As highlighted in KPMG China Tax Weekly Update (Issue 16, April 2017), Premier Li Keqiang, at an 19 April 2017 executive meeting of the State Council, outlined several tax reduction measures. These included, inter alia:
(i). Reduction of VAT brackets for general VAT taxpayers from four to three;
(ii). Increase to research and development (R&D) expense super deduction for science and technology-related small and medium enterprises (SMEs).
Following this, several authorities, including the Ministry of Finance (MOF) and the State Administration of Taxation (SAT), issued additional guidance.
On 31 March 2017, the MOF and the SAT jointly issued Cai Shui  No. 29 (“Circular 29”). This clarifies that lease of construction land collectively owned by rural dwellers shall be subject to the UTLUT and the UTLUT shall be paid by entities or individuals which directly lease land from collective economic organizations.
The existing rule, Cai Shui  No. 56 only provided that, actual user (including enterprise and individual) of taxable collectively-owned construction land shall be subject to the UTLUT if the transfer formalities in respect of the right to use land has not been gone through. Circular 29 provides a clarification on who should be taxpayer of UTLUT for lease of collectively-owned construction land.
On 24 April 2017, the SAT issued Shui Zong Fa  No. 42 setting out tax administration initiatives to better serve the “Belt and Road” initiative:
By the end of April 2017, China had signed 106 bilateral tax treaties. Together with other arrangements, such as tax information and exchange agreements, there were agreements with 116 countries and regions in place. 54 of these are with countries along the “Belt and Road”.
Two relevant ‘going out’ cases were reported on SAT’s official WeChat, with a view to explaining to ‘going out’ enterprises how the Chinese tax authorities could assist them. One case concerned a Shandong company undertaking construction of a thermal energy power plant in Kazakhstan. In this case, the timely issuance of a China tax residence certificate by the Chinese tax authorities allowed for a reduction from 15% to 5% in the CIT rate paid (RMB2 million reduction). A second case involved a Fujian company which made an investment in Malaysia and was subject to significant interest withholding tax exposures. In response to this the Chinese and Malaysian authorities negotiated a protocol to the China-Malaysia tax treaty, reducing the interest withholding tax exposure. The enterprise in question was relieve of RMB34 million in tax.
The SAT further noted in their WeChat article that the SAT, since 2013, has negotiated 181 MAP cases and eliminated double tax exposures of RMB13.1 billion (US$1.9 billion) for outbound investors in the process. Increasing overseas investment will inevitably lead to more disputes in future, requiring greater use of tax treaties and MAP by “going out” enterprises, looking forward.
The Organisation for Economic Cooperation and Development (OECD) on 4 May 2017 announced that international exchanges of Country-by-Country (CbC) reports (BEPS Action 13) are currently facilitated by more than 700 automatic exchange bilateral relationships. Most of these relationships are facilitated under the Multilateral Competent Authority Agreement on the Exchange of CbC Reports ("the CbC MCAA") and others under bilateral agreements. China, while a signatory to the CbC MCAA, has yet to nominate any bilateral exchange relationships, though time remains as China’s exchanges will commence in 2018.
The full list of automatic exchange relationships that are now in place is available on the OECD website, together with an update on the implementation of the domestic legal framework for CbC Reporting in jurisdictions; on jurisdictions that will permit surrogate filing and voluntary parent surrogate filing; and on steps that are being taken to address concerns about local filing being applied before the end of 2017. Regular updates will be published on the OECD website on exchange relationships to provide clarity for MNE Groups and tax administrations.
* State Administration of Taxation (SAT) Announcement  No. 42 provides China’s CbC administrative guidance, together with a supplementary SAT announcement on 27 March 2017. You may refer to below our KPMG publications for more details: