More tax agreements seen boosting foreign, local firms

Both domestic and foreign companies are expected to enjoy more tax preferential policies for the Belt and Road economies, after eight more bilateral tax treaties are signed this year, officials with the nation's top taxation administration said.

The authorities will strengthen policy communications, they said. It will send officials abroad to major economies along the Belt and Road with large scale outbound investment projects to help resolve tax disputes and provide consulting services, according to Meng Yuying, deputy head of the international taxation department at the State Administration of Taxation.

Guo Yong, a senior official with the Shandong provincial taxation bureau, said although tax treaties were not signed to specifically serve companies with investment projects along the Belt and Road, they were certainly expected to benefit from the initiative in the future, considering its major importance.

"Treaties aim for win-win results for both governments and enterprises - governments avoid duplications on tax collecting and companies are able to reduce costs," Guo said.

"Treaties established with other countries will be revised if new problems and challenges emerge."

China has entered into 106 bilateral tax treaties with different countries and regions, including 54 economies along the Belt and Road, an international cooperation initiative proposed by President Xi Jinping in 2013.

The treaty network established between China and other countries is the third biggest tax treaty network in the world, covering major outbound investment destinations.

By the end of April, an estimated 13.18 billion yuan ($1.9 billion) of repeated taxes had been eliminated since 2013.

Thanks to support from the tax administration, Zhangzhou-based Kibing Glass Co, China's leading glass manufacturer, saved a large sum on paying tax when the company started business in Malaysia in 2014, according to Cao Yuchang, manager of the company.

"We met some difficulties understanding the policies of the local withholding tax," Cao said. "We contacted the tax administration in Beijing straightaway, seeking help."

Withholding tax is an amount withheld by a party making payment (the payer) on income earned by a nonresident (payee) and paid to the Malaysian authorities, according to the Inland Revenue Board of Malaysia.

After the State taxation administration negotiated with local tax authorities and signed additional agreements, the company was waived 34 million yuan ($5 million) in tax.

Kibing's Cao said with tax cut after preferential policies were brought in by the Belt and the Road Initiative, the company sees business potential and plans to build more production lines in Malaysia.

The company's overseas project has been listed among 82 provincial key projects along the Belt and Road, according to the development and reform commission in Hunan province.

In the meantime, bilateral tax treaties benefit foreign enterprises when they make investment in China.

In 2016 alone, Chinese tax authorities helped foreign taxpayers in China receive tax relief valued at 28 billion yuan, according to the taxation administration.

Zibo DSM Pharmaceutical Co Ltd, a Netherlands-based company, reduced costs on paying tax by submitting a request to the local tax bureau, after China and Netherlands reached a bilateral tax treaty in late 2016.

Guo, the official with the Shandong taxation bureau, said international companies were welcome to submit requests for tax consulting services and China would make sure that their interests were well-protected.