between Chinas competent author-
ity and the SAT officials at or below provincial level are clearly defined and
effective in practice.
241. No bank secrecy or other provisions in Chinas laws and regulations
unduly prevent the competent authority from obtaining, directly or indirectly,
account information maintained by banks or other financial institutions for
tax purposes. Banks and other financial institutions are obliged to disclose
relevant information upon request from the SAT authorities.
242. The volume of specific requests for exchange of information both
to and from Chinas exchange of information partners has been increasing
over the past several years. The requests vary in complexity and cover a wide
range of material. Over the last three years, there have been no cases where
China has not provided information requested by exchange of information
partners due to difficulties in accessing requested information.
243. Rights and safeguards (e.g. notification, appeal rights) in China do
not unduly prevent or delay effective exchange of information.
B.1. Competent Authoritys ability to obtain and provide information
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information).
Bank, ownership, and identity information (ToR B.1.1) and
accounting records (ToR B.1.2)
244. The SAT is responsible for the administration of Chinas taxes and
consists of local state taxation bureaus (LSTBs) and local taxation bureaus
(LTBs) at the provincial level. The LSTBs, LTBs and their local branches at
various levels are responsible for the collection and administration of taxes in
respect of the taxes they respectively manage. Tax branches are representa-
tive offices of the county offices and established on the basis of economic
districts, administrative districts, or sectors. Generally, every SAT office at
provincial level comprises the following bureaus: a Tax Investigation Bureau,
a Collection Bureau, a Foreign Investment Tax Bureau, and/or an Import and
Export Tax Administration Bureau. The SAT Headquarters conducts vertical
leadership over the offices of the SAT with respect to organisation, size, per-
sonnel, and budgets, and assists local governments by way of dual leadership
over the LTBs.
245. As at the end of 2011, there were approximately 700 000 tax officials
serving in approximately 61 tax offices (or bureaus) at provincial level, 30
municipal tax offices (or bureaus) at vice-provincial level, 664 tax offices (or
bureaus) at municipal level, 4 176 tax offices at county level, and more than
55 466 tax branches. Approximately 70% of the total tax officials are tax
collectors.
246. The SAT and its authorised representatives, i.e. the Director General,
the Deputy Director General of the International Taxation Department of
the SAT and Director of the Global Co-operation and Compliance Division
(GCCD) of the International Taxation Department of the SAT, are the com-
petent authority under Chinas DTCs and TIEAs. Requests received by the
Director General or the Deputy Director General of the International Taxation
Department are forwarded to the GCCD. The officials in GCCD then examine
the request to ensure that it meets the requirements provided by the respec-
tive exchange of information (EOI) agreement and that it provides sufficient
information to action the request. The competent authority of the requesting
jurisdiction is notified of any deficiencies concerning its request. If the request
is valid, the GCCD will seal an official SAT Headquarters document to dis-
patch the request to provincial tax authorities where the taxpayer or third party
possessing the information resides to make further investigations.
247. The LSTBs and LTBs have their own responsibilities in relation to
EOI matters. Investigation and examinations for all EOI requests are handled
by the lower working level tax authorities (LSTBs and LTBs). There is at least
one specialist in each tax bureau at provincial level in charge of assisting the
competent authority in carrying out investigations in each respective prov-
ince. The procedures used to access information are generally the same for all
types of information and categories of record keepers from which the infor-
mation is to be obtained. The local tax authorities send a notice to the person
or entity that has control of the information and request the information to
be provided within a prescribed time limit, normally 7 to 30 days depending
on the difficulty of access to information. If the information is already in the
hands of the tax authorities, the requested information is normally sent to the
competent authority of the requesting jurisdiction within 60 days. If another
government department in China (e.g. the SAIC) maintains the information,
the SAT sends a formal letter requesting information to be provided within 7
to 30 days, depending on the difficulty of access to information. The SAIC is
obliged to co-operate with the SAT by providing all information maintained
in its registries (e.g. registration information) to the SAT, both automatically
and upon request.
32
32. See Notice on Business Registration and Tax Registration Information Exchange
and Sharing by State Administration of Taxation and State Administration of
Industry and Commerce [Guo Shui Fa [2003] No. 81.
248. When the requested information is received by the responsible local
tax bureau, the information, together with a report, is submitted to each upper
level tax bureau until it reaches the SAT Headquarters. Each level of tax
bureau goes through the documents submitted to ensure that it contains the
information requested in the request. At each step, if the reviewing official
considers that the information collected is not sufficient, or where further
research is necessary, the local tax bureau is required to take the necessary
steps to deliver the additional information until it fully meets the require-
ments of the requesting party. After the GCCDs review, the information is
sent to the competent authority for final approval.
Powers to obtain information
249. Chinas tax authorities have the necessary information gathering powers
under the TCAL, the SAT Notice on Protocol for International Exchange of Tax
Information (the SAT Protocol) (Guo Shui Fa [2006] No. 70), and its exchange of
information agreements. The TCAL and the SAT Protocol provide the statutory
authority for Chinas competent authority to exchange information for tax pur-
poses with foreign jurisdictions pursuant to the provisions of a DTC or TIEA.
250. Article 57 of the TCAL provides that when conducting tax inspections
in accordance with the law, the SAT authorities have the right to require units
and individuals to disclose tax related information. Article 56 of the TCAL
provides that all units and individuals are obliged co-operate with the SAT
authorities when they conduct tax inspections in accordance with the law.
251. Article 54(2) of the TCAL provides that the SAT authorities are
empowered to inspect a units or individuals commodities, goods or other
properties at the units or individuals place(s) where production or business
operations are conducted. Article 58 of the TCAL further provides that when
investigating a tax case, the SAT authorities may record, tape-record, video
tape, photograph and photocopy information relevant to the case.
252. The SAT Protocol, promulgated in 2006, provides detailed proce-
dures and requirements relating to Chinas EOI program based on the OECD
Manual for EOI. In particular, the SAT Protocol provides the procedures used
by the SAT authorities from the date an EOI request is received to the date
the information is provided to the requesting jurisdiction.
253. Article 10 of the SAT Protocol provides that under no circumstances
can the SAT authorities at or below provincial level decline to supply infor-
mation to the competent authority, nor shall the competent authority decline
to supply information to the contracting parties solely because:
it has no domestic interest in such information;
lack of reciprocity in the quantity and quality of the exchanged infor-
mation ;
tax authorities have secrecy obligations to taxpayers;
banks have secrecy obligations to client information; or
tax information is kept by an agent, intermediary organisation or a
third party.
254. Article 142 of the General Principles of the Civil Law provides that,
in case of inconsistency with domestic civil tax laws, Chinas bilateral trea-
ties/agreements prevail over domestic civil laws. Further, Article 91 of the
TCAL provides that Chinas international treaties/agreements prevail over
domestic tax laws in case of inconsistency with domestic tax laws. Thus, the
information exchange rules in Chinas DTCs and TIEAs override any incon-
sistent domestic tax laws or secrecy provisions.
255. Article 5 of the TCAL provides that all relevant PRC government
departments and units must support and assist the SAT authorities when they
carry out duties in accordance with the law. Article 6 of the TCAL further
provides that individuals, withholding agents and other units concerned must
truthfully report to the SAT authorities on matters concerning tax filing
and payment, withholding tax and the collection of tax on behalf of the SAT
authorities.
256. Chinas competent authority is able to respond to an EOI request that
relates to information regarding a criminal tax matter in the requesting juris-
diction. Requests for information pertaining to a criminal tax matter in the
requesting jurisdiction are treated seriously and other PRC government authori-
ties (e.g. government security agencies) may be involved in case investigations,
particularly when search and seizure is necessary.
Bank information
257. There are no limitations on the ability of Chinas tax authorities to
obtain information held by a bank or other financial institution for either civil
or criminal tax purposes in response to a specific exchange of information
request.
258. Article 54(6) of the TCAL provides that the SAT authorities are
empowered to investigate the deposit accounts opened by any unit, individual
or withholding agent, upon the issuance of a national standard bank account
investigation warrant. Article 87 of the TCALIR provides that the deposit
account investigation warrant is produced by the tax bureau commissioner
at county/district level or above. Consent of other authorities or regulatory
bodies is not required. Warrants are typically produced on the same day they
are requested. There are no other special procedures used to access informa-
tion held by banks or other financial institutions. There is also no need for
court approval when officials from the SAT authorities request information
from banks or other third party financial institutions. Article 17 of the TCAL
expressly provides that banks and other financial institutions are obliged to
assist the SAT authorities when investigation of units or individuals bank
accounts is necessary.
259. There is no explicit requirement to specify particular details when
making an EOI request for bank information to China. As a matter of prac-
ticality, however, sufficient details would need to be provided to enable the
SAT authorities to action the request. The SAT reports that it is possible to
action a request for bank information if the requesting jurisdiction provides
a combination of information to specify the identity of the account holder
(e.g. account number or similar identifying information). In rare occasions,
providing only a name in Pinyin
33
will not be enough information as it may
match multiple identities in China. It is not uncommon that more than one
person bears the same name. For example, more than 100 000 people in
China have the same name of Zhang Ming. Under these circumstances,
China sends letters to its treaty partners requesting additional information to
enable the competent authority to effectively process the requests.
260. The SAT authorities have a good relationship with financial institu-
tions in China and report that banks are co-operative with regard to requests
for information. There have been no cases where banks have refused to
provide information to the tax authorities for EOI purposes. However, one
of Chinas peers mentioned during the course of this review that in one
specific case China was not in a position to provide the requested banking
information.
Ownership and identity information and accounting records
261. There are no limitations on the ability of the tax authorities to obtain
ownership and identity information and accounting records from taxpayers
or third parties for civil or criminal tax purposes. There is no need for court
approval when officials from the tax authorities request information from
taxpayers or third parties.
262. Article 54(1) of the TCAL grants the SAT authorities the power to
inspect a units or individuals accounting books, supporting vouchers, state-
ments, and other relevant information. The SAT authorities can also inspect
a withholding agents accounting books, supporting vouchers, or other
33. Pinyin is the official system to transcribe Chinese characters into Latin script
used in China.
documentary evidence and relevant information in respect of the amount of
taxes being withheld and remitted or collected and remitted.
263. Article 86 of the TCALIR provides that when the SAT authorities exer-
cise their powers provided under the provisions of Article 54(1) of the TCAL,
the tax authority is empowered to do so at the business premises of a unit,
individual, or withholding agent. When deemed necessary and upon approval
of the head of the tax bureau at district level or above, the SAT authority is
entitled to take the units, individuals or withholding agents accounting
books, supporting vouchers, financial statements and other relevant materi-
als from previous years to the tax bureau office for examination. Upon the
approval of the head of the tax bureau at city level or above, the SAT author-
ity is empowered to take the taxpayer and withholding agents current years
accounting information back to the tax bureau office for inspection purposes.
Use of information gathering measures absent domestic tax interest
(ToR B.1.3)
264. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes.
China has no domestic tax interest with respect to its information gathering
powers. Information gathering powers provided to Chinas tax authorities
under the TCAL can be used to provide EOI assistance regardless of whether
China needs the information for its own domestic tax purposes (SAT Protocol
Art. 10).
Compulsory powers (ToR B.1.4)
265. As previously described, the SAT authorities have the necessary
powers to obtain information from natural and legal persons and have
enforcement measures to compel the production of such information. Under
the TCAL, the SAT authorities are entitled to inspect a units or individuals
commodities, goods or other property at the units or individuals place(s) and
to record, tape-record, video tape, photograph and photocopy information rel-
evant to the case. Upon approval of the head of the tax bureau at district level
or above, the SAT authority is entitled to take the units, individuals or with-
holding agents accounting books, supporting vouchers, financial statements
and other relevant materials from previous years to the tax bureau office for
examination.
266. Article 70 of TCAL further provides that if a taxpayer or with-
holding agent refuses to co-operate with or obstructs a tax inspection, the
SAT authority is empowered to impose a fine not exceeding CNY 50 000
(EUR 5 896).
267. Article 73 of the TCAL provides that if a bank or other financial
institution in which a taxpayer or withholding agent has opened an account,
refuses: (i) to allow the SAT authorities to investigate the taxpayers or with-
holding agents deposit account, or (ii) refuses to act in accordance with the
SAT authorities request to freeze the taxpayers or withholding agents deposits
or withhold tax from the account, or (iii) after receiving a written notification
from the SAT authorities, helps the taxpayer or withholding agent to trans-
fer deposits and thereby causing a loss of tax revenue, the SAT authorities
may impose a fine between CNY 100 000 (EUR 11 792) and CNY 500 000
(EUR 58 962), and impose a fine between CNY 1 000 (EUR 118) and
CNY 10 000 (EUR 1 179) on the persons directly responsible.
Secrecy provisions (ToR B.1.5)
268. There are no provisions under Chinas laws relating to the secrecy of
ownership, identity or accounting information. Article 54 of the TCAL and
Article 10 of the SAT Protocol override confidentiality provisions applicable
to banks and other financial institutions.
269. All of Chinas EOI agreements permit China to decline a request if
responding to the request would disclose any trade, business, industrial, com-
mercial or professional secret or trade process, or information, the disclosure
of which would be contrary to public policy. This follows the standards set
forth in Article 26 of the OECD Model Tax Convention and the OECD Model
TIEA. Information that falls within these categories remains protected under
PRC domestic law and EOI requests for such information will generally be
declined.
270. Among the situations in which China is not obliged to supply infor-
mation in response to a request is when the requested information would
disclose confidential information protected by attorney-client privilege. The
concept of attorney-client privilege is not well defined under PRC law. The
Lawyer Law and the PRC Code of Ethics for Attorneys both only provide that
attorneys are obliged to keep confidential trade secrets obtained from their
clients and the privacy of their clients. This obligation does not apply when
the clients or other persons actions or plans are harmful to state security,
public security or when personal and property safety of others may be seri-
ously harmed. The limited scope of the attorney-client privilege does not
exempt attorneys from being forced to disclose information in a judicial
action (Civil Procedure Law Art. 70). In addition, PRC law does not protect
any legal document or correspondence that is marked confidential and
privileged. Moreover, the SAT authorities report that, in practice, an EOI
request will not be declined because the information requested is maintained
by an attorney. The SAT authorities can, with approval from the head of a tax
bureau at or above district/county level, compel the production of information
from an attorney pursuant to their general access powers under the TCAL.
271. There are no cases, either domestic tax cases or for responding to EOI
requests, where the attorney-client privilege prevented the SAT from accessing
information. Input received from Chinas peers confirms this. There are no other
professional privileges in China, for example relating to accountants or tax advis-
ers, which may hinder these professionals providing information to government.
Phase 2 rating
completed.
B.2. Notification requirements and rights and safeguards
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)
272. The SAT authorities are not statutorily obliged to inform the person
concerned of the existence of an EOI request. Likewise, the SAT authorities
are not obliged to inform the taxpayer concerned prior to contacting third
parties to obtain information.
273. Generally, taxpayers have no special rights to intervene against the
SAT authorities information-gathering powers under the TCAL and the SAT
Protocol. However, if a taxpayer considers any specific administrative action
by the SAT authorities to infringe their legal rights, the taxpayer can file a
tax administrative review petition with the SAT administrative reviewing
authority (i.e. the tax bureau one level higher than the tax bureau that con-
ducted the original action) (TCAL Art. 8). The scope of tax administrative
review covers: tax collection actions, tax administrative permits and approv-
als, administration on invoices, tax guarantee measures and enforcement
measures, tax administrative penalties, and others specific tax administrative
actions. Taxpayers are obliged to provide any information requested by the
SAT authorities before any decision can be made during the administrative
review proceedings (Art. 88).
274. Although there have been no administrative review proceedings
regarding the exercise of the SAT authorities information-gathering powers
for EOI purposes, Chinas competent authority reports that, in practise, it will
not respond to an EOI request until resolution of the administrative review
proceedings. Typically, administrative review proceedings are completed
within one month depending on the facts of the case.
275. The SAT authorities report that, to date, there have been no cases
where taxpayers or third party record keepers refused to provide requested
information in response to the tax authorities information-gathering powers
under the TCAL.
Phase 2 rating
completed.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 83
C. Exchanging Information
Overview
276. Jurisdictions generally cannot exchange information for tax purposes
unless they have a legal basis or mechanism for doing so. A jurisdictions
practical capacity to effectively exchange information relies both on having
adequate mechanisms in place as well as an adequate institutional frame-
work. This section of the report assesses Chinas network of exchange of
information agreements against the standards and the adequacy of its institu-
tional framework to achieve effective exchange of information in practice.
277. China has a comprehensive network of bilateral agreements that pro-
vide for exchange of information in tax matters, and is currently engaged in
negotiations to establish new agreements as well as renegotiations of its older
agreements. Currently, China has a network of 97 DTCs, 95 of which are in
force, and two agreements
34
containing information exchange requirements.
In addition, China has entered into TIEAs with eight jurisdictions, seven of
which are in force with Argentina, The Bahamas, the British Virgin Islands,
Bermuda, the Cayman Islands, Guernsey, the Isle of Man, and Jersey. Chinas
agreements cover its major trading partners and China has not refused to
enter into an exchange of information agreement with any Global Forum
member seeking to do so. The large majority of Chinas agreements meet
the international standards. However, Chinas DTCs with Austria (1991),
Brunei (2004), Estonia (1998), Jamaica (1996), Luxembourg (1994), Malaysia
(1985), Switzerland (1990), and Trinidad and Tobago (2003) do not meet the
standard because of limitations in place in the domestic laws of Chinas treaty
partners. A protocol amending the DTC with Switzerland was initialled in
March 2012. It is recommended that China continue its program of updating
its exchange of information agreements to incorporate wording in line with
Article 26 of the OECD Model Tax Convention.
34. With Hong Kong Special Administrative Region (Hong Kong SAR) and Macau
Special Administrative Region (Macau SAR).
84 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION
278. Chinas policy is to negotiate exchange of information agreements
to the international standard. In particular, Chinas practice is to include an
exchange of information article in conformity with the 2005 update of the
OECD Model Tax Convention. Considering Chinas comprehensive treaty
network, many of them do not contain the last version of Article 26 of the
OECD Model Tax Convention. However, Chinas capacity to access a wide
range of information (as detailed in section B.1. of this report), in particu-
lar bank information, without reference to a domestic tax interest ensures
Chinas ability to exchange information in line with the international stand-
ard. All of Chinas TIEAs are based on and closely follow the OECD Model
TIEA.
279. All exchange of information articles in Chinas agreements contain
confidentiality provisions and Chinas domestic legislation also contains
relevant confidentiality provisions. These provisions apply equally to all
information and documentation forming the requests received by China as
well as to responses received from counterparties.
280. Chinas agreements ensure that the contracting parties are not obliged
to provide information which would disclose trade, business, industrial, com-
mercial or professional secrets or information which is the subject of attorney
client privilege or to make disclosures which would be contrary to public
policy.
281. Input received from Chinas peers indicates that in many cases China
is able to respond to requests for information within 90 days of receipt by
providing the information requested or an update on the status of the request.
Chinas domestic procedures for handling exchange of information requests
are well defined and generally effective in practise. However, there are a
small number of cases reported where Chinas competent authority did not
provide the requesting jurisdiction with a status update when the request
could not be responded to within 90 days. The Chinese authorities explained
that failure to provide a status update in some cases was the result of insuffi-
cient personnel resources within the GCCD at the SAT Headquarters. In light
of the growing number of inbound requests received by China, China should
ensure that it has an appropriate number of staff working within the GCCD
to ensure effective management of Chinas exchange of information requests.
282. In general, the responses to the peer questionnaire from Chinas
exchange of information partners suggest that Chinas practices in terms
of exchange of information are to a high standard. Information provided by
peers shows that China is able to respond to the vast majority of requests it
receives in a thorough and comprehensive manner.
C.1. Exchange-of-information mechanisms
Exchange of information mechanisms should allow for effective exchange of information.
Other forms of exchange of information
283. Beyond meeting the standard of effective exchange of information assis-
tance in response to specific requests, China engages in exchange of information
practices that go beyond the standard, including automatic and spontaneous
exchanges of information. Input received from Chinas peers indicates that
China actively exchanges information on a spontaneous and automatic basis.
284. Since 2004, China has been exchanging information on an automatic
basis with several of its key treaty partners. The SAT sends out approxi-
mately 10 000 pieces of information through automatic exchange each year.
The information generally covers certain types of payments, e.g. dividend,
interest, royalty, salary, and pension payments. Each single piece of automatic
information exchanged is manually translated from Chinese into English.
285. China has also developed a spontaneous exchange of information
relationship with a number of treaty partners. The SAT sends out approxi-
mately 35 pieces of information through spontaneous exchange each year.
286. The processes and procedures applied to automatic and spontaneous
exchanges follow the guidance under the SAT Protocol and the circular on
EOI Directive Rules and are the same as applied to exchange of information
on request.
287. Several of Chinas exchange of information partners provided positive
feedback regarding Chinas spontaneous and automatic exchange of informa-
tion practices. Chinas competent authority reports that some of its specific
requests for exchange of information relate to information provided on a spon-
taneous or automatic basis.
Joint International Tax Shelter Information Centre
288. China actively participates in the Joint International Tax Shelter
Information Centre (JITSIC). JITSIC was established in 2004 to supplement
the ongoing work of its members in identifying and curbing tax avoidance
and shelters and those who promote them and invest in them.
35
Delegates
from each of the member jurisdictions are based in either Washington, DC or
London and exchange information on abusive tax schemes, their promoters
and investors, consistent with the provisions of bilateral tax conventions.
36
35. JITSIC Memorandum of Understanding.
36. JITSIC Terms of Reference.
Pursuant to the domestic procedures of the parties, the delegates of JITSIC
from each respective member jurisdiction are delegated the ability to act as
competent authorities for purposes of bilateral exchanges of information.
289. China joined JITSIC in September 2008 as an observer country by
sending a delegate to the JITSIC London office for three months. China sent
another delegate to the JITSIC London office in 2010. In 2010, China formally
joined JITSIC and became JITSICs seventh member country, after Australia,
Canada, Japan, the United Kingdom, the United States and Republic of Korea.
290. China currently has one delegate with competent authority status at
the JITSIC London office. Chinas JITSIC delegate is primarily involved in:
(i) identifying abusive tax avoidance schemes by regularly exchanging anony-
mous details of new schemes within the JITSIC framework, both bilaterally
and multilaterally; (ii) carrying out case specific exchange of information
on abusive tax avoidance schemes within Chinas current framework of
its existing bilateral tax agreements; (iii) facilitating a platform for direct
communications between experts and field auditors in home countries; and
(iv) sharing the expertise, best practices and experience in tax administration
to combat abusive tax schemes.
Tax examinations abroad
291. The TIEAs concluded by China include provisions that tax officials
of a requesting jurisdiction can be present during examinations of taxpayers
and third parties upon a requested jurisdictions consent. The SAT approved
one incoming authorised visit from a treaty partner and is currently drafting
its first internal directive on handling overseas audits.
Foreseeably relevant standard (ToR C.1.1)
292. The international standard for exchange of information envis-
ages information exchange upon request to the widest possible extent.
Nevertheless it does not allow fishing expeditions, i.e. speculative requests
for information that have no apparent nexus to an open inquiry or investiga-
tion. The balance between these two competing considerations is captured in
the standard of foreseeable relevance which is included in Article 26(1) of
the OECD Model Tax Convention set out below:
The competent authorities of the contracting states shall exchange
such information as is foreseeably relevant for carrying out the
provisions of this Convention or to the administration or enforce-
ment of the domestic laws concerning taxes of every kind and
description imposed on behalf of the contracting states, of their
political subdivisions or local authorities, insofar as the taxation
thereunder is not contrary to the Convention. The exchange of
information is not restricted by Articles 1 and 2.
293. Chinas DTCs are generally patterned on the OECD Model Tax
Convention and its commentary as regards the scope of information that
can be exchanged. DTCs initially signed or amended by protocol after 2008
generally use the foreseeably relevant standard (Belgium (2009); the Czech
Republic (2009); Finland (2010); Hong Kong, China (2010); Malta (2010);
Singapore (2010); Syria (2010); Tajikistan (2008); Turkmenistan (2009); the
United Kingdom (2011); Zambia (2010)). Older DTCs generally use the term
as is necessary or as is relevant in lieu of as is foreseeably relevant. The
terms as is necessary and as is relevant are recognised in the commen-
tary to Article 26 of the OECD Model Tax Convention to allow for the same
scope of exchange as does the term foreseeably relevant.
37
294. Chinas DTC with Switzerland (1990) incorporates additional lan-
guage: such information (being information which is at their disposal under
their respective taxation laws in the normal course of administration) as
is necessary. This wording imposes a restriction on the partners abil-
ity to respond to a request as it may be interpreted in a restrictive manner.
Furthermore, the scope of this treaty is limited to the application of the
Convention. This treaty does not meet the standard. China and Switzerland
initialled a protocol amending this DTC in March 2012.
295. All of Chinas TIEAs (with Argentina, Bahamas, Bermuda, British
Virgin Islands, Cayman Islands Guernsey, the Isle of Man, Jersey) meet the
foreseeably relevant standard as they are patterned on the OECD Model
TIEA and its commentary regarding the scope of information that can be
exchanged.
296. In cases where a request is unclear or incomplete, Chinas competent
authority reports that it routinely seeks clarifying or additional information
from the requesting jurisdiction before declining a request. Information
received from partner jurisdictions with an exchange of information relation-
ship with China confirms this.
In respect of all persons (ToR C.1.2)
297. For exchange of information to be effective, it is necessary that a
jurisdictions obligation to provide information is not restricted by the resi-
dence or nationality of the person to whom the information relates or by the
37. The word necessary in Article 26(1) of the 2003 OECD Model Tax Convention
was replaced by the phrase foreseeably relevant in the 2005 version. The com-
mentary to Article 26 recognises that the term necessary allows for the same
scope of exchange as does the term foreseeably relevant.
residence or nationality of the person in possession or control of the informa-
tion requested. For this reason, the international standard for exchange of
information envisages that exchange of information mechanisms will provide
for exchange of information in respect of all persons.
298. All but one of Chinas DTCs and all of its TIEAs provide for
exchange of information with respect to all persons. With the exception of
Chinas DTC with Switzerland, none of Chinas agreements restricts the
jurisdictional scope of the exchange of information provisions to certain per-
sons, for example those considered resident in one of the contracting States.
The China-Switzerland DTC limits the scope of exchange of information to
residents of the contracting states.
Obligation to exchange all types of information (ToR C.1.3)
299. Jurisdictions cannot engage in effective exchange of information if
they cannot exchange information held by financial institutions, nominees or
persons acting in an agency or a fiduciary capacity. The OECD Model Tax
Convention, which is an authoritative source of the standards, stipulates that
bank secrecy cannot form the basis for declining a request to provide infor-
mation and that a request for information cannot be declined solely because
the information is held by nominees or persons acting in an agency or fiduci-
ary capacity or because the information relates to an ownership interest.
300. Only Chinas DTCs signed or amended by protocol after 2008 include
paragraph 26(5) of the OECD Model Tax Convention, which provides that a
contracting state may not decline to supply information solely because the
information is held by a bank, other financial institution, nominee or person
acting in an agency or a fiduciary capacity or because it relates to ownership
interests in a person (e.g. Barbados (2010); Belgium (2009); the Czech Republic
(2009); Finland (2010); Hong Kong, China (2010); Malta (2010); Singapore
(2010); Syria (2010); Tajikistan (2008); the United Kingdom (2011) and Zambia
(2010)). Chinas policy is to include Article 26(5) in all of its new agreements.
301. Although Chinas other DTCs do not include such a provision, there
are no limitations in Chinas laws with respect to access to bank informa-
tion, information held by nominees, and ownership and identity information.
There are, however, such limitations in place in the domestic laws of some
of its treaty partners (e.g. Austria (1991), Estonia (1998), Luxembourg (1994),
Malaysia (1985) and Switzerland (1990)). In these cases, the absence of a
specific provision requiring exchange of bank information unlimited by bank
secrecy may serve as a limitation on the exchange of information which can
occur under the relevant DTC. It is recommended that China continue to
renegotiate the DTCs with Austria, Estonia, Luxembourg, and Malaysia to
include paragraph 26(5) of the OECD Model Tax Convention and bring these
EOI mechanisms to the international standard. A protocol updating the DTC
with Switzerland was already concluded in March 2012.
302. All Chinas TIEAs include the provisions contained in Article 5(4)
subparagraphs (a) and (b) of the OECD Model TIEA, obliging the contracting
parties to exchange all types of information.
Absence of domestic tax interest (ToR C.1.4)
303. The concept of domestic tax interest describes a situation where a
contracting party can only provide information to another contracting party
if it has an interest in the requested information for its own tax purposes. An
inability to provide information based on a domestic tax interest requirement
is not consistent with the international standard. Contracting parties must use
their information gathering measures even though invoked solely to obtain
and provide information to the other contracting party.
304. Chinas DTCs with Barbados (2010); Belgium (2009); the Czech
Republic (2009); Finland (2010); Hong Kong, China (2010); Malta(2010);
Singapore (2010); Syria (2010); Tajikistan (2008); United Kingdom (2011) and
Zambia (2010) incorporate wording in line with Article 26(4) of the OECD
Model Tax Convention, obliging the contracting parties to use information-
gathering measures to exchange requested information without regard to a
domestic tax interest. Chinas other DTCs do not contain such a provision.
There are, however, no domestic interest restrictions on Chinas powers to
access information. China is able to exchange information, including in cases
where the information is not publicly available or already in the possession of
the governmental authorities as noted in section B.2 of this report.
305. There is a domestic tax interest requirement for some of Chinas
treaty partners (Brunei (2004), Jamaica (1996), Trinidad and Tobago (2003)).
In such cases, the absence of a specific provision requiring exchange of infor-
mation unlimited by domestic tax interest will serve as a limitation on the
exchange of information that can occur under the relevant DTC. It is recom-
mended that China continue to renegotiate its DTCs with Brunei, Jamaica,
and Trinidad and Tobago to include paragraph 26(4) of the OECD Model Tax
Convention and to bring these EOI mechanisms to the international standard
306. All of Chinas TIEAs allow information to be obtained and exchanged
notwithstanding it is not required for any domestic tax purpose.
Absence of dual criminality principles (ToR C.1.5)
307. The principle of dual criminality provides that assistance can only be
provided if the conduct being investigated (and giving rise to an information
request) would constitute a crime under the laws of the requested country if
it had occurred in the requested country. In order to be effective, exchange of
information should not be constrained by the application of the dual criminal-
ity principle.
308. There are no dual criminality requirements in Chinas agreements for
exchange of information in tax matters.
Exchange of information in both civil and criminal tax matters
(ToR C.1.6)
309. Information exchange may be requested both for tax administration
purposes and for tax prosecution purposes. The international standard is not
limited to information exchange in criminal tax matters but extends to infor-
mation requested for tax administration purposes (also referred to as civil
tax matters).
310. All of Chinas exchange of information agreements provide for
exchange of information in both civil and criminal tax matters.
311. Chinas competent authority is able to respond to an EOI request that
relates to information regarding a criminal tax matter in the requesting juris-
diction. Chinas authorities reported that in practice requests for information
pertaining to a criminal tax matter in the requesting jurisdiction are treated
seriously and that there are no differences between civil and criminal tax
matters in the manner the information relating to these cases will be collected
and further exchanged by China.
Provide information in specific form requested (ToR C.1.7)
312. Exchange of information mechanisms should allow for the provision
of information in the specific form requested (including depositions of wit-
nesses and production of authenticated copies of original documents) to the
extent possible under a jurisdictions domestic laws and practices.
313. There are no restrictions in the exchange of information provi-
sions in Chinas DTCs and TIEAs that would prevent China from providing
information in a specific form, as long as this is consistent with its own
administrative practices.
314. Chinas competent authority is prepared to provide information in the
specific form requested to the extent permitted under PRC law and admin-
istrative practice. Information received from partner jurisdictions with an
exchange of information relationship with China indicates that China is able
to respond to such requests.
In force (ToR C.1.8)
315. Exchange of information cannot take place unless a jurisdiction has
exchange of information arrangements in force. Where exchange of infor-
mation agreements have been signed the international standard requires
that jurisdictions must take all steps necessary to bring them into force
expeditiously.
316. China has a comprehensive network of 107 bilateral agreements that
provide for exchange of information in tax matters, comprising 97 DTCs, 2
arrangements and 8 TIEAs. Ninety-five of Chinas DTCs, its two arrange-
ments and seven TIEAs are in force. Chinas agreements with Belgium (new
DTC), Ethiopia, the Cayman Islands, and Uganda are awaiting ratification.
317. It normally takes under 12 months for China to ratify a DTC or a
TIEA. In fact, approximately 85% of Chinas agreements entered into force
within 12 months of signing.For seventeen of Chinas agreements, it took
more than 24 months before they entered into force.
38
From an update pro-
vided by China, it appears that 10 of these agreements were ratified by China
within one year and three more within two years. In practice, a signed DTC
or TIEA is submitted to the State Council via the Ministry of Foreign Affairs
to be ratified. After the ratification, a note for entry into force will be sent to
the contracting state through diplomatic channels. China dispatches its note
indicating its completion of its internal procedures for the entry into force to
its treaty partner who will acknowledge receipt of the notification and may
confirm it has also completed its internal procedure for the same purpose.
When China receives the second notification, the treaty (either DTC or TIEA)
will be in force.
318. The SAT authorities report that in some instances ratification has
been difficult when a TIEA is signed between China and a jurisdiction which
is either a crown dependency or an overseas territory of a sovereign jurisdic-
tion. There have been miscommunications with regard to the issue of entry
into force. However, the SAT authorities report that all miscommunications
have been rectified. Only one of Chinas recent TIEAs is pending ratification,
that with the Cayman Islands, signed on 26 September 2011.
38. Australia (26 months), Belarus (21 months), Belgium (29 months), Croatia
(77 months), Greece (42 months), Hungary (31 months), Italy (50 months), Morocco
(48 months), Nepal (117 months), Nigeria (84 months), Portugal (26 months), Qatar
(92 months), Russia (35 months), Trinidad and Tobago (25 months), United States
(31 months), Venezuela (45 months).
In effect (ToR C.1.9)
319. For exchange of information to be effective, the contracting parties must
enact any legislation necessary to comply with the terms of the agreement.
320. All of Chinas agreements which have been signed and concluded by
both parties are in effect in China.
321. As noted previously in this report, Chinas legal and regulatory
framework is in place to ensure availability and access to information
required for international tax matters. Treaties are given the full force and
effect of law in China and must be faithfully observed. International agree-
ments, such as DTCs and TIEAs override domestic laws in the case of
conflict (TCAL Art. 91). As such, Chinas international agreements have been
given effect to in its national legislation.
322. Chinas competent authority has a developed institutional framework
that supports effective exchange of information. It has written administrative
procedures to be followed by exchange of information staff for processing,
co-ordinating, and responding to incoming requests. The SAT Protocol
provides procedures for the co-ordination between the competent author-
ity, Regional Taxation Bureaus, and Tax Offices. The guidelines establish
a commitment by the tax authorities to provide exchange of information
assistance in a timely manner. Agreements between Chinas SAT and other
relevant PRC government agencies provide procedures for assistance in rela-
tion to exchanging information (e.g. Notice on Business Registration and Tax
Registration Information Exchange and Sharing by State Administration of
Taxation and State Administration of Industry and Commerce).
Phase 2 rating
completed.
C.2. Exchange-of-information mechanisms with all relevant partners
The jurisdictions' network of information exchange mechanisms should cover
all relevant partners.
323. Ultimately, the international standard requires that jurisdictions exchange
information with all relevant partners, meaning those partners who are
interested in entering into an information exchange arrangement. Agreements
cannot be concluded only with counterparties without economic significance. If
it appears that a jurisdiction is refusing to enter into agreements or negotiations
with partners, in particular ones that have a reasonable expectation of requiring
information from that jurisdiction in order to properly administer and enforce
its tax laws it may indicate a lack of commitment to implement the standards.
324. China has a comprehensive treaty network that covers all of its major
trading partners (European Union; United States; Japan; ASEAN
39
member
states except Cambodia and Myanmar; Hong Kong, China; Republic of
Korea; Australia; Russia; India.
40
). China has signed exchange of information
agreements with 33 of the 34 OECD
41
countries (not with Chile), all the G20
countries, and 63 of the 106 Global Forum members.
42
325. China has signed TIEAs with eight jurisdictions (Argentina,
Bahamas, British Virgin Islands, Bermuda, Cayman Islands, Guernsey, Isle
of Man, Jersey) and has established a detailed agenda of negotiation for addi-
tional exchange of information agreements. In addition, seven existing DTCs
will be renegotiated. In all cases, China expects that the outcome in terms
of exchange of information provisions will be to the international standard.
There is no indication that China has not entered into an agreement with a
jurisdiction when requested to do so.
39. The Association of Southeast Asian Nations (ASEAN) has 10 member states:
Brunei, Cambodia, Indonesia, Lao P.D.R., Malaysia, Myanmar, Philippines,
Singapore, Thailand, and Vietnam (See www.aseansec.org/).
40. http://english.mofcom.gov.cn/static/column/statistic/ie.html/1.
41. Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungary, Iceland, Israel, Italy, Japan, Korea,
Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal,
Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom,
United States.
42. Argentina; Australia; Austria; Bahamas; Bahrain; Barbados; Belgium; Bermuda;
Brazil; Brunei; Cayman Islands; Canada; Cyprus; Czech Republic; Denmark;
Estonia; Finland; France; FYROM; Georgia; Germany; Greece; Guernsey; Hong
Kong, China; Iceland; India; Indonesia; Ireland; Isle of Man; Israel; Italy; Jamaica;
Japan; Jersey; Korea; Luxembourg; Macao, China; Malaysia; Malta; Mauritius;
Mexico; the Netherlands; New Zealand; Nigeria; Norway; Philippines; Portugal;
Qatar; Russia; Saudi Arabia; the Seychelles; Singapore; Slovak Republic; Slovenia;
South Africa; Spain; Sweden; Switzerland; Trinidad and Tobago; Turkey; United
Arab Emirates; United Kingdom.
Factors underlying
China should continue to develop its
exchange of information network with
all relevant partners.
Phase 2 rating
completed
C.3. Confidentiality
The jurisdictions' mechanisms for exchange of information should have adequate
provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)
326. Governments would not engage in information exchange without the
assurance that the information provided would only be used for the purposes
permitted under the exchange mechanism and that its confidentiality would
be preserved. Information exchange instruments must therefore contain
confidentiality provisions that spell out specifically to whom the information
can be disclosed and the purposes for which the information can be used.
In addition to the protections afforded by the confidentiality provisions of
information exchange instruments, jurisdictions with tax systems generally
impose strict confidentiality requirements on information collected for tax
purposes.
327. All exchange of information articles in Chinas DTCs have con-
fidentiality provisions modelled on Article 26(2) of the OECD Model Tax
Convention. Likewise, all of Chinas TIEAs have confidentiality provisions
modelled on Article 8 of the OECD Model TIEA. Chinas DTCs and TIEAs
override domestic PRC law in case of inconsistency (TCAL Art. 91).
328. The confidentiality provisions in Chinas DTCs and TIEAs are
backed by general confidentiality provisions in Chinas domestic legisla-
tion. Article 8 of the TCAL imposes an obligation on Chinas tax authorities
to maintain strict confidentiality in respect of any information obtained
through their work. Article 87 provides that if any tax information is divulged
due to any violation of the confidentiality provisions under the TCAL, the
responsible personnel will be punished according to the relevant administra-
tive laws, and may be liable to up to 7 years imprisonment if such violation
constitutes a crime. Tax information under exchange of information is gov-
erned by the Law on Guarding State Secrets, the State Administration for
Protection of State Secrets on the Confidentiality Administration of Carriers
of State Secrets, and other relevant laws and regulations. According to the
Law on Guarding State Secrets, any tax authority who violates the confi-
dentially provisions under the TCAL is subject to a fine between CNY 1 000
(EUR 118) and CNY 5 000 (EUR 590). In addition, the SAT authorities will
circulate an internal notice of warning naming the tax authority that divulged
such information to raise awareness of the importance of confidentiality.
329. The SAT Protocol provides specific rules for safeguarding the con-
fidentiality of information for exchange of information purposes during the
collection, storage, transmittal, and use of information. The detailed safe-
guards are as follows (Arts.15 30):
information being exchanged is treated as a national secret and is
protected under the Law on Guarding State Secrets;
the information received must be handled as confidential documents
in conformity with the procedures provided by relevant domestic law
(e.g. TCAL);
only authorised officials can access the information and these offi-
cials must have taken training courses on confidentiality;
tax authorities are not allowed to disclose information received to
irrelevant persons or departments unless the competent authority
approves such disclosure;
no taxation authority at any level may disclose the source and con-
tents of the tax information in any public taxation document; and
information being exchanged must be transmitted through the National
Secret Channel, including an independent mailing system and phone
system;
330. In each tax bureau of the SAT (61 across Chinas territory), there is
at least one computer used exclusively for dealing with exchange of informa-
tion requests in order to ensure the confidentiality of all information received
and provided. In addition all information related to exchange of information
requests is packed and sealed for transmission and delivered according to the
relevant confidentiality provisions (i.e. through the National Secret Channel).
In packing and sealing tax information, a confidential seal is affixed on the
envelope and the serial number and names of the receiving and dispatching
units are indicated.
All other information exchanged (ToR C.3.2)
331. The confidentiality provisions in Chinas exchange of information
agreements and domestic law do not draw a distinction between information
received in response to requests or information forming part of the requests
themselves. As such, these provisions apply equally to all requests for such
information, background documents to such requests, and any other docu-
ment reflecting such information, including communications between the
requesting and requested jurisdictions and communications within the tax
authorities of either jurisdiction.
Phase 2 rating
completed.
C.4. Rights and safeguards of taxpayers and third parties
The exchange of information mechanisms should respect the rights and
safeguards of taxpayers and third parties.
Exceptions to requirement to provide information (ToR C.4.1)
332. Each of Chinas exchange of information agreements ensures that
the parties are not obliged to provide information which would disclose any
trade, business, industrial, commercial or professional secret or information
which is the subject of attorney client privilege or information the disclosure
of which would be contrary to public policy.
333. As noted in section B.1 of this report, Chinas domestic law permits
the disclosure of information to the extent that it is required to be disclosed
by a DTC or TIEA. Chinas DTCs and TIEAs specifically provide that trade,
business, industrial, commercial or professional secrets are not required to
be disclosed. Similarly, they do not require the disclosure of information
that would be contrary to public policy. Therefore, information that falls into
these categories remains protected under Chinas domestic laws and requests
for such information are declined. As noted previously in section B.1, legal
professional privilege does not prevent the access to information by Chinese
authorities.
Phase 2 rating
completed.
C.5. Timeliness of responses to requests for information
The jurisdiction should provide information under its network of agreements
in a timely manner.
Responses within 90 days (ToR C.5.1)
334. In order for exchange of information to be effective, it needs to be
provided in a timeframe, which allows tax authorities to apply the informa-
tion to the relevant cases. If a response is provided after a significant lapse
of time the information may no longer be of use to the requesting authorities.
This is particularly important in the context of international co-operation
as cases in this area must be of sufficient importance to warrant making a
request.
335. There are no provisions in Chinas laws or in its DTCs pertaining to
the timeliness of responses or the timeframe within which responses should
be provided. Chinas TIEAs include an obligation to either respond to the
request, or provide a status update within 90 days of receipt of the request.
As such, there appear to be no legal restrictions on the ability of Chinas
competent authority to respond to requests within 90 days of receipt by pro-
viding the information requested or by providing an update on the status of
the request.
336. China receives a relatively high volume of requests for informa-
tion. Over the last three years, China received around 300 inbound requests
a year: 296 in 2009, 221 in 2010 and 345 in 2011, and the SAT expects the
number of inbound requests to continue to grow in future years. Information
received from partner jurisdictions with an exchange of information relation-
ship with China indicates that 85% of the requests are answered in 90 days.
In the majority of other cases, Chinas competent authority provides a status
update, within 90 days. In a few cases China responds to requests within 180
days. Only in exceptionally rare cases does China respond within one year.
China gives priority to urgent requests and requests relating to criminal tax
matters in the requesting jurisdiction. Requests that cannot be fulfilled within
90 days typically relate to requests that involve a large number of taxpayers
who are geographically dispersed in different provinces, cities, or districts
in the country. Notwithstanding, the SAT authorities report that any delay is
not the result of any particular type of information requested or the particular
investigative measures used to access information.
Monitoring and reporting
337. Chinas competent authority uses measures to internally monitor its
exchange of information program. The GCCD maintains a national database
of all requests and correspondence classified by the name of the EOI partners.
The national database is an application that allows for statistics generation
and facilitates tracking and review. All local tax authorities (LSTBs and
LTBs) are also obliged to establish similar recording systems at the local
level. To ensure every request is responded to in a timely manner, the GCCD
closely monitors each case and progress is tracked and updated in the national
database. The GCCD will request follow-up reports from the relevant local
tax bureaus in cases where a request is long outstanding. This system appears
to be working efficiently.
338. In order to monitor Chinas EOI program and evaluate the perfor-
mance of all tax authorities at the provincial level that have participated in
EOI, the SAT issues an annual EOI report, in which the following indicators
are assessed:
number of requests (including statistics by EOI partners and by pro-
vincial tax authorities);
length of time for providing a response (the SAT requires provin-
cial tax authorities to finish investigations within 40 to 60 days,
depending on the circumstances of each case, any delay by local tax
authorities will be addressed in the report);
quality of requests and replies (according to the DTC, TIEA, as well
as the OECD standard); and
application of domestic procedures in collecting information.
339. Chinas competent authority has procedures to produce a status
report or an interim report for requests that take longer than 90 days to pro-
vide a response. However, this process is monitored manually and it may, in
some cases not be entirely accurate. Nevertheless, the competent authority is
in the process of updating its system to allow for automatic status reporting.
340. When the responsible local tax bureau obtains requested information,
the information, together with a report, is submitted to each higher level of
tax bureau until it reaches the competent authority at the SAT Headquarters.
In each step, if the reviewing official believes that the information collected
is not sufficient, or further audit is necessary, the information is returned to
the local responsible tax bureau for further collection or audit until it fully
meets the requirements of the requesting jurisdiction.
341. Chinas competent authority has periodical meetings with jurisdic-
tions with which it has a significant EOI relationship or has strong mutual
economic ties in order to update the status of requests, as well as to exchange
views pertaining to matters of interest for both jurisdictions regarding EOI.
For example, the competent authority reports that the tax attach of the
United States in Beijing has made frequent visits to the SAT to discuss the
practical operation of the EOI article under the existing United States China
DTC. In addition, the SAT has meetings with officials from Japan on EOI
topics two or three times each year.
Organisational process and resources (ToR C.5.2)
342. Chinas legal and regulatory framework relevant to exchange of
information for tax purposes is presided over by the SAT. The GCCD is
delegated authority to act as competent authority under Chinas EOI agree-
ments. Chinas competent authority is clearly identifiable to its exchange of
information partners. The competent authoritys name and address is listed
on the SATs website in English, and additional information can be found on
the website in Chinese (www.chinatax.gov.cn).
