Monday, 22 December 2014

China Updates- Taxation

New General Anti-Avoidance Rules (GAAR) were issued. The new rules, which come into effect on 1st February, 2015, apply only to cross-border arrangements. It is specified that:
1. GAAR should only be used once SAAR (Specific Anti-Avoidance Rules) and tax treaty provisions are exhausted.  SAT approval is required.
2. GAAR will be invoked where either the sole or main purpose of an arrangement is to obtain a tax benefit or the tax benefit is obtained by using an arrangement whose form is permitted under tax rules, but is not consistent with the economic substance of the arrangement.
3. Once GAAR are invoked, tax authorities may adjust the result of the arrangement such that it is in conformity with the deemed reality of the underlying commercial situation.

4. The onus of proof under a GAAR investigation rests with the party being investigated. 

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