Prosperity together may not just be China's goal.
From FATCA and CRS to the international minimum corporate tax agreement led by the Organisation for Economic Cooperation and Development (OECD), a storm is unfolding around the world...
The tax turmoil is sweeping the world.
In June, the Group of Seven (G7) finance ministers meeting in London reached a "milestone" agreement: to support setting the international minimum corporate tax rate at 15%, and multinational companies not only need to pay taxes at their headquarters, but also Need to pay taxes in the country where they do business.
The energy of G7 is that its every move is exemplary and can drive the global trend.
In October, Hungary, Ireland and Estonia ratified the agreement. Currently, 136 countries have joined this global plan.
In 2020, some developed countries have corporate tax rates, and few countries have tax rates below 15%.
Low tax rate/tax exemption is a huge competitive advantage for many countries to attract multinational companies.
After Brexit, many companies moved from London to Dublin, and they were fancying Ireland's low tax rate of only 12.5%.
Ireland has also publicly opposed the world's lowest tax rate, because the implementation of international tax reforms can cause Ireland to lose 20% of the tax revenue of multinational corporations.
Irish Minister of Finance, Public Expenditure and Reform Donohue
However, the voice of support may be the majority.
For example, Hans Vijlbrief, Dutch Finance Minister, Janet Yellen, U.S. Treasury Secretary, Rishi Sunak, British Chancellor of the Exchequer...
The global statutory corporate tax has been declining for a long time, and the international average has fallen from nearly 40% in the 1980s to more than 20% now. Even those countries that traditionally have the highest tax rates have seen a downward trend in corporate taxes.
Figures | Reuters
Setting such a "bottom line" can curb a further decline in the global average tax rate.
The more realistic driving force is that after this "epidemic", there has been a deficit in the national treasury worldwide, and governments of all countries are short of money and have to increase taxes.
G7 is the leader of this tax reform, and the United States is playing a leading role in this tax reform.
But the G7 countries have different purposes:
The proposed tax rules are supported by U.S. Treasury Secretary Janet Yellen.
Figures | JUSTINTALLIS/PRESS POOL
Europe is a digital economy market country and hopes to get the taxation power of a digital economy market country and get a share of the tax reform.
The United States hopes to resolve domestic fiscal problems through tax reform, maintain national competitiveness while ensuring fiscal sustainability.
Japan and Canada are not major digital economy market countries. They only have a small number of large multinational companies that need to pay digital taxes, but they still hope to be able to allocate taxation rights.
This is also the reason why international tax reform can be supported by G7, G20 and even most of the OECD countries.
In the latest OECD discussion meeting, in addition to Ireland obtaining a certain tax concession policy, China has actually won a small range of tax incentives for overseas companies.
So, what impact will this global tax reform have on China?
1. Chinese-funded enterprises going overseas:
One of the clear targets of the international tax reform wave is the Internet technology giants.
Relevant enterprises should actively study relevant tax rules and do a good job in compliance. If necessary, start corporate tax health examinations.
2. Foreign-invested enterprises:
Favorable: China's role as a global manufacturing base, a stable labor market, and the government's policy preference towards foreign businessmen are all beneficial to foreign businessmen.
Disadvantages: Some tax policies are gradually losing their appeal, and some companies face rigid demands for tax medical examinations.
3. High-net-worth groups:
First was FATCA and then CRS. Taxing the "rich" is not just talking.
How does the global tax information exchange network become more and more dense? From the following "Standard for Automatic Exchange of Financial Information in Tax Matters" (Standard for Automatic Exchange of Financial Information in Tax Matters, AEOI Standard) brief history can be understood in one picture!
Image Xingyunhai International Cartography | Envy
All in all, both FATCA and CRS are the legal basis for taxation of high-net-worth individuals, but the difference is that the former is the way the United States traces the overseas assets of U.S. citizens (including green card holders). The above is beneficial to the United States; and the CRS is a form of equality and mutual assistance among the signatories.
How to deal with this storm as an individual?
With the increasing intensity of global tax audits, we have to make asset planning from the perspective of tax saving in accordance with tax laws, which is the best solution to the problem.
Commonly used legal tools for family property planning include foundations, family limited partnerships, etc., in addition to the well-known family trusts.
Under different legal systems and needs, the applicable tools are different.
Singapore bears the brunt of a country with a sound private property protection system. In the Monetary Authority of Singapore, there is a policy called the fund tax exemption plan, which is divided into three types, namely 13R, 13X, and 13CA. This is an excellent tax planning opportunity.
Singapore is very hot in 2021, and the threshold has been raised a lot. If you have a need for tax financing structure, please contact Xingyunhai International in time!
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