Research on the Renovation of Exchange of Information Rules: China’s perspective by Xiaochen Wu

Research on the Renovation of Exchange of Information Rules: China’s perspective

written by Xiaochen Wu

As a pivotal measure of tax administration assistance, China had established its institutional system of EOI since the reform and opening up. In the aspect of international tax law, EOI rules first embedded in bilateral tax treaties. China’s first tax treaty is the agreement concluded with Japanese government. This intergovernmental agreement was signed in 1983 and has been applicable since 1985. Article 26 of this agreement stipulated the responsibility of EOI for both contracting states. Since then, all the bilateral tax conventions and arrangements concluded by China, which is now more than one hundred and ten, contain the EOI provision, though the wording of the paragraphs in each treaty sometimes vary from others.

Upon the treaty foundation, China has built up its own EOI system. China first concluded a serial of Tax Information Exchange Agreements (TIEAs) from 2009 to 2014. After that China signed The Multilateral Convention on Mutual Administrative Assistance in Tax Matters in 2013, which has been applicable since 2017, though ratified with reservations. Then came the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, China signed it in 2015, which is the acknowledgement of CRS. For the implementation, China has transposed CRS into domestic law system and it will be explained later.

After CRS, China stepped into the next phase of EOI in light with the BEPS action plan, signed the multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports. The signature took place in2016. According to the dynamic statistical result, tillOctober 2024, China exchanges CbC report to 76 jurisdictions, and accepts CbC report from 91 jurisdictions as destination.

Following is the domestic regulations about EOI. Almost synchronous with the establishment of tax treaty network, China have been practicing EOI since 1980s.For example, as demonstrated on the website of STA, an official reply about the application of bilateral tax treaties, issued from STA to the subordinate tax bureau in 1989, is one of the oldest tax rulings regarding EOI. Three tax treaties were mentioned and EOI with UK was involved.

The domestic regulation regarding EOI was issued in 2001. It has stipulated the scope, categories of EOI, rule of confidentiality, archive management, and the executive routines covering launches of EOI from both China and foreign states. It was quite a comprehensive regulation as a trial implementation version. The confidentiality rule of this regulation was reinforced later in 2002 by another administrative regulatory document, which caused the secrecy of EOI upgraded to a level required higher permission and more complex procedure.In 2006, both regulations aforesaid became obsolete and substituted by a new regulation with refined administrative provisions that adapt to the rapidly developing economy. The requirements of confidentiality in the regulation were loosened, due to the difficulty of application prescribed in the previous one.

The policy regarding CRS is introduced jointly by six government departments, including the Ministry of Finance, STA, The People’s Bank of China (the central bank) and the regulators of the finance industry. The ruling focuses on the administration of financial accounts owned by non-residents, specified the due diligence of financial institutions. For the CbC Report, China introduced a regulation comply with the standard of BEPS Action 13 in 2016.

To sum up, most regulations about EOI in China have followed the path of the reform and opening up, also managed to react to the development of society and economy in time. Most of the rules are conform with the international tax norms. The next stage of the research could be conducted focusing on the application and practice of these rules.