China is tightening tax laws related to foreign companies, a recent corporate briefing from Thomson Reuters said.
Industries such as pharmaceuticals, distribution, real estate, construction, installation and transportation have been targeted by China’s tax authorities, and both small firms and large multinationals will be affected, according to the China Tax and Financial Planning Briefing.
“China is stepping up its enforcement of tax and other laws against foreign firms,” said Gary Brown, senior director of WorldTrade Executive (WTE), a part of Thomson Reuters, which published the briefing. The Chinese tax authorities would also seek to coordinate with governments overseas to better enforce taxation when it came to multinational firms, he added.
In order to tax foreign companies, the briefing suggests, it is possible the Chinese government might impute profits by redefining what revenue can be taxed, particularly through transfer pricing analysis if a company’s China operation is not making a healthy profit.
The briefing also discussed the ways in which financial reporting might differ in China and how this could affect the credibility of audits performed on Chinese companies.
WTE is a Thomson Reuters brand, specializing in providing reports and periodicals concerning tax and legal issues in international markets. Related publications include Practical China Tax and Finance Strategies and Practical Asian Tax Strategies. ALB
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