Taxes provide the most important revenue source for the Government of the People's Republic of China.
Tax is a key component of macro-economic policy, and greatly affects China's economic and social development.
[2]: 345 Since the early 2010s, the Ministry of Finance has sought to implement personal property taxes but has been opposed by the National People's Congress and many local governments.
Filing tax returns often entails giving detailed information about taxpayers’ income, expenses, deductions, and credits.
Taxpayers in China are subject to stringent filing and payment deadlines that must be met in order to avoid penalties and enforcement measures.
This deadline is set out in the "Provisions of the State Administration of Taxation on the Time Limit for Tax Declaration and Payment”.
The GAAR was introduced for the first time in China in 2008 in the PRC Enterprise Income Tax Law and has subsequently undergone numerous updates and revisions.
Tax authorities can disregard or recharacterize transactions that they deem to be artificial or to lack economic substance under the Chinese GAAR regulations.
If a GAAR investigation is to be initiated, the local tax authorities must first obtain approval from the State Administration of Taxation.
The tax authorities in China must inform the taxpayer in writing of any challenges made to a transaction under the GAAR provisions and state their justifications.
[14] It is considered that there is no legitimate commercial purpose in the following cases: (1) More than 75% of the income of foreign enterprises comes from taxable assets in China.
(2) At any point in the preceding year, more than 90% of the foreign corporation's asset value (excluding cash) consists of Chinese assets; (3) The foreign company has only limited activities and risks, and although legally fully incorporated, it has virtually no economic existence.
However, a transaction will not be considered an indirect transfer in the following situations: (1) The exchange of publicly listed shares on a stock market; (2) When the income would be exempt from Chinese taxation under a relevant tax treaty or agreement if the transaction were direct; (3) When all of the following conditions are met in the transaction: The two parties involved in the indirect transfer are part of the same corporate group, where either the transferring company owns more than 80 percent of the shares of the receiving company, or vice versa, or a third company owns over 80 percent of the shares in both the transferring and receiving companies.
[2]: 101 Beginning with Reform and Opening Up in 1978 and continuing through the early 1990s, China's fiscal policy focused on decentralization and reducing firms' tax burdens in order to improve economic growth.
[1]: 59 After the Golden Tax Project Phase II was completed in 2003, the VAT invoicing system was made fully electronic.
[1]: 305–306 Through improved anti-counterfeiting, auditing, and inspection processes, the problem of false invoices declined and the amount of tax revenue collected from VAT increased significantly.
[2]: 27 In 2015, the State Administration of Taxation prohibited local tax authorities from inspecting e-commerce businesses.
[2]: 73 In 2023, Chinese local governments' fiscal revenues will show a steady increase in proportion to support policies, sending a green light for national economic recovery.
It was discovered that the Intelligent Tax software's uninstall feature would leave the malware in place if used.
[22] The suspicious characteristics of GoldenSpy include: Covert download, occurring two hours after the installation of the Intelligent Tax software, Creation of two autostart services for monitoring and self-restart, Uninstalling the tax software does not remove the GoldenSpy binaries, Beaconing traffic to a domain unrelated to the tax software, and Running with system-level privileges and allowing for remote code execution.
[23] GoldenHelper was discovered after GoldenSpy and is an equally sophisticated malware program which was part of the Golden Tax Invoicing software from Baiwang which is used by all companies in China to pay VAT.
This discovery indicated that Chinese tax software was harboring malware for much longer than suspected.
[2]: 70 The Zhou dynasty also collecting a form of personal property tax called chan bu.
[2]: 383 Guan Zhong (723-645 BCE) wrote that because taxation would reduce the people's wealth and make them dislike the government, it was better to obtain revenue by monopolizing the sale of salt, iron, forest products, and ore.[2]: 5 Confucian thinking generally held that taxation should be low.
[2]: 3–4 Chinese historiography often attributes the collapse of dynasties to the imposition of heavy taxes and levies.
[2]: 4 Discontent with these policies contributed to rebellion and ultimately the defeat of the Qin and establishment of the Han dynasty.
[2]: 4 During the Han dynasty, Emperor Wu (156-87 BCE) collected min qian (a form of business tax) from merchants, businessmen, and handicraftsmen.
[2]: 70–71 In 9 CE, Emperor Wang Mang of the Xin dynasty (9 to 23 CE) established the first income tax through a 10% tax of net earnings from wild herb and fruit collection, fishing, shepherding, and various nonagricultural activities and forms of trading.
[2]: 97 The penalty for evading this tax was one year of hard labor and confiscation of the entirety of a person's property.
[2]: 97 The Tang dynasty (618-907 CE) imposed yashui (a form of business tax) on intermediary agents.