343. The GCCD is based in Beijing and is comprised of a specialised
team of three experts in international taxation. The GCCD oversees all EOI
matters in China. In addition, for each level of tax authorities, there are des-
ignated specialists working exclusively or concurrently on EOI matters. All
EOI personnel are obliged to have bachelors degree or above in related fields,
as well as more than five years experience in international taxation.
344. All staff engaged in EOI matters receive training specific to EOI
issues in order to provide quality service to Chinas EOI partners. The
training is specifically designed to cover essential topics in EOI, including
obligations under EOI mechanisms, internal processing of requests and con-
fidentiality obligations. One of the most significant training programs is the
Seminar on EOI under the OECD Outreach Program, which is held once a
year with approximately 100 staff participating. In addition, there are several
other seminars held each year in China on selective EOI topics (e.g. interna-
tional practice in EOI and case studies). According to the statistics provided
by Chinas tax authorities, approximately 450 tax officials received EOI train-
ing in the past three years.
345. In 2006, the SAT published a comprehensive circular on EOI directive
rules, namely the SAT Protocol, which provides procedures and requirements
for all categories of Chinas EOI program. The SAT Protocol is based on the
OECD Manual on Information Exchange. In particular, the SAT Protocol sets
forth the procedures used from the date an EOI request is received to the date
that the information is provided to the requesting jurisdiction. The SAT also
released a circular on EOI Model Templates in order to provide additional
guidance for EOI requests and replies. The model templates explain the spe-
cific requirements on how to prepare a valid request and response and also
provides templates for EOI documents and correspondence, including cover
letter, memorandum, acknowledgement, etc.
346. When a request is received by the Director General or the Deputy
Director General of International Taxation Department, the request is sent
directly to the GCCD. The experts in the GCCD then examine the request to
ensure that the request is in line with the respective DTC or TIEA between
China and the requesting jurisdiction. If a request is deficient in any respect,
the competent authority of the requesting jurisdiction will be notified.
Chinas competent authority never simply declines an invalid request without
asking for clarification or additional information from the requesting jurisdic-
tion. If a request is identified as valid, the GCCD will immediately seal an
official SAT Headquarters document to dispatch it to the relevant provincial
tax authorities to make further investigations.
347. As described in section B of this report, the tax administration
system in China is divided into five levels from the Central Government at
the top level to the local tax authorities at the lower working levels, all of
which have their own responsibilities in relation to EOI matters. Investigation
and examinations for all EOI requests are handled by the lower working level
tax authorities and reported to each upper level. The specialists in each tax
bureau at the provincial level have been trained especially for the purpose
of assisting Chinas competent authority to complete investigations in their
respective provinces. There is adequate financial and technical support at the
provincial level dedicated to providing EOI assistance. For example, there is
at least one computer exclusively used for dealing with EOI requests in each
tax bureau in order to ensure the confidentiality of all information received
and provided.
348. The three international tax specialists in the GCCD, who work
exclusively for matters concerning EOI in China, are facing challenges
posed by the gradual increase in the number of inbound requests. From 2009
to 2010, the number of inbound requests received by China increased by
approximately 100. The SAT authorities report that they expect the number
of inbound requests to continue to grow in future years. Under staffing of the
GCCD may result in longer response times, especially if large quantities of
requests are received in a short time. The SAT authorities report, however,
that they are currently considered adding additional personnel in the GCCD.
349. Overall, China has dedicated appropriate financial and technical
resources to the various areas of EOI regime. However, considering the
increasing volume of inbound requests China receives, it is recommended
that China devote additional personnel resources to the GCCD to ensure
effective management of Chinas EOI program. Notwithstanding, all compe-
tent authority staff maintain high professional standards and have adequate
expertise and training specific to EOI.
Absence of restrictive conditions on exchange of information
(ToR C.5.3)
350. There are no laws or regulatory practices in China that impose unrea-
sonable, disproportionate, or unduly restrictive conditions on exchange of
information.
The assessment team is not in a position to evaluate whether this
element is in place, as it involves issues of practice that are dealt with in
the Phase 2 review.
Phase 2 rating
completed.
Factors underlying
China's EO program is, in practice,
managed by three officials in the
GCCD who face personnel resource
challenges posed by the gradual
increase in the number of inbound
requests received by China.
China should devote additional
personnel resources to the GCCD
to ensure effective management of
China's EO program.
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 103
Summary of Determinations and Factors
Underlying Recommendations
43
Determination
Factors underlying
Jurisdictions should ensure that ownership and identity information for all relevant entities
and arrangements is available to their competent authorities (ToR A.1)
Phase 1
determination: The
element is in place.
Not all of the regions in
China have implemented
legal provisions that ensure
ownership information in
relation to bearer shares is
available.
All of the regions in China
should implement provisions
ensuring the availability of
ownership information in
relation to bearer shares.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities
and arrangements (ToR A.2)
Phase 1
determination: The
completed.
43. The ratings will be finalised as soon as a representative subset of Phase 2 reviews
is completed.
104 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Factors underlying
Banking information should be available for all account-holders (ToR A.3)
Phase 1
determination: The
completed.
Competent authorities should have the power to obtain and provide information that is the
subject of a request under an exchange of information arrangement from any person within
their territorial jurisdiction who is in possession or control of such information (irrespective
of any legal obligation on such person to maintain the secrecy of the information) (ToR B.1)
Phase 1
determination: The
completed.
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the
requested jurisdiction should be compatible with effective exchange of information (ToR B.2)
Phase 1
determination: The
completed.
Exchange of information mechanisms should allow for effective exchange of information
(ToR C.1)
Phase 1
determination: The
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 105
Determination
Factors underlying
completed.
The jurisdictions' network of information exchange mechanisms should cover all relevant
partners (ToR C.2)
Phase 1
determination: The
China should continue to
develop its exchange of
information network with all
relevant partners.
completed.
The jurisdictions' mechanisms for exchange of information should have adequate provisions
to ensure the confidentiality of information received(ToR C.3)
Phase 1
determination: The
completed.
The exchange of information mechanisms should respect the rights and safeguards of
taxpayers and third parties (ToR C.4)
Phase 1
determination: The
completed.
106 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS
Determination
Factors underlying
The jurisdiction should provide information under its network of agreements in a timely
manner (ToR C.5)
The assessment team
is not in a position to
evaluate whether this
element is in place, as
it involves issues of
practice that are dealt
with in the Phase 2
review.
completed.
China's EO program is, in
practice, managed by three
officials in the GCCD who face
personnel resource challenges
posed by the gradual increase
in the number of inbound
requests received by China.
China should devote additional
personnel resources to the
GCCD to ensure effective
management of China's EO
program.
ANNEXES 107
Annex 1: Jurisdictions Response to the Review Report*
China would like to express its heartfelt appreciation for the hard work
done by the Secretariat, assessment team and all PRG members in the whole
peer review process of China.
While long committed to transparency and exchange of information for
tax purposes, China will continue to develop its exchange of information
network with all relevant partners. The country has recently signed its 98
th
Double Tax Agreement with Botswana and is in the process of completing
its internal procedures for the entry into force of the just signed. Meanwhile,
China is also speeding up the completion of its internal procedures for
the entry into force of other Double Tax Agreements and TIEAs that have
already been signed but are not in force yet. In addition, China has already
devoted one more staff to the GCCD to ensure effective management of its
EOI program.
To sum up, China will join hands with all Global Forum members and
other relevant jurisdictions to push forward transparency and effective
exchange of information for tax purposes.
* This Annex presents the Jurisdictions response to the review report and shall
not be deemed to represent the Global Forums views.
108 ANNEXES
Annex 2: List of All Exchange-of-Information Mechanisms
in Force
No. Jurisdiction
Type of EOI
Agreement Date Signed Date in force
1 Albania Double Tax
Convention
(DTC)
13 Sep 2004 28 Jul 2005
2 Algeria DTC 06 Nov 2006 27 Jul 2007
3 Argentina Tax nformation
Exchange
Agreement
(TEA)
13 Dec 2010 16 Sep 2011
4 Armenia DTC 05 May 1996 28 Nov 1996
5 Australia DTC 17 Nov 1988 28 Dec 1990
6 Austria DTC 10 Apr 1991 01 Nov 1992
7 Azerbaijan DTC 17 Mar 2005 17 Aug 2005
8 Bahamas TIEA 01 Dec 2009 28 Aug 2010
9 Bahrain DTC 16 May 2002 08 Aug 2002
10 Bangladesh DTC 12 Sep 1996 10 Apr 1997
11 Barbados DTC 15 May 2000 27 Oct 2000
DTC Protocol 10 Feb 2010 09 Jun 2010
12 Belarus DTC 17 Jan 1995 03 Oct 1996
13 Belgium DTC 18 Apr 1985 10 Sep 1987
New DTC 07 Oct 2009 ---
14 Bermuda TIEA 02 Dec 2010 31 Dec 2011
15 Bosnia and
Herzegovina*
DTC 02 Dec 1988 16 Dec 1989
16 Brazil DTC 05 Aug 1991 06 Jan 1993
ANNEXES 109
No. Jurisdiction
Type of EOI
17 British Virgin
slands
TIEA 07 Dec 2009 30 Dec 2010
18 Brunei DTC 21 Sep 2004 29 Dec 2006
19 Bulgaria DTC 06 Nov 1989 25 May 1990
20 Canada (negotiating
new)
DTC 12 May 1986 29 Dec 1986
21 Cayman slands TIEA 26 Sep 2011 ---
22 Croatia DTC 9 Jan 1995 18 May 2001
23 Cuba DTC 13 Apr 2001 17 Oct 2003
24 Cyprus
44
DTC 25 Oct 1990 05 Oct 1991
25 Czech Republic DTC 28 Aug 2009 04 May 2011
26 Denmark
(negotiating new)
DTC 26 Mar 1986 22 Oct 1986
27 Egypt DTC 13 Aug 1997 24 Mar 1999
28 Estonia DTC 12 May 1998 08 Jan 1999
29 Ethiopia DTC 14 May 2009 ---
30 Finland DTC 25 May 2010 25 Nov 2010
31 France (negotiating
new)
DTC 30 May 1984 21 Feb 1985
32 FYROM
45
DTC 09 Jun 1997 29 Nov 1997
33 Georgia DTC 22 Jun 2005 10 Nov 2005
34 Germany
(negotiating new)
DTC 10 Jun 1985 14 May 1986
44. 1. Footnote by Turkey: The information in this document with reference to
Cyprus relates to the southern part of the Island. There is no single authority
representing both Turkish and Greek Cypriot people on the Island. Turkey rec-
ognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and
equitable solution is found within the context of the United Nations, Turkey shall
preserve its position concerning the Cyprus issue.
2. Footnote by all the European Union Member States of the OECD and the
European Commission: The Republic of Cyprus is recognised by all members
of the United Nations with the exception of Turkey. The information in this
document relates to the area under the effective control of the Government of the
Republic of Cyprus.
45. Former Yugoslav Republic of Macedonia.
110 ANNEXES
No. Jurisdiction
Type of EOI
35 Greece DTC 03 Jun 2002 11 Nov 2005
36 Guernsey TIEA 27 Oct 2010 17 Aug 2011
37 Hong Kong, China DTC 21 Aug 2006 08 Dec 2006
DTC Protocol 30 Jan 2008 11 Jun 2008
DTC Protocol 27 May 2010 20 Dec 2010
38 Hungary DTC 17 Jun 1992 31 Dec 1994
39 celand DTC 03 Jun 1996 05 Feb 1997
40 ndia DTC 18 Jul 1994 19 Nov 1994
41 ndonesia DTC 07 Nov 2001 25 Aug 2003
42 ran DTC 20 Apr 2002 14 Aug 2003
43 reland DTC 19 Apr 2000 29 Dec 2000
44 sle of Man TIEA 26 Oct 2010 14 Aug 2011
45 srael DTC 08 Apr 1995 22 Dec 1995
46 taly DTC 31 Oct 1986 13 Dec 1989
47 Jamaica DTC 03 Jun 1996 15 Mar 1997
48 Japan DTC 06 Sep 1983 26 Jun 1984
49 Jersey TIEA 29 Oct 2010 10 Nov 2011
50 Kazakhstan DTC 12 Sep 2001 27 Jul 2003
51 Korea DTC 28 Mar 1994 27 Sep 1994
52 Kuwait DTC 25 Dec 1989 20 Jul 1990
53 Kyrgyzstan DTC 24 Jun 2002 29 Mar 2003
54 Laos DTC 25 Jan 1999 22 Jun 1999
55 Latvia DTC 07 Jun 1996 27 Jan 1997
56 Lithuania DTC 03 Jun 1996 18 Oct 1996
57 Luxembourg DTC 12 Mar 1994 28 Jul 1995
58 Macao, China DTC 27 Dec 2003 30 Dec 2003
DTC Protocol 15 Jul 2009 15 Sep 2010
DTC Protocol 26 Apr 2011 08 Oct 2011
59 Malaysia DTC 23 Nov 1985 14 Sep 1986
60 Malta New DTC 23 Oct 2010 25 Aug 2011
61 Mauritius DTC 01 Aug 1994 04 May 1995
DTC Protocol 05 Sep 2006 25 Jan 2007
ANNEXES 111
No. Jurisdiction
Type of EOI
62 Mexico DTC 12 Sep 2005 01 Mar 2006
63 Moldova DTC 07 Jun 2000 26 May 2001
64 Mongolia DTC 26 Aug 1991 23 Jun 1992
65 Morocco DTC 27 Aug 2002 16 Aug 2006
66 Nepal DTC 14 May 2001 31 Dec 2010
67 Netherlands DTC 13 May 1987 05 Mar 1988
68 New Zealand DTC 16 Sep 1986 17 Dec 1986
69 Nigeria DTC 15 Apr 2002 21 Mar 2009
70 Norway DTC 25 Feb 1986 21 Dec 1986
71 Oman DTC 25 Mar 2002 20 Jul 2002
72 Pakistan DTC 15 Nov 1989 27 Dec 1989
73 Papua New Guinea DTC 14 Jul 1994 16 Aug 1995
74 Philippines DTC 18 Nov 1999 23 Mar 2001
75 Poland DTC 07 Jun 1988 07 Jan 1989
76 Portugal DTC 21 Apr 1998 07 Jun 2000
77 Qatar DTC 02 Apr 2001 21 Oct 2008
78 Romania DTC 16 Jan 1991 05 Mar 1992
79 Russia DTC 27 May 1994 10 Apr 1997
80 Saudi Arabia DTC 23 Jan 2006 01 Sep 2006
81 Serbia ** DTC 21 Mar 1997 01 Jan 1998
82 Seychelles DTC 26 Aug 1999 12 Dec 1999
83 Singapore DTC 11 Jul 2007 18 Sep 2007
DTC Protocol 24 Aug 2009 11 Dec 2009
DTC Protocol 23 Jul 2010 22 Oct 2010
84 Slovak Republic DTC 11 Jun 1987 23 Dec 1987
85 Slovenia DTC 13 Feb 1995 27 Dec 1995
86 South Africa DTC 25 Apr 2000 07 Jan 2001
87 Spain DTC 22 Nov 1990 20 May 1992
88 Sri Lanka DTC 11 Aug 2003 22 May 2005
89 Sudan DTC 30 May 1997 09 Feb 1999
90 Sweden DTC 16 May 1986 03 Jan 1987
91 Switzerland DTC 06 July 1990 27 Sep 1991
92 Syria DTC 31 Oct 2010 01 Sep 2011
112 ANNEXES
No. Jurisdiction
Type of EOI
93 Tajikistan DTC 27 Aug 2008 28 Mar 2009
94 Thailand DTC 27 Oct 1986 29 Dec 1986
95 Trinidad
And Tobago
DTC 18 Sep 2003 22 May 2005
96 Tunisia DTC 16 Apr 2002 23 Sep 2003
97 Turkey DTC 23 May 1995 20 Jan 1997
98 Turkmenistan DTC 13 Dec 2009 30 May 2010
99 Uganda DTC 11 Jan 2012 ---
100 Ukraine DTC 04 Dec 1995 18 Oct 1996
101 United Arab
Emirates
DTC 01 Jul 1993 14 Jul 1994
102
United Kingdom DTC 26 Jul 1984 23 Dec 1984
New DTC 27 Jun 2011 ---
103 United States DTC 30 Apr 1984 21 Nov 1986
104 Uzbekistan DTC 03 Jul 1996 03 Jul 1996
105 Venezuela DTC 17 Apr 2001 23 Dec 2004
106 Vietnam DTC 17 May 1995 18 Oct 1996
107 Zambia DTC 26 Jul 2010 30 Jun 2011
* China continues to apply the provision of the treaty with the former Yugoslavia for its relationships
with Bosnia and Herzegovina.
** Serbia and Montenegro ceased to exist on 5 June 2006. Serbia is the legal successor of the state union
of Serbia and Montenegro. This treaty was concluded by the former Yugoslavia and continued to apply
in relations between Serbia and Montenegro and China. This treaty remains applicable in relations
between Serbia and China. Montenegro has declared that it will honor all tax treaties that applied
with respect to Serbia and Montenegro. However, application of the treaty with Montenegro has to be
confirmed by China.
ANNEXES 113
Annex 3: List of all Laws, Regulations
and Other Relevant Material
Accounting
Accounting Law of the Peoples Republic of China (Order of the
President of the Peoples Republic of China [1999] No. 24)
Circular of the Ministry of Finance and the State Archives
Administration Regarding the Release of the Procedures for the
Administration of Accounting Archives (Cai Kuai Zi [1998] No. 32)
Circular of the Ministry of Finance on Printing and Distributing the
Accounting System for Non-governmental Non-profit Organizations
(Cai Kuai [2004] No. 7)
Financial Rules for Financial Enterprises (Order of the Ministry of
Finance [2006] No. 42)
Anti-money laundering
Anti-Money Laundering Law of the Peoples Republic of China (Order of
the President of the Peoples Republic of China [2006] No. 56)
Rules for Anti-money Laundering by Financial Institutions (Order of the
Peoples Bank of China [2006] No. 1)
Company Law
Company Law of the Peoples Republic of China (Order of the President
[2005] No. 42)
Company Law of the Peoples Republic of China (1993 Version)
Regulations of the Peoples Republic of China on the Administration
of Company Registration (Amended in 2005) (Order of the State
Council [2005] No. 451)
114 ANNEXES
Wholly Foreign-owned Enterprise Law of the Peoples Republic of China
(2000 Revision)
Detailed Implementing Rules for the Law of the Peoples Republic of
China on Wholly Foreign-owned Enterprises (Revised) (Order of
State Council [2001] No. 301)
Detailed Implementation Rules for the Administrative Regulations of the
Peoples Republic of China on the Registration of Enterprise Legal
Persons
Sino-foreign Equity Joint Venture Law (2001 Revision) (Order of the
President [2001] No. 48)
Sino-Foreign Co-operative Joint Venture Law of the Peoples Republic of
China (Order of the President [2000] No. 40)
Circular of the State Administration for Industry and Commerce, the
Ministry of Commerce, the General Administration of Customs and
the State Administration of Foreign Exchange on the Issue of the
Implementing Opinion on Several Issues Concerning the Application
of Law in the Administration of the Examination, Approval and
Registration of Foreign-invested Companies (Gong Shang Wai Qi Zi
[2006] No. 81)
Administrative Measures for the Registration of Enterprises of Foreign
Countries (Regions) Engaged in Production and Business Activities
within the Territory of China (Order of the State Administration for
Industry and Commerce [1992] No. 10)
Provisions of the Supreme Peoples Court about Several Issues on the
Application of the Company Law of the Peoples Republic of China
(i) (Fa Shi [2006] No. 3)
Circular of the Ministry of Foreign Trade and Economic Cooperation and
the State Administration for Industry and Commerce on Printing and
Issuing Several Provisions for the Alteration of Investors Equities in
Foreign Investment Enterprises (Wai Jing Mao Fa [1997] No. 267)
Constitution/Legislation/Court
The Constitution of the Peoples Republic of China (Amended 2004)
Legislation Law of the Peoples Republic of China (Order of the President
[2000] No. 31)
ANNEXES 115
Organic Law of the Peoples Courts of the Peoples Republic of China
(Revised in 2006) (Order of the President of the Peoples Republic of
China No. 59)
General Principles of Civil Law of the Peoples Republic of China (Order
of the President [1986] No. 43)
Criminal Law of the Peoples Republic of China (1997 Version) (Order of
the President [1997] No. 83)
Civil Procedure Law of the Peoples Republic of China (Revised in 2007)
(Order of the President of the Peoples Republic of China [2007]
No. 75)
Several Provisions of the Supreme Peoples Court on Evidence in Civil
Proceedings
Administrative Litigation Law of the Peoples Republic of China
Interpretations of the Supreme Court on Certain Issues Concerning the
Application of the Administrative Procedure Law of the Peoples
Republic of China
Financial industry
Regulation of Deposit Saving Administration (Order of the State Council
[1992] No. 107)
Peoples Bank of China Law of the Peoples Republic of China (2003
amendment) (Order of the President [2003] No. 12)
Law of the Peoples Republic of China on Commercial Banks (Revised in
2003) (Order of the Present [2003] No. 13)
Administrative Measures for Identifying the Financial Institutions
Clients and Preserving Their Identity Information and Transaction
Records (Joint Order of the Peoples Bank of China, the China
Banking Regulatory Commission, the China Securities Regulatory
Commission and the China Insurance Regulatory Commission
[2007] No. 2)
Implementing Measures of China Banking Regulatory Commission
for Administrative Licensing Matters Concerning Chinese-funded
Commercial Banks (Revised 2006) (Order of China Banking
Regulatory Commission [2006] No. 7)
116 ANNEXES
Order of the China Banking Regulatory Commission on the Release of
the Measures for the Administration of Financial License Control
(Order of the China Banking Regulatory Commission [2003] No. 2)
Administrative Rules for the Reporting by Financial Institutions of
Large-value and Suspicious Transactions (Order of the Peoples Bank
of China [2006] No. 2)
Measures for the Administration of Financial Institutions Reports on
Suspicious Financing Transactions for Terrorist-related Activities
(Order of the Peoples Bank of China [2007] No. 1)
Foreign exchange
Foreign Exchange Administrative Regulations of the Peoples Republic of
China (2008 Revision) (Order of the State Council No. 532)
Circular on Certain Issues Relating to Strengthening the Administration
of Capital Account Foreign Exchange Business (Hui Fa [1998]
No. 21)
Foundation
Regulation on the Administration of Foundation (Order of the State
Council [2004] No. 400)
Measures for Annual Inspection of Foundations (Order of the Ministry of
Civil Affairs [2005] No. 30)
Measures for the Information Disclosure of Foundations (Order of the
Ministry of Civil Affairs [2006] No. 31)
Fund
Law of the Peoples Republic of China on Securities Investment Fund
(Order of the President of the Peoples Republic of China [2003]
No. 9)
Measures for the Administration of Securities Investment Fund
Management Companies (Order of the China Securities Regulatory
Commission [2004] No. 22)
ANNEXES 117
Individual income tax
Circular of Civil Aviation Administration on the Issuance of the
Measures (Trial) on Individual Income Tax (IIT) Self Declaration
(Guo Shui Fa [2006] No. 162)
Circular of the Ministry of Finance and the State Administration
of Taxation on Printing and Distributing the Provisions on the
Collection of Individual Income Tax on Investors of Individual
Proprietorship and Partnership Enterprises (Cai Shui [2000] No. 91)
Individual Income Tax Law of the Peoples Republic of China (2011
Revision) (Order of the President of the Peoples Republic of China
No. 48)
Regulations for the Implementation of the Individual Income Tax Law of
the Peoples Republic of China (2011 Revision)
Insurance law
Insurance Law of the Peoples Republic of China (Amended) (Order of
the President of the Peoples Republic of China No. 11)
Miscellaneous
Lawyer Law of the Peoples Republic of China (2007 Amendment) (Order
of the President [2007] No. 76)
Code of Ethics for Lawyers
Partnership
Partnership Enterprise Law of the Peoples Republic of China (2006
Amendment) (Order of the President of the Peoples Republic of
China [2006] No. 55)
Decision of the State Council on Revising the Administrative Measures
of the Peoples Republic of China for the Registration of Partnership
Enterprises (Order of State Council No. 497)
The Regulations on the Administration of Registration of Partnership
Businesses (1997) (The order of the State Council No. 236)
118 ANNEXES
Administrative Measures on the Establishment of Partnership Enterprises
in China by Foreign Enterprises or Individuals (Order of the State
Council of the Peoples Republic of China No. 567)
Circular of the Ministry of Finance and the State Administration of
Taxation on Issues Concerning the Income Tax Levied on Partners
of a Partnership Enterprise (Cai Shui [2008] No. 159)
SAIC Measures for the Annual Inspection of Enterprises
Measures for the Annual Inspection of Enterprises (Order of the State
Administration for Industry and Commerce [2006] No. 23)
Securities
Securities Law of the Peoples Republic of China (Order of the President
of the Peoples Republic of China No. 43)
Measures for the Administration of Securities Registration and
Settlement (2009 Revision) (Order of the China Securities Regulatory
Commission No. 65)
Tax
Law of The Peoples Republic of China Concerning the Tax
Administration and Tax Collection (Decree of the President [2001]
No. 49)
Detailed Rules for the Implementation of the Law of the Peoples
Republic of China on Tax Administration and Collection (Order of
the State Council [2002] No. 362)
Procedures for the Administration of Tax Registration (Order of the State
Administration of Taxation [2003] No. 7)
The Law of the Peoples Republic of China on Enterprise Income Tax
(Order of the President [2007] No. 63)
The Circular of the State Administration of Taxation Regarding the
Issuance of the Interim Procedures for the Administration of Source
Withholding for Non-Resident Enterprise Income Tax (Guo Shui Fa
[2009] No. 3)
ANNEXES 119
Provisional Measures for Tax Administration on Contracting Engineering
Operation and Providing Labour Services of Non-residents (Order of
the State Administration of Taxation [2009] No. 19)
Circular on Printing and Distributing the Tentative Administrative
Measures on Tax Convention Treatments for Non-Residents (Guo
Shui Fa [2009] No. 124)
The Release of Regulations on the Implementation of Enterprise Income
Tax Law of the Peoples Republic of China by the State Council
(Order of the State Council [2007] No. 512)
Circular of the State Administration of Taxation on Issues Concerning
the Identification of China-controlled Overseas-registered
Enterprises as Resident Enterprises on the Basis of the Standard of
Actual Management Organization (Guo Shui Fa [2009] No. 82)
Circular on Issues Concerning Tax Credit for Enterprises Overseas
Income (Cai Shui [2009] No. 125)
Announcement on Promulgating the Operating Guidelines on Tax
Credit for Enterprise Offshore Income (Announcement of the State
Administration of Taxation [2010] No. 1)
Circular of the State Administration of Taxation on Issues Concerning
the Identification of China-controlled Overseas-registered
Enterprises as Resident Enterprises on the Basis of the Standard of
Actual Management Organization (Guo Shui Fa [2009] No. 82)
Working Regulations for the International Exchange of Tax Intelligence
(State Administration of Taxation June 12, 2006)
Trust
Trust Law of the Peoples Republic of China (Order of the President of the
Peoples Republic of China [2001] No. 50)
Procedures on the Administration of Trust Companies (Order of the
China Banking Regulatory Commission [2007] No. 2)
Circular of the Ministry of Finance on Printing and Issuing the
Accounting Rules of Trust Business (Cai Kuai [2005] No. 1)
Circular of the China Banking Regulatory Commission and the State
Administration of Foreign Exchange on the Issues Concerning
Promulgation of the Tentative Measures for Administration of
Commissioned Overseas Wealth Management Business Undertaken
by Trust Companies (Yi Jian Fa [2007] No. 27)
120 ANNEXES
Annex 4: People Interviewed During On-Site Visit
Banking Regulatory Commission
Guangdong Local Taxation Bureau
Jiangsu Municipal Office of the State Administration of Taxation
Ministry of Commerce
Ministry of Justice
Ministry of Finance
Ministry of Public Security
Peoples Bank of China
Securities Depository and Clearing Corporation Limited
Securities Regulatory Commission
Shanghai Trust Registration Centre
State Administration for Industry and Commerce
State Administration of Taxation
State Counsel Legislative Affairs Office
The National Peoples Congress of the Peoples Republic of China
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PEOPLES REPUBLIC OF CHINA
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