• Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 7/23/2014

China - GAAR draft guidance 

July 23:  China’s State Administration of Taxation released draft guidance with respect to the general anti-avoidance rule (GAAR) measures for public comment. Comments are due 1 August 2014.

Existing GAAR provisions use a tax avoidance purpose test to identify impermissible tax arrangements, and are directed at arrangements that reduce taxable income and lack reasonable business purpose.

The draft GAAR administrative measures, if finalized, would provide guidance in various areas, including:

  • When could a tax avoidance scheme be selected as a GAAR case
  • Documentation that the tax authority could request from taxpayers
  • How tax adjustments could be made

KPMG observation

The draft GAAR administrative measures may provide a greater degree of transparency with respect to the procedures for administering GAAR cases. Yet, the draft guidance on the identification of avoidance transactions arguably would broaden the types of transactions “caught” in the GAAR net.

Read a July 2014 report prepared by the KPMG member firm in China: Guidance on Chinese General Anti-Avoidance Rule published for public comment

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