; Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: People's Republic of China 2012
Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: People's Republic of China 2012

VIEWS: 6 PAGES: 127

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 100 jurisdictions which participate in the work of the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes.  These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention.  The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework.  Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed

More Info
  • pg 1
									GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE
OF INFORMATION FOR TAX PURPOSES



Peer Review Report
Combined: Phase 1 + Phase 2


PEOPLE’S REPUBLIC OF CHINA
      Global Forum
    on Transparency
      and Exchange
 of Information for Tax
Purposes Peer Reviews:
    People’s Republic
      of China 2012
      COMBINED: PHASE 1 + PHASE 2



                      June 2012
  (reflecting the legal and regulatory framework
                   as at April 2012)
This work is published on the responsibility of the Secretary-General of the
OECD. The opinions expressed and arguments employed herein do not
necessarily reflect the official views of the OECD or of the governments of its
member countries or those of the Global Forum on Transparency and Exchange
of Information for Tax Purposes.

This document and any map included herein are without prejudice to the status
of or sovereignty over any territory, to the delimitation of international frontiers
and boundaries and to the name of any territory, city or area.


  Please cite this publication as:
  OECD (2012), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
  Reviews: People's Republic of China 2012: Combined: Phase 1 + Phase 2, OECD Publishing.
  http://dx.doi.org/10.1787/9789264178267-en



ISBN 978-92-64-17825-0 (print)
ISBN 978-92-64-17826-7 (PDF)


Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews
ISSN 2219-4681 (print)
ISSN 2219-469X (online)




Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.
© OECD 2012

You can copy, download or print OECD content for your own use, and you can include excerpts from OECD
publications, databases and multimedia products in your own documents, presentations, blogs, websites and
teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given.
All requests for public or commercial use and translation rights should be submitted to rights@oecd.org
Requests for permission to photocopy portions of this material for public or commercial use shall be addressed
directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre français d’exploitation du
droit de copie (CFC) at contact@cfcopies.com.
                                                                                                 TABLE OF CONTENTS – 3




                                            Table of Contents


About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
   Information and methodology used for the peer review of China . . . . . . . . . . . . .11
   Overview of China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
   Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   23
   A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      25
   A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            60
   A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             68
B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
   B.1. Competent Authority’s ability to obtain and provide information . . . . . . . . 74
   B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 81
C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
   Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   83
   C.1. Exchange-of-information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        85
   C.2. Exchange-of-information mechanisms with all relevant partners . . . . . . . .                                       92
   C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       94
   C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . .                             96
   C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . .                             97




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
4 – TABLE OF CONTENTS

Summary of Determinations and Factors Underlying Recommendations. . . .103

Annex 1: Jurisdiction’s Response to the Review Report . . . . . . . . . . . . . . . . . 107
Annex 2: List of All Exchange-of-Information Mechanisms in Force . . . . . . 108
Annex 3: List of all Laws, Regulations and Other Relevant Material . . . . . . .113
Annex 4: People Interviewed During On-Site Visit . . . . . . . . . . . . . . . . . . . . . 120




        PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                             ABOUT THE GLOBAL FORUM – 5




                              About the Global Forum

           The Global Forum on Transparency and Exchange of Information for Tax
       Purposes is the multilateral framework within which work in the area of tax
       transparency and exchange of information is carried out by over 100 jurisdic-
       tions which participate in the Global Forum on an equal footing.
           The Global Forum is charged with in-depth monitoring and peer review
       of the implementation of the international standards of transparency and
       exchange of information for tax purposes. These standards are primarily
       reflected in the 2002 OECD Model Agreement on Exchange of Information
       on Tax Matters and its commentary, and in Article 26 of the OECD Model
       Tax Convention on Income and on Capital and its commentary as updated in
       2004, which has been incorporated in the UN Model Tax Convention.
           The standards provide for international exchange on request of foreseeably
       relevant information for the administration or enforcement of the domestic tax
       laws of a requesting party. Fishing expeditions are not authorised but all fore-
       seeably relevant information must be provided, including bank information
       and information held by fiduciaries, regardless of the existence of a domestic
       tax interest or the application of a dual criminality standard.
           All members of the Global Forum, as well as jurisdictions identified by
       the Global Forum as relevant to its work, are being reviewed. This process
       is undertaken in two phases. Phase 1 reviews assess the quality of jurisdic-
       tions’ legal and regulatory framework for the exchange of information, while
       Phase 2 reviews look at the practical implementation of that framework.
       Some Global Forum members are undergoing combined – Phase 1 plus
       Phase 2 – reviews. The Global Forum has also put in place a process for
       supplementary reports to follow-up on recommendations, as well as for the
       ongoing monitoring of jurisdictions following the conclusion of a review. The
       ultimate goal is to help jurisdictions to effectively implement the international
       standards of transparency and exchange of information for tax purposes.
           All review reports are published once approved by the Global Forum and
       they thus represent agreed Global Forum reports. For more information on
       the work of the Global Forum on Transparency and Exchange of Information
       for Tax Purposes, and for copies of the published review reports, please refer
       to www.oecd.org/tax/transparency and www.eoi-tax.org.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                   EXECUTIVE SUMMARY – 7




                                   Executive Summary

       1.       This report 1 summarises the legal and regulatory framework for
       transparency and exchange of information in the People’s Republic of China 2
       (the terms “PRC” and “China” are interchangeably used) as well as the prac-
       tical implementation of that framework. The international standard, which
       is set out in the Global Forum’s Terms of Reference to Monitor and Review
       Progress Towards Transparency and Exchange of Information, is concerned
       with the availability of relevant information within a jurisdiction, the compe-
       tent authority’s ability to gain timely access to that information, and whether
       that information can be effectively exchanged with the jurisdiction’s exchange
       of information partners.
       2.      China has transformed from a planned economy to a socialist market
       economy. Since the introduction of market-based economic reforms in 1978
       and the government’s openness toward foreign direct investment, China
       has become the world’s second-largest economy. As a rapidly developing
       and industrialising global power, exchange of information for tax purposes,
       although relatively new to China, has been instrumental in China’s tax com-
       pliance management. China fully endorses the international standards for
       transparency and exchange of information for tax purposes and has been
       an active member of the Global Forum on Transparency and Exchange of
       Information for Tax Purposes since its creation.
       3.       China has developed a comprehensive network of bilateral agree-
       ments that provide for exchange of information in tax matters. Currently,
       China has a network of 97 Double Taxation Conventions (DTCs), 95 of which
       are in force, and two agreements 3 in force containing provisions concerning

1.     This document and any map included herein are without prejudice to the status
       of or sovereignty over any territory, to the delimitation of international frontiers
       and boundaries and to the name of any territory, city or area.
2.     The following territories were not included as part of this assessment: Hong Kong
       Special Administrative Region (Hong Kong SAR), Macau Special Administrative
       Region (Macau SAR) and Chinese Taipei.
3.     With Hong Kong Special Administrative Region (Hong Kong SAR) and Macau
       Special Administrative Region (Macau SAR).


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
8 – EXECUTIVE SUMMARY

     information exchange. In addition, China has entered into Tax Information
     Exchange Agreements (TIEAs) with eight jurisdictions (Argentina, The
     Bahamas, the British Virgin Islands, Bermuda, the Cayman Islands,
     Guernsey, the Isle of Man, and Jersey), seven of which are in force. China’s
     agreements cover its major trading partners and China has not refused to
     enter into an exchange of information agreement with any Global Forum
     member seeking to do so. The large majority of China’s agreements meet the
     international standards. China is also actively seeking to expand its exchange
     of information network and is currently engaged in negotiations to establish
     new agreements as well as renegotiations of its older agreements.
     4.       The main types of entities in China include limited liability com-
     panies, joint stock companies, and partnerships. China’s system of multiple
     public registries, registers of shareholders maintained by public and private
     companies, and private registries maintained by China’s tax authorities ensure
     that accurate and adequate current information concerning the ownership
     and control of legal entities and arrangements is readily accessible to China’s
     competent authority. China’s corporate and anti money laundering laws also
     ensures that bank information and accounting records are effectively main-
     tained and accessible in a timely fashion. Additionally, there is a variety of
     penalties under China’s laws to ensure that information required to be main-
     tained is, in fact, maintained. Several of China’s exchange of information
     partners who provided input regarding the review of China noted that over the
     past three years China has been able to provide ownership information and
     accounting records (including underlying documentation) for all types of legal
     entities and arrangements as well as bank information in response to specific
     requests for exchange of information.
     5.       China’s tax authority (the State Administration of Taxation (SAT))
     has broad powers to obtain bank, ownership, identity, and accounting infor-
     mation and have enforcement measures to compel the production of such
     information. The ability of the SAT to obtain information for exchange of
     information purposes is derived from general access powers under the Tax
     Collection and Administration Law and the SAT Protocol for International
     Exchange of Tax Information coupled with the authority provided under the
     relevant exchange of information agreements. The SAT authorities have
     rights to make enquires, inspect documents, and search and seize informa-
     tion when necessary. No bank secrecy or other provisions in China’s laws
     and regulations unduly prevent the SAT authorities from obtaining, directly
     or indirectly, account information maintained by banks or other financial
     institutions for tax purposes.
     6.     China’s competent authority (the Director of the Global Co-operation
     and Compliance Division of the International Taxation Department of the SAT
     (GCCD)), when requested by a foreign counterpart, can access information



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                   EXECUTIVE SUMMARY – 9



       with the assistance of the SAT officials at or below provincial level, who have
       the necessary powers to access information from taxpayers and third parties
       in China. The co-ordination procedures between China’s competent authority
       and the SAT are clearly defined and effective in practise.
       7.      Over the past three years, the volume of specific requests for exchange
       of information both to and from China’s exchange of information partners has
       increased considerably. China’s competent authority reports that it expects the
       number of inbound requests to continue to grow in future years. Understaffing
       at the GCCD may consequently result in longer response times, especially if
       large quantities of requests are received in a short time. It is therefore recom-
       mended that China devote additional personnel resources to the GCCD to
       ensure effective management of China’s EOI program.
       8.      All of China’s significant exchange of information partners, as well
       as most of its top trading partners, provided input to this review. The infor-
       mation received confirms that, notwithstanding some imperfections, China’s
       practices with respect to exchange of information in tax matters are of a very
       high standard.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 11




                                          Introduction


Information and methodology used for the peer review of China 4

       9.       The assessment of the legal and regulatory framework of the People’s
       Republic of China (the terms “PRC” and “China” are interchangeably used)
       and the practical implementation and effectiveness of this framework was
       based on the international standards for transparency and exchange of infor-
       mation as described in the Global Forum’s Terms of Reference to Monitor
       and Review Progress Towards Transparency and Exchange of Information,
       and was prepared using the Global Forum’s Methodology for Peer Reviews
       and Non-Member Reviews. The assessment was based on the laws, regula-
       tions, and exchange of information mechanisms in force or effect as at April
       2012, other information, explanations and materials supplied by China during
       the on-site visit that took place on 12-14 December 2011, and information
       supplied by partner jurisdictions. During the on-site visit, the assessment
       team met with officials and representatives of relevant Chinese government
       agencies, including the State Administration of Taxation, the Securities
       Regulatory Commission, the Banking Regulatory Commission, the State
       Administration for Industry and Commerce, the Ministry of Justice, and the
       Ministry of Finance (see Annex 4).
       10.       The Terms of Reference breaks down the standards of transparency and
       exchange of information into 10 essential elements and 31 enumerated aspects
       under three broad categories: (A) availability of information; (B) access to
       information; and (C) exchange of information. This combined review assesses
       China’s legal and regulatory framework and the implementation and effective-
       ness of this framework against these elements and each of the enumerated
       aspects. In respect of each essential element, a determination is made regarding
       China’s legal and regulatory framework that either: (i) the element is in place;
       (ii) the element is in place but certain aspects of the legal implementation of the

4.     This document and any map included herein are without prejudice to the status
       of or sovereignty over any territory, to the delimitation of international frontiers
       and boundaries and to the name of any territory, city or area.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
12 – INTRODUCTION

      element need improvement; or (iii) the element is not in place. These determi-
      nations are accompanied by recommendations for improvement where relevant.
      In addition, to reflect the Phase 2 component, recommendations are also made
      concerning China’s practical application of each of the essential elements. As
      outlined in the Note on Assessment Criteria, following a jurisdiction’s Phase 2
      review, a “Rating” will be applied to each of the essential elements to reflect
      the overall position of a jurisdiction. However, this rating will only be published
      “at such time as a representative subset of Phase 2 reviews is completed”. This
      report therefore includes recommendations in respect of China’s legal and regu-
      latory framework and the actual implementation of the essential elements, as
      well as a determination on the legal and regulatory framework, but it does not
      include a rating of the elements.
      11.     The assessment was conducted by a team which consisted of two
      assessors and two representatives of the Global Forum Secretariat: Ms. Silke
      Voß of the Federal Ministry of Finance of Germany; Ms. Shauna Pittman of
      the Canada Revenue Agency; and Mr. Stewart Brant and Mr. Rémi Verneau
      from the Global Forum Secretariat.

Overview of China

      12.      The PRC was founded on 1 October 1949 with Beijing as its capital.
      China is located in eastern Asia, bounded by the western shore of the Pacific
      Ocean. It has a land area of approximately 9.6 million square kilometres.
      China’s territory is comprised of 34 provinces, autonomous regions, munici-
      palities and special administrative regions. As at the end of 2010, China had
      a population of 1.3 billion. 5 The major cities are the capital Beijing, which is
      the political and cultural centre, and Shanghai, which is the largest industrial,
      commercial and financial centre. China is a multi-ethnic nation consisting of
      56 ethnic groups. The official language is Chinese. All Chinese citizens over 18
      years of age have the right to vote and stand for election (Constitution Art. 3).
      13.     China has transformed from a planned economy to a socialist market
      economy. It has become one of the world’s largest economies since the intro-
      duction of market-based economic reforms in 1978. China’s gross domestic
      product (GDP) was approximately 47.2 trillion Chinese Yuan Renminbi
      (CNY) (EUR 5.57 trillion) in 2011 (an increase of 9.2% from the preced-
      ing year). 6 Its economy is dominated by industry (46%) and services (44%);
      agriculture represents 10%. 7 Foreign direct investment in China reached
      approximately CNY 730 billion (EUR 86.1 billion) in 2011 (an increase of

5.    2010 Sixth National Population Census Data Gazette [1] (No. 1).
6.    China Statistical Yearbook 2010.
7.    www.worldbank.org/.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 13



       9.7% from the preceding year). 8 China’s major trading partners are (in order)
       the European Union; the United States; Japan; ASEAN 9 member states; Hong
       Kong China; the Republic of Korea; Chinese Taipei; Australia; Russia; and
       India. 10 China’s currency is the Chinese Yuan Renminbi (CNY) (CNY 8.48
       = EUR 1 as at 29 February 2012). 11
       14.     China is a member of the United Nations (Security Council), Group
       of Twenty Finance Ministers and Central Bank Governors (G20), Asia Pacific
       Economic Cooperation (APEC), Financial Action Task Force, the Asia-
       Pacific Group on Money Laundering, and the Eurasian group on combating
       money laundering and financing of terrorism. China has been an active
       member of the Global Forum on Transparency and Exchange of Information
       for Tax Purposes, its Steering Group and Peer Review Group.

       General information on legal system and the taxation system
       15.     The Chinese state has a functional division among the legislative,
       executive and judicial bodies. The Constitution is the fundamental law of
       China. The existing Constitution was adopted by the National People’s
       Congress (NPC) on 4 December 1982.
       16.       The NPC is China’s legislative body (parliament) and the country’s
       highest authority of state power (Constitution Art. 57). The NPC elects all
       executive (administrative), judicial and prosecutorial departments of the state
       (Art. 3). It also has authority over the local people’s congresses which exist
       at all levels of local government. When the NPC is between sessions, the
       Standing Committee of the NPC (Standing Committee) executes the NPC’s
       powers. Both the NPC and its Standing Committee exercise the power to
       enact national legislation (Art. 58). The NPC is empowered to amend China’s
       Constitution and supervise its enforcement, and to enact and amend laws
       (e.g. the criminal law, civil law and law on state institutions) (Art. 62). The
       Standing Committee is empowered to interpret the Constitution and laws,
       supervise the Constitution’s enforcement, and enact and amend laws other
       than those which should be enacted by the NPC.


8.     hhttp://english.mofcom.gov.cn/aarticle/statistic/foreigninvestment/201202/
       20120207948411.html.The top ten countries/jurisdictions investing in China in
       2010 were: Hong Kong, China; Chinese Taipei; Japan; Singapore; United States;
       the Republic of Korea; United Kingdom; Germany; France; and the Netherlands.
9.     The Association of Southeast Asian Nations (ASEAN) has 10 member states:
       Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore,
       Thailand and Vietnam.
10.    http://english.mofcom.gov.cn/aarticle/statistic/ie/200901/20090105999698.html.
11.    www.xe.com/.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
14 – INTRODUCTION

      17.      China’s executive body is the State Council (Constitution Art. 85).
      The State Council is led by the Premier, who leads the Ministers and
      Commissioners who are in charge of the various ministries and commissions.
      The State Council is empowered to formulate administrative legislation and
      regulations in accordance with the provisions of the Constitution and laws
      (Art. 89). Additionally, departmental regulations can be issued by the minis-
      tries and commissions of the State Council. The State Council is responsible
      to the NPC.
      18.      The judicial framework comprises two departments: the People’s
      courts and the People’s procuratorates (Constitution Art. 135). The Supreme
      People’s courts and the Supreme People’s procuratorates are directly respon-
      sible to the NPC and its Standing Committee (Art. 128). The national judicial
      departments are elected by the NPC, report to the NPC and are under the
      NPC’s supervision. The Supreme People’s Court (SPC) and the regional
      people’s courts are the state departments of adjudication, and independently
      determine on criminal, civil, administrative and state compensation cases.
      The Supreme People’s Procuratorate (SPP) and the regional people procura-
      torates are the state departments of public prosecution and legal supervision.
      All of these courts and procuratorates can hear tax cases. The Ministry of
      Public Security (MPS) and the local public security departments are the
      state departments of criminal investigation. The Ministry of Public Security
      (MPS) is responsible to the State Council (Art. 89).
      19.      China adopts a civil law system. The Constitution of China has the
      highest legal authoritative power (Constitution Preamble). No laws, admin-
      istrative regulations, or regional laws and regulations should conflict with
      the Constitution. The hierarchy of laws is as follows (in descending order):
      Constitution, laws, national administrative regulations, ministerial decrees
      and local regulations. Laws and local regulations are enacted by the NPC
      and by local People’s Congresses, respectively. Ministerial decrees and local
      governmental rules are enacted by the ministries under the State Council
      and by the local executive authorities (People’s governments), respectively.
      National administrative regulations may be referred to as rules, regulations
      or measures.
      20.     The NPC has the right to amend or revoke inappropriate laws made
      by the Standing Committee and to revoke specific regulations that are
      approved by the Standing Committee but which do not comply with the pro-
      visions of the Constitution and the Legislation Law (Constitution Art. 62).
      The Standing Committee has the right to revoke administrative regulations
      that conflict with the Constitution and laws. The State Council has the right
      to amend or revoke inappropriate departmental and local governmental
      regulations.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 15



       21.     At various levels, the executive branches exercise administrative
       power in accordance with the Constitution and related laws. The State
       Council is in charge of formulating administrative regulations and has the
       power to make decisions on government administrative affairs that have
       national implications (Constitution Art. 89). Administrative regulations deal
       with administration by the executive. There are more than 40 departments
       which exercise specific administrative powers within their respective area
       under the State Council, such as industry and commerce, taxation, finance,
       customs, foreign exchange and banking sectors.
       22.      Tax treaties with foreign jurisdictions are concluded by the State
       Administration of Taxation but require the approval of the State Council.
       Treaties have the full force and effect of law in China and must be faithfully
       observed. From a tax perspective, international agreements, such as double
       taxation conventions (DTCs) and taxation information exchange agreements
       (TIEAs) override domestic laws but not the Constitution in the case of con-
       flict (Tax Collection and Administration Law Art. 91).

       The tax system
       23.      The administration of China’s tax system is under the general juris-
       diction of the State Administration of Taxation (SAT), consisting of local
       state taxation bureaus (LSTBs) and local taxation bureaus (LTBs) at the pro-
       vincial level. The LSTBs, LTBs and their local branches at various levels are
       responsible for collecting and administering the taxes based on the substance
       of revenue allocation respectively (Tax Collection and Administration Law
       (Arts.5, 10). The chart below illustrates the organisation structure of the SAT.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
16 – INTRODUCTION

      24.     The current tax system in China has specific tax laws, rules, circu-
      lars and regulations for different types of taxes and all are binding from a
      tax perspective. State organisations that have the authority to formulate tax
      regulations within their administration include: The NPC and its Standing
      Committee, the State Council, the Ministry of Finance (MOF), the SAT, the
      Tariff and Classification Committee of the State Council, and the General
      Administration of Customs.
      25.     There are four tax laws in China: the Enterprise Income Tax Law
      (EITL), the Individual Income Tax Law (IITL), the Tax Collection and
      Administration Law (TCAL), and the Vehicle and Vessel Tax Law (VVTL).
      There are also several provisional regulations, including the Value Added Tax
      (VAT) Provisional Regulation, the Business Tax (BT) Provisional Regulation,
      and the Consumption Tax (CT) Provisional Regulation. In addition, there are
      circulars/rules and local regulations/rules to provide guidance, implementa-
      tion details and clarifications on different tax issues as they evolve.
      26.     China’s tax system consists of income, goods, and services taxes, as
      well as other taxes. Income taxes include enterprise income tax (EIT) and
      individual income tax (IIT). Goods and services taxes include VAT, BT, and
      CT. Local taxes include stamp duty (SD) and real estate tax (RET).
      27.      A PRC tax resident entity (i.e. an entity incorporated in China or an
      entity incorporated outside of China but with its place of effective manage-
      ment in China) is subject to EIT on its worldwide income at a statutory rate of
      25% (unless specific preferential treatment applies) (EITL Arts.2, 3, 4). The
      EITL contains a foreign tax credit (FTC) mechanism for taxes paid on foreign
      income. 12 Non-resident taxpayers are generally subject to withholding tax on
      their China sourced income at a statutory tax rate of 20%, which is reduced
      to 10% by the State Council (or lower if a DTC rate applies) (EITL Arts.3, 4;
      the Implementation Rules of EITL Art. 91). Non-residents having a permanent
      establishment (PE) in China are subject to EIT of 25% to the extent of net
      taxable income attributable to such PE. The EITL also contains special rules,
      such as a general anti-avoidance rule and a number of specific anti-avoidance
      regimes, such as controlled foreign company rules and transfer pricing rules.
      28.      Chinese nationals who are domiciled in China are resident for tax
      purposes. Resident individual taxpayers are generally subject to the IITL on
      their worldwide income (special rules apply to expatriates). Non-tax resident
      individuals are subject to IIT in respect of their China-sourced income (IITL,
      Art. 1). Wages and salaries are taxed at progressive rates ranging from 3% to
      45%. Business income is taxed at progressive rates ranging from 5% to 35%.
      Other income is taxed at 20%.


12.   Circular Caishui [2009] No. 125 and Circular SAT Announcement [2010] No. 1.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 17



       29.      The TCAL and its Implementation Rules contain provisions for mat-
       ters that are common and fundamental to tax collection in China. Articles
       dealing with procedural matters, such as the tax registration (Chapters II), tax
       audit (Chapters IV), and penalties and legal liabilities (Chapter V) make up
       the majority of the TCAL, but general provisions on maintaining accounting
       books, tax reporting requirements and collecting, and on other areas are also
       included.
       30.      All taxpayers in China (including residents and non-residents, except
       for government authorities and individuals) are required to register with the
       SAT under the Taxation Registration Administrative Rules (TRAR Art. 2).
       With a view to promoting and facilitating foreign direct investment, spe-
       cific laws on different forms of Foreign Invested Enterprises (FIEs) were
       promulgated by the NPC. FIEs in China may take three major forms: equity
       joint ventures (EJVs), co-operative joint ventures (CJVs) and wholly foreign-
       owned enterprises (WFOEs). These companies are purely Chinese resident
       companies and are consequently subject to the same taxation rules as apply
       to Chinese owned companies. In terms of foreign companies, there are vari-
       ous tax regulations which require a non-resident company to complete tax
       registration with the SAT as long as it has China sourced income (CITL Art. 2,
       TCAL Art. 2).
       31.      China has various types of special economic zones in order to attract
       foreign investment. The zones are classified as special economic zones, open
       coastal cities and economic and technology development zones, open coastal
       economic zones, high-and new-technology development zones, and free
       trade zones or bonded zones. Since 2008, most of the tax incentives granted
       to these zones have been abolished. Certain non-tax incentives are available,
       which generally include more liberal regulations for foreign exchange control,
       labour management, land use, and provision of utilities. In terms of registra-
       tion requirements or availability of information, companies located in these
       zones are subject to the same disclosure requirements as apply to companies
       established outside these zones.

       International exchange of information for tax purposes
       32.      China’s framework relevant to exchange of information for tax
       purposes is presided over by the SAT. Administration of the exchange of
       information under China’s treaty network is the responsibility of China’s
       competent authority, being the Director General, the Deputy Director General
       of the International Taxation Department, and the Director of the Global
       Co-operation and Compliance Division (GCCD) of the International Taxation
       Department. In practice, the GCCD is responsible for managing and respond-
       ing to all of China’s exchange of information requests.



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
18 – INTRODUCTION

      33.     China has a comprehensive network of bilateral agreements that pro-
      vide for exchange of information in tax matters, and is currently engaged in
      negotiations to establish new agreements as well as renegotiations of its older
      agreements. China signed its first DTC with Japan in 1983. Currently, China
      has a network of 97 DTCs, 95 of which are in force, and two agreements con-
      taining information exchange requirements. In addition, China has entered
      into eight TIEAs, with Argentina, The Bahamas, the British Virgin Islands,
      Bermuda, the Cayman Islands, Guernsey, the Isle of Man, and Jersey, seven
      of which are in force.
      34.     China also exchanges information through specific requests and
      on automatic and spontaneous basis on more than 10 000 cases a year.
      Further, with the aim of identifying and curbing international tax avoidance,
      China participates in the Joint International Tax Shelter Information Centre
      (JITSIC) along with Australia, Canada, France, Japan, the Republic of Korea,
      the United Kingdom and the United States.

      Overview of the financial sector and relevant professions
      35.      Most financial activities are domestic and most of the key financial
      institutions are owned by the Chinese government, either fully or by a major-
      ity stake.

      Banking sector
      36.      The PBOC (People’s Bank of China) was established in December
      1948. In 1949, the central government of the PRC conferred on the PBOC the
      status of a national bank. It is the government’s central bank and is entrusted
      with the independence and autonomy to make decisions regarding monetary
      policies. It reports its decisions to the State Council.
      37.      The CBRC (China Banking Regulatory Commission) took over the
      regulatory function of the banking sector from the PBOC in 2003. The CBRC
      is a ministerial-level organisation under the State Council. It is entrusted with
      regulation and supervision of banking institutions, asset management compa-
      nies, trust companies and non-bank financial institutions.
      38.       The following table sets out the types of entities in China’s banking
      sector. 13


13.   There are also three policy banks founded and capitalised by the government:
      China Development Bank, China Import and Export Bank of China, and China
      Agricultural Development Bank. They participate in financing and business sec-
      tors or projects that are in-line with the state policies.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 19




                           Banking institutions (domestic and foreign)
                                          Credit co-operatives
          Commercial Banks                 and credit unions             Non-bank institutions




       39.     As at the end of 2010, the total assets of the domestic banks was
       CNY 91 473 billion (EUR 10 787 billion) while the total assets of non-bank
       financial institutions was CNY 2 090 billion (EUR 246 billion). The total
       assets of the foreign banks was CNY 1 742 billion (EUR 205 billion). 14

       Securities sector
       40.      The CSRC (China Securities Regulatory Commission) is a ministry-
       level unit under the State Council authorised to regulate China’s securities
       and futures markets. 15 China’s securities sector is comprised of three main
       types of institutions: securities organisations, futures institutions, and fund
       institutions. Securities organisations are institutions that provide intermedi-
       ary services to security market participants. The following table sets out the
       various types of securities institutions:




14.    Appendix 8-1 to 2010 Annual Report, China Banking Regulatory Commission.
15.    See further: www.csrc.gov.cn/pub/csrc_en/about/.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
20 – INTRODUCTION


                       Securities institutions (domestic and foreign)
             Securities
           organisations                Futures institutions             Funds institutions




      41.      There are currently two stock exchanges in China: the Shanghai
      Stock Exchange and the Shenzhen Stock Exchange. Both are for listing of
      domestic companies (A shares for domestic investors only while B shares
      are permitted for foreign investments). As on 12 March 2012, there were
      2 369 listed companies in domestic A shares; there were 108 listed compa-
      nies in domestic B shares which have been permitted for foreign investment.
      Additionally, there were 170 companies listed in the Hong Kong, China Stock
      Exchange (overseas H shares).

      Insurance sector
      42.      The CIRC is the government body authorised to regulate China’s
      insurance sector. China’s insurance sector includes four types of institutions,
      as set out in the following table:
                       Insurance institutions (domestic and foreign)




      Relevant professions
      43.     Accountants in China are generally only authorised to perform audit
      and related services (Law on Certified Public Accountants, Art. 15). As of
      December 2011, China had 97 510 registered certified public accountants and
      7 976 registered public accounting firms.
      44.     As of October 2011, China had 200 000 licensed lawyers and more
      than 17 000 registered law firms. The Ministry of Justice is responsible for
      licensing and supervising lawyers. Lawyers are required to obtain a legal
      practice certificate issued by the provincial judicial administrative authority.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                         INTRODUCTION – 21



       Lawyers who intend to establish a law firm must submit an application to the
       provincial judicial administrative authority (Law on Lawyers, Arts.4, 15). The
       judicial departments examine lawyers and law firms annually for compliance
       with rules relating to legal practice, internal management and professional
       ethics. Lawyers are also supervised by the All China Lawyer Association
       (ACLA) which is the legal sector’s national self-regulatory organisation.
       Lawyers are required to join their local lawyers’ association (Art. 36).
       45.       In China, notaries are required to operate on a non-profit basis. They
       may verify the legality, objectivity and authenticity of documents and trans-
       actions, hold funds in escrow, or handle funds on behalf of other persons or
       entities. As at June 2011, China had 3 182 notary offices, with 19 389 notaries.
       Establishment of a notary office is subject to the approval of the Ministry of
       Justice. Notaries who have passed the national judicial examination, satis-
       fied the qualification stipulated by the Ministry of Justice, and served a full
       year’s internship and passed exam after receiving pre-service training may be
       licensed by the Ministry of Justice to perform notary services.
       46.     Authorised trust investment companies are the only businesses in
       China that are permitted to administer business trusts (Regulations on Trust
       Investment Corporations). No other financial institutions, lawyers, accountants
       or other professionals are permitted to engage in this activity as a business.
       Trust investment companies are treated as non-bank financial institutions
       and are covered by the Anti-Money Laundering Law (AMLL) and Anti Money
       Laundering Rules (AMLR) as described in part A of this report.

Recent developments

       47.     China signed a TIEA with the Cayman Islands and a new DTC with
       the United Kingdom in 2011. China’s agreements with Argentina (TIEA),
       Bermuda (TIEA), the Czech Republic (DTC), Guernsey (TIEA), the Isle of
       Man (TIEA), Jersey (TIEA), Malta (DTC), Syria (DTC) and Zambia (DTC)
       entered into force in 2011.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 23




                       Compliance with the Standards




A. Availability of Information



Overview

       48.      Effective exchange of information requires the availability of reliable
       information. In particular, it requires information on the identity of owners
       and other stakeholders as well as information on the transactions carried
       out by entities and other organisational structures. Such information may
       be kept for tax, regulatory, commercial or other reasons. If such informa-
       tion is not kept or the information is not maintained for a reasonable period
       of time, a jurisdiction’s competent authority 16 may not be able to obtain and
       provide it when requested. This section of the report describes and assesses
       China’s legal and regulatory framework for availability of information. It also
       assesses the implementation and effectiveness of this framework.
       49.      The main forms of business organisations in China include limited
       liability companies and joint stock companies. China relies primarily on
       business and tax registration, corporate record keeping requirements, and
       statutory tax filing requirements to ensure the maintenance of information on
       the legal ownership of companies. Companies are obliged to register with the
       relevant State Administration for Industry and Commerce (SAIC) and State
       Administration of Taxation (SAT) authorities before carrying on business


16.    The term “competent authority” means the person or government authority des-
       ignated by a jurisdiction as being competent to exchange information pursuant
       to a double tax convention or tax information exchange.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
24 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      activities in China. Ownership information of companies, including foreign
      invested enterprises, is disclosed in the registration process. Joint stock
      companies are obliged to maintain up-to-date shareholder registries contain-
      ing ownership information for all registered shareholders. China Securities
      Register and Settlement Institution and Securities Depository and Settlement
      Centres at local level maintain ownership information for unregistered shares
      in China.
      50.     Foreign companies conducting business in China are obliged to
      register with the SAIC authorities and are subject to the same tax filing
      requirements as domestic companies under the Enterprise Income Tax Law
      (EITL) as regards Chinese-source income. A foreign company is deemed a
      PRC-resident company for tax purposes if its place of effective management
      is in China. Under such circumstances, foreign companies are obliged to reg-
      ister ownership information with the responsible SAT authorities to the same
      extent as domestic companies.
      51.      Information is available to China’s competent authority that identifies
      the partners in any partnership that has income, deductions or credits for tax
      purposes, carries on business in China, or is a limited partnership formed
      under PRC law. Such partnerships are obliged to register with the SAIC and
      SAT authorities before carrying out business in China. Ownership informa-
      tion of partnerships, including foreign invested partnerships, is disclosed in
      the registration process.
      52.      PRC law requires the maintenance of information that identifies
      the settlor, trustee, and beneficiaries of trusts. All trusts must be created in
      writing in the form of a trust deed and contain the names and addresses of
      the settlor, trustee and beneficiary. Trust deeds relating to business trusts
      are registered with the Shanghai Trust Registration Centre or the regulatory
      agency in charge of public affairs (for public welfare trusts). Trust companies
      are subject to stringent record-keeping requirements under the Anti-Money
      Laundering Law (AMLL), which requires the maintenance of ownership
      information on the settlors and beneficiaries. Resident trustees of foreign
      trusts are obliged to maintain ownership information on the settlor and ben-
      eficiaries for PRC tax purposes.
      53.      PRC law requires the maintenance of information that identifies the
      founders and members of the foundation council and beneficiaries of founda-
      tions established under its laws. Foundations in China are non-profit legal
      persons established for public welfare purposes. Foundations are obliged to
      register with the Ministry of Civil Affairs and the responsible SAT authorities
      before carrying out activities in China. Information that identifies the found-
      ers and members of the foundation council and beneficiaries is disclosed in
      the registration process.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 25



       54.     China’s general legal framework provides that relevant legal entities
       and arrangements carrying on business in China are obliged to maintain a
       full range of accounting records, including underlying documentation, for a
       minimum of five years. This is supplemented by specific legal rules appli-
       cable to each type of relevant entity and arrangement and makes accounting
       records available in China. Financial institutions operating in China are
       obliged to maintain information on all account-holders and related financial
       and transactional information.
       55.      The SAT reports to have few difficulties with respect to issues regard-
       ing the availability of ownership and identity information, both for domestic
       tax cases and for international assistance in tax matters. Additionally, there are
       a variety of penalties under China’s laws to ensure that information required
       to be maintained is, in fact, maintained. The penalties appear to be effective
       and dissuasive enough to ensure compliance. Most of China’s laws provide a
       range of penalties, including small to large monetary fines depending on the
       level of infraction, and imprisonment in egregious cases.
       56.     Information received from partner jurisdictions with an exchange of
       information relationship with China, as well as quantitative and qualitative
       information received from China, indicate that China actively exchanges
       bank, ownership, and identity information and accounting records. Based on
       peer input received, it is clear that China’s competent authority has been able
       to provide such information for all types of legal entities and arrangements in
       response to specific requests for exchange of information.

A.1. Ownership and identity information




       57.      In China, a legal person is defined as an organisation that independently
       enjoys civil rights and assumes civil obligations in accordance with the law,
       from the time that it is established until it is terminated (General Principles of
       Civil Law of the PRC Art.36). In addition to the term “legal persons”, Chinese
       nomenclature also uses the term “unit”. A unit is a much broader concept than
       a legal person. In general, a unit may refer to various organisations, such as
       companies, partnerships, trusts, foundations, official (state) organisations, social
       organisations, government-sponsored institutions, etc. To conduct business
       activities in China, a legal or natural person must register with the appropriate
       PRC authorities.
       58.     The SAIC is the government authority in charge of market super-
       vision/regulation and related enforcement of commercial laws through



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
26 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      administrative means. One of the SAIC’s major responsibilities is to carry
      out and administer registration of enterprises (including foreign-invested
      enterprises), agricultural co-operatives, entities or individuals engaged in
      business operations and resident representative offices of foreign companies.
      It is also mandated to investigate and ban unlicensed business operations. All
      commercial entities in China must register with the SAIC and submit annual
      or tri-annual re-registration documents to the local SAIC office. Any changes
      in business scope or ownership structure must also be registered with the
      SAIC within a prescribed time, (e.g. 30 days from the time upon which the
      changes take place). The Foreign Enterprise Registration Bureau within the
      SAIC handles the regulation and registration of foreign representative offices
      and companies with foreign investment.

      Companies (ToR 17 A.1.1)

      Types of companies
      59.      The Company Law of the PRC was enacted by the Standing
      Committee of the NPC in 1993 (last amended in 2005) with the aim of revi-
      talising domestic enterprises by adopting a modern company structure. The
      Company Law provides the general rules for the formation and organisation
      of companies, including incorporation procedures, issuance of shares and
      bonds, responsibilities and functions of directors and management, finance
      and accounting rules, corporate restructuring, and dissolutions and liquida-
      tions. Companies in China are legal persons, which have independent legal
      personality and can hold property in their own name (Company Law Art. 3).
      60.     Companies can be categorised by the residency of their investors:
      domestic invested enterprises (DIEs) are companies with PRC resident inves-
      tors only; and foreign invested enterprises (FIEs) are companies partly or
      wholly owned by foreign investors. FIEs can be jointly established by foreign
      companies (or enterprises, or other economic organisations or individuals)
      in co-operation with Chinese companies (or enterprises or other economic
      organisations) or established by foreign investors only (Regulations for the
      Implementation of the Law of the PRC on Joint Ventures Using Chinese and
      Foreign Investment Art. 16).
      61.     DIEs are only regulated by the Company Law. In addition to the
      Company Law, there are three basic laws on foreign investment that govern
      FIEs: Law on Sino-Foreign Equity Joint Ventures (LEJV), Law on Chinese-
      foreign Cooperative Joint Ventures (LCJV), and Law on Wholly Foreign-Owned
      Enterprises (LWFOE). In case of divergence, the laws on foreign investment

17.   Terms of Reference to Monitor and Review Progress Towards Transparency and
      Exchange of Information.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 27



       will prevail over the Company Law (Art.18). The Taxation Registration
       Administrative Rules (TRAR), Administrative Rules for Company Registration
       (ARCR) and Accounting Law apply also equally to DIEs and FIEs established
       in accordance with PRC laws and regulations. Consequently, although there are
       specific rules that apply to FIEs, registration rules are the same for DIEs and
       FIEs (see below).
       62.   The Company Law provides for two types of DIEs: limited liability
       companies and companies limited by shares (joint stock companies) (Art. 2):
                 joint stock companies can be public or private companies (Art. 78).
                 Joint stock companies may be incorporated by any person or entity
                 (except civil servants) by means of sponsorship or share offer
                 (Company Law Art. 77). The capital of a joint stock company is
                 divided into equal shares, and the shareholders are liable to the com-
                 pany to the extent of their respective shareholdings (Art. 126). Joint
                 stock companies may have from 2 to 200 initial shareholders. Joint
                 stock companies that issue shares to the general public must follow
                 special rules issued by the securities regulatory institution of the
                 State Council (Art. 129). As at the end of 2011, there were more than
                 205 000 joint stock companies registered in China; and
                 any person or entity (except civil servants) may incorporate a limited
                 liability company which cannot have more than 50 members. All mem-
                 bers are liable for the company’s debts to the extent of their respective
                 capital contributions (Company Law Art. 3). As at the end of 2011, there
                 were 9 500 000 limited liability companies registered in China.
       63.      Amongst FIEs, Equity Joint Ventures (EJVs) and Wholly Foreign-
       Owned Enterprises (WFOEs) are companies with limited liability and legal
       personality. Cooperative Joint Ventures (CJVs) may or may not have legal
       personality, depending on the intention of the contracting parties as laid down
       in the CJV agreement. The ratio of distribution of income of a CJV may differ
       from the ratio of capital contributions of the contracting parties. The foreign
       party may have disproportionate superior rights to dividends until they have
       recovered the initial capital contribution. All CJV terms are based on negotia-
       tion by the parties. The ratio of capital in all three forms of FIEs is expressed
       in the percentage of interest of the investment, there are no “shares” issued
       to any parties unless the FIE is approved as foreign-invested joint stock com-
       pany. 18 As at the end of 2011, there were 446 000 FIEs registered in China,
       among them approximately 52% were WFOEs, 40% EJVs and 8% CJVs.
       64.   From a tax perspective, companies are categorised as PRC-resident
       companies and non-resident companies. PRC-resident companies are those

18.    By the end of 2011, there were 6 833 foreign-invested joint stock companies approved.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
28 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      that are established in accordance with PRC laws and regulations, or those
      that are established under foreign law but whose place of effective man-
      agement is located in China. Non-resident companies are those that are
      incorporated in foreign jurisdictions, not having a place of effective manage-
      ment in China, but with a permanent establishment in China, or deriving
      income from China without permanent establishments in China (EITL Art. 2).

      Ownership information on domestic companies

      Business registration with the State Administration for Industry and
      Commerce (SAIC)
      65.       Companies incorporated under the Company Law (including both
      DIEs and FIEs) are obliged to register with the SAIC before carrying out busi-
      ness activities in China. A company is not considered formally established in
      China until it obtains SAIC approval in the form of a business registration cer-
      tificate (business license). The Administrative Rules for Company Registration
      (ARCR) regulates the registration process.
      66.    Registration for limited liability companies (including FIEs) is
      completed by registering inter alia the following information with the SAIC
      (ARCR Art. 20):
               registration application form signed by the legal representative;
               company’s articles of association;
               identification document of members (such as identity card or passport);
               identification document of the legal representative;
               name and address of the company’s directors, supervisors and man-
               agers; and
               verification report of the company’s registered capital.
      67.      Members of a limited liability company are obliged to sign the arti-
      cles of association (Company Law Art. 25). The articles of association must
      include each member’s name, amount of the member’s contribution, the con-
      tribution method and the date of the contribution (Art. 25). The identity card
      of a PRC resident contains the person’s permanent address.
      68.      Registration for joint stock companies is completed by registering
      inter alia the following information with the SAIC authorities (ARCR Art. 21):
               registration application form signed by the legal representative;
               company’s articles of association;



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 29



                 identification document of initiators (such as identity card or passport);
                 identification document of the legal representative;
                 name and address of the company’s directors, supervisors and man-
                 agers; and
                 verification report of the company’s registered capital.
       69.      The articles of association for joint stock companies must specify the
       initial shareholders’ names, amount of each shareholder’s contribution, the
       contribution method and the date of the contribution (Company Law Art. 82).
       70.      Limited liability companies and joint stock companies are obliged to
       complete alteration registration with the SAIC when there are any changes to
       the information they originally registered (ARCR Art. 26). Limited liability
       companies are obliged to complete alteration registration within 30 days of
       transfer of membership rights or change of member’s name or title (ARCR
       Art. 35). Joint stock companies are obliged to complete alteration registration
       and make a public announcement when they successfully complete a new
       share offer (Company Law Art. 137). In the event of a share transfer, both
       publicly-listed and private joint stock companies are obliged to register the
       shares transferred as well as identity information of buyers, including names,
       addresses, identity document numbers, with China’s Securities Depositary
       and Settlement Centre (or local depositary centres) upon the share transfer
       (Measures for the Administration of Securities Registration and Settlement
       Arts.2, 29, see further developments under section A.1.2). This obligation
       applies irrespective of the number of shares transferred and is supported by
       effective sanctions (see below paragraph 112). The SAIC maintains registra-
       tion information for an indefinite duration.
       71.      The SAIC reports that contents of the business registry are accurate
       and reliable because: it verifies whether registered documents are in the pre-
       scribed form and that their formulation is in accordance with PRC laws; those
       who fail to register or intentionally register false information are punished
       (ARCR Arts.68, 69); and registration applicants are obliged to submit docu-
       ments necessary to investigate the contents of the application (ARCR Art. 2).
       The SAIC does not, however, routinely verify the accuracy of information
       contained in an application for registration, but will do so by verifying the
       identity of individuals concerned and the bona fides of the application where
       it has reason to believe that the company has not provided all the necessary
       information as required by law. In cases where the SAIC comes to know
       about a person who has failed to meet his/her registration obligations which
       subjects them to fines, the SAIC may directly impose such fines.
       72.     In practice, in 2011, the SAIC concluded 13 207 cases for register-
       ing false information with more than CNY 1.1 billion (EUR 119 million) in



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
30 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      fines collected and almost 310 000 cases for non-compliance with registration
      requirements with more than CNY 2.6 billion (EUR 308 million) in fines
      collected. These statistics cover all types of enterprises, i.e. companies and
      partnerships.

      Ownership information kept by companies
      73.      Article 72 of the Company law provides that the stock rights of
      shareholders of a limited liability companies may be transferred among the
      shareholders and in the event that the rights are transferred to a non share-
      holder, this transfer requires the prior consent of a majority of the other
      shareholders. To this extent, notice of the transfer must be given and all share-
      holders have 30 days to consent or disagree. Considering this, shareholders in
      limited liability companies always have knowledge of the identity of the other
      shareholders.
      74.      In addition, limited liability companies are obliged to prepare and
      maintain a membership register that records: the name and address of each
      member; the capital contribution made by each member; and the serial number
      of the capital contribution certificate (Company Law Art. 33). Following the
      transfer of a membership interest, limited liability companies are obliged to
      record the name and address of the transferee in the membership register
      (Art. 74). The membership register must be maintained and be made available
      for inspection at the company’s registered office (Art. 33).
      75.      Joint stock companies are also obliged to prepare and maintain a
      shareholder register that must be kept at the company’s registered address
      (Company Law Art. 97). This requirement applies to both publicly-listed
      companies and unlisted companies. Upon issuance of registered shares, the
      shareholder register must record: the name and address of each shareholder,
      the number of shares held by each shareholder, the serial numbers of stock
      certificates held by each shareholder, and the date on which each shareholder
      acquires their shares (Art. 131). Following the transfer of registered shares,
      joint stock companies are obliged to record the name and address of the trans-
      feree in the shareholder register (Art. 140).

      Tax registration with the State Administration of Taxation (SAT)
      76.      Upon obtaining a business license, both joint stock companies and
      limited liability companies are obliged to complete tax registration with
      the SAT within 30 days (Tax Collection and Administration Law (TCAL)
      Art. 15). Articles 13 and 14 of the TRAR (Administrative Rules for Tax
      Registration) provide that companies are obliged to register, inter alia, the
      following documents: business license, articles of association (containing the
      names of shareholders/members), organisation identity code certificate, legal


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 31



       representative’s identification card or passport, and tax registration applica-
       tion form. Those who fail to register are punished (TCAL Art. 60, TCALIR
       Art. 92).
       77.      Further, the SAT has reported that according to Article 17 of the
       TCAL, taxpayers engaged in production or business operations are obliged
       to submit their certificate of tax registration to banks or other financial
       institutions when opening accounts. Taxpayers are further obliged to report
       all of their bank or financial account numbers to the SAT authorities. Banks
       and other financial institutions must record tax registration numbers in the
       accounts opened by taxpayers and render assistance to the SAT authorities
       when they inquire about the accounts of taxpayers (Art. 17).
       78.     Companies are further obliged to disclose ownership information
       concerning their shareholders/members to the SAT in the tax registration
       application form, including their: name, nationality (for foreign shareholder/
       member) or address (for Chinese shareholder/member), status (e.g. foreign
       company, Chinese company, natural person), business license number in
       cases where the shareholder/member is a legal entity, and identity card
       number if the shareholder/member is a natural person. The SAT is obliged
       to maintain tax registration information for 10 years (Regulations on Tax
       Collection and Records Management).
       79.     Companies are further obliged to notify the SAT of any changes to
       previously registered information, including changes to the company’s own-
       ership within 30 days of alteration registration with the SAIC (TCAL Art. 16;
       TRAR Arts.18, 19).
       80.      Article 29 of the TCALIR provides that companies are obliged to
       keep tax related information for at least 10 years, which includes the tax
       registration certificate and relevant tax registration documents. This general
       requirement applies to all types of companies (Art. 29).In practice, SAT reg-
       istration authorities verify whether registered documents are in the prescribed
       form and that the information they contain is in accordance with PRC laws;
       those who fail to register or intentionally register false information are pun-
       ished (TRCR Art. 44, TCAL Art. 60).

       Foreign exchange registration with the Administration of Foreign
       Exchange
       81.     In addition to registration with the SAIC, FIEs are obliged to register
       with the relevant foreign exchange administrative authority (SAFE) within
       30 days of obtaining their business license (Foreign Exchange Registration
       of FIEs Interim Measures Art. 4). During the foreign exchange registration,
       the company is obliged to disclose inter alia the following information to the
       SAFE or its local offices (via an application form along with a FIF Foreign


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
32 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      Exchange Information Registration Form) (Foreign Exchange Registration of
      FIEs Interim Measures Annex 1):
               name and nationality of the foreign investor;
               foreign investor’s registered address; and
               name and nationality of the ultimate shareholder 19.
      82.      Where there is any change in the items registered by a foreign enter-
      prise, the foreign enterprise shall apply to the original Registration Authority
      within 30 days to change its registration (Art. 10 of the Measures).

      Ownership information on foreign companies 20

      Business registration with the SAIC
      83.      Foreign companies are obliged to register with the SAIC authorities
      before carrying out business activities in China (Administrative Measures
      for the Registration of Enterprises of Foreign Countries (Regions) Engaged
      in Production and Business Activities within the Territory of China Art. 2).
      Registration for foreign companies is completed by registering inter alia the
      following information with the SAIC (Arts.5, 6):
               company name and address;
               identification document of the responsible person of the project in
               China; and
               certificate of incorporation/business registration certificate issued
               by the government authorities of the foreign jurisdiction where the
               company is located.
      84.     The SAIC authorities are obliged to maintain registration information
      during the period a registered entity is in operation. After the entity is de-
      registered, the SAIC authorities are further obliged to maintain registration
      information before it is passed to the local archive centre for a permanent
      record (SAIC Corporate Registration Records Management Approach).

19.   Web link for a sample of the application form and the registration form (PDF attached sepa-
      rately): http://tianjin.pbc.gov.cn/publish/fzh_tianjin/2910/2011/20110830145733944892556/
      20110830145733944892556_.html.
20.   According to the Terms of Reference, where a company or body corporate incor-
      porated in one jurisdiction has a sufficient nexus to another jurisdiction including
      being resident there for tax purposes (for example by reason of having its place
      of effective management or administration there), that other jurisdiction will also
      have the responsibility of ensuring that ownership information is available.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 33



       Tax registration with SAT
       85.      Article 2 of the EITL provides that a foreign company is deemed a
       PRC-resident company for tax purposes if its place of effective management
       is in China, even though it is not incorporated within China. Under such
       circumstance, foreign companies are obliged to fulfil their EIT obligations
       in line with the EITL and relevant rules (as applied to PRC-resident compa-
       nies), including registering their annual returns and necessary supporting
       documentation. Ownership information is disclosed in the registration pro-
       cess to the same extent as for PRC-resident companies. Article 4 of the EITL
       Implementation Rules provides that “place of effective management” refers to
       an establishment that exercises, in substance, overall management and control
       over the production and business, personnel, accounting, properties, etc. of an
       enterprise.
       86.      A non-resident PRC company without a place of effective manage-
       ment in China is subject to PRC tax on China sourced income. To this extent,
       this foreign company must register with the tax authorities, file tax returns
       and pay taxes. Additionally, non-PRC resident companies engaged in con-
       tract engineering operations or providing labour or other services in China
       must apply for temporary tax registration with the responsible SAT authority
       where the project is located or the service is provided within 30 days from the
       date the contract is signed (The SAT Order [2009] No. 19 Art. 5). To complete
       the tax registration process, non-resident companies are obliged to disclose
       inter alia the following information to the responsible SAT authorities (via a
       tax registration form and an explanation letter (Art. 13):
                 name of the foreign company;
                 name and passport number of the foreign company’s legal representative;
                 name of the foreign company’s shareholder(s);
                 nationality of the foreign company’s shareholder(s);
                 shareholder’s status (e.g. foreign company, natural person);
                 shareholder’s business license number or company registration number
                 if the shareholder is a legal entity; and
                 shareholder’s passport number if the shareholder is a natural person.

       Ownership information held by service providers
       87.     China has several anti-money laundering laws and regulations which
       apply to financial institutions and certain non-financial institutions. These
       include the Anti-money Laundering Law (AMLL), Rules for Anti-money
       Laundering by Financial institutions (AMLRFI), the Administrative Rules for the



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
34 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      Reporting of Large-Value and Suspicious Transactions by Financial Institutions,
      the Administrative Rules for the Reporting of Suspicious Transactions related
      to the Financing of Terrorism By Financial Institutions, and the Administrative
      Measures for Identifying the Financial Institutions’ Clients and Retaining Their
      Identity Information and Transaction Records (ARCIV).

      Financial institutions
      88.      All financial institutions in China are obliged to verify and maintain
      records of the identities of their clients (AMLL Arts.16, 19). Financial institu-
      tions are prohibited from providing services to any client whose identity is
      unclear. The term “financial institutions” refers to policy banks, commercial
      banks, credit cooperatives, saving institutions, trust and investment compa-
      nies, securities firms, futures brokerage companies, and insurance companies
      (AMLL Art. 34).
      89.      Article 16 of the AMLL provides that when establishing business
      relationships with customers, or providing customers with one-time finan-
      cial services including cash remittance, cash conversion and acceptance and
      payment of notes exceeding the specified amount, financial institutions must
      request the clients to present their real and valid identification certificates
      or other supporting documents for verification and registration purpose.
      Article 7 of the ARCIV provides that the threshold for verifying a customer’s
      identity for a one-off transaction at the financial institution is CNY 10 000
      (EUR 1 179). Article 8 of ARCIV provides that where the customer with-
      draws an amount above CNY 50 000 (EUR 5 896), the financial institution is
      required to verify the customer’s identity and require the customer to present
      his/her identification document.
      90.     According to the ARCIV, financial institutions are obliged to properly
      preserve their clients’ identity information and their transaction records and
      ensure that every transaction can be adequately reproduced, so as to pro-
      vide the necessary information for identifying their clients, monitoring and
      analysing the circumstances of their transactions, investigating suspicious
      transactional activities, and investigating and prosecuting money-laundering
      cases. Where the client is not a natural person (e.g. a legal person or other
      organisation), the records kept by financial institutions must contain the fol-
      lowing information (ARCIV Art. 33):
               name;
               address;
               business scope;
               organisation identification code;



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 35



                 tax registration certificate number;
                 business license (or other types of license which allows the entity to
                 conduct operation) number;
                 name and identification document of the client’s actual controlling
                 shareholders/members/beneficiaries; and
                 name and identification document of the client’s legal representative.
       91.     For each transaction conducted, financial institutions must keep such
       records as are reasonably necessary to enable the transaction to be readily
       reproduced (ARCIV Art. 3). Financial institutions are required to update the
       information they have on the client when there is any change. Client identity
       data must be kept for at least five years from the date the business relation-
       ship terminates and transaction records must be kept for at least five years
       from the date the transaction terminates. In case of bankruptcy and winding-
       up, financial institutions are obliged to transfer their records to an agency
       designated by the relevant department of the State Council (AMLL Art. 19).
       92.      In practice, companies incorporated in China typically have accounts
       with financial institutions in China. This is because all companies are obliged
       to have registered capital upon incorporation. Article 10 of the Administrative
       Provisions on the Registration of the Registered Capital of Companies
       provides that the registered capital of a limited liability company cannot be
       less than CNY 30 000 (EUR 3 538), whereas the registered capital of a joint
       stock company cannot be less than CNY 5 million (EUR 589 623). In addi-
       tion, the capital contribution of a company’s registered capital must consist
       of no less than 30% cash. Article 12 of the Administrative Provisions on the
       Registration of the Registered Capital of Companies provides that the cash
       contribution must be deposited into a bank account opened by the company
       in full amount.
       93.      Further, the SAT reports that in practice taxpayers are obliged to
       open a bank account to pay their tax liabilities. According to Article 17 of the
       TCAL, a taxpayer engaged in production or business activities is required to
       submit all of its bank or other financial account numbers to tax authorities
       and banks and other financial institutions must register a client’s tax ID upon
       the opening of an account. Those who fail to register are punished (TCAL,
       Art. 60, TCALIR, Art. 92).
       94.    China’s Financial Intelligence Unit reports that financial institutions
       in China are aware of their obligations under the AMLL.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
36 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      Non-financial institutions
      95.     The Anti Money Laundering Law does not contain any specific rules
      requiring designated non-financial businesses and professionals (e.g. lawyers,
      accountants, notaries) to have knowledge of their clients.
      96.      Lawyers and notaries in China are obliged to conduct limited
      customer due diligence on their clients. For clients who are legal persons,
      lawyers are required to determine whether the legal person is a “legal estab-
      lishment or legal existence”, its current conditions, the scope of its business
      as confirmed in its business license and its actual major business scope. For
      customers who are natural persons, lawyers are required to determine their
      nationality, residence, vocation and “other natural conditions” (Work Rules on
      Legal Counsel for Lawyers Art. 11). Lawyers are required to keep a working
      diary of legal services provided (Work Rules on Legal Counsel for Lawyers
      Art. 21). Lawyers engaging in securities work are required to keep their
      working papers for 10 years (Administrative Rules on Lawyers Engaging in
      Securities Business Art. 17). However, the required content of these records
      is not specified.
      97.      When performing notarial acts, notaries are required to examine the
      identity of the person concerned (Notarisation Law Art. 28). No further cus-
      tomer identification, verification or due diligence requirements are specified.
      These legal requirements do not ensure accurate ownership information is
      kept by these professionals.

      Ownership information held by nominees
      98.      Article 18 of the Administrative Measures for Securities Measures
      and Settlement provides that shares must be registered under the name
      of their real owner, unless otherwise specified by laws and regulations.
      Currently, China only permits nominal shareholding in the following limited
      situations under specific laws and regulations:
               qualified foreign institutional investors (QFIIs) are obliged to open
               securities accounts at China’s securities registration organisation,
               and the accounts may be opened in the name of nominees. Nominee
               account holders are obliged to report to the CSRC and stock exchange
               at the end of each quarter on the name and address of the actual
               shareholder (Measures for the Administration of Securities Investment
               within the Territory of China by Qualified Foreign Institutional
               Investors Art. 16); and
               B shares (shares listed in the domestic China exchanges that provide
               restricted approval for foreign investors to trade) are also permitted
               to register the share under the name of the nominee shareholder.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 37



                 Any change in the beneficial shareholder must be disclosed to the
                 Securities Registration and Settlement Institution (SRSI). (Rules on
