What makes up tax law in China? Is it just one law or are there many?
The body of Chinese tax Law includes the taxation Laws enacted by the National People's Congress and its Standing Committee, Administrative Regulations stipulated by the State Council, Ministerial Decrees as well as Provincial or Local regulations. It also includes bilateral or multilateral tax treaties and various notices, circulars, replies to local tax authorities and other relevant documents issued by the State Administration of Taxation (SAT) and the Ministry of Finance (MF).
Out of the above-mentioned documents, the tax law adopted on March 15, 2000 is the most important law to abide. The tax system of the People's Republic of China is based upon tax laws such as this and others like the Law of the People's Republic of China Concerning the Administration of Tax Collection. The formulation of tax laws goes through four procedures, including legislation proposals, reviewing, voting and promulgation.
Regulations stipulated by the State Administration of Tax are not as binding as the tax laws enacted by the NPC but more binding than Ministerial Decrees and Provincial or Local tax regulations. STA Regulations usually determine the basic administrative principles of some major tax issues such as VAT and IIT.
Detailed rules concerning specific administrative procedures are usually determined by Tax Ministerial Decrees. Ministries that have the authority to formulate tax decrees are the State Administration of Tax (SAT), Ministry of Finance (MF), State General Administration of Customs, and the Tariff and Classification Committee of the State Council. The formulation of Tax Administrative Regulations and Ministerial Decrees must pass the four procedures of programming, drafting, examining and promulgation.
Within the tax system of the People's Republic of China, the tax laws passed by the NPC are the highest laws, followed by the Administrative Regulations, Ministerial Decrees and Provincial or Local regulations respectively. In the event that any documents conflict with tax laws, decrees or regulations, the Chinese court or an arbitration tribunal will usually refer to the tax laws, decrees and regulations. In administrative actions, such tax regulating documents cannot be used as the basis or reference for a judgement.
However, unlike courts and arbitration tribunals, Chinese tax authorities and other government departments usually adhere to the tax regulating documents in their daily administration. This is mainly because the tax regulating documents usually contain detailed provisions of specific tax issues that are usually not addressed in tax laws, decrees and regulations but are nonetheless very useful in facilitating tax matters.
For example, under the current tax executive system, the state tax authorities are organized in a vertical leadership. That means that in practice, the local SAT is only responsible to its higher authority and carries out those notices, circulars, replies or other tax regulating documents issued by national State Administrative of Taxation, which usually cannot be obtained by taxpayers.
Within the current tax environment, sometimes it is more important for investors to know the provisions of tax regulating documents rather than become familiar with the national tax laws and regulations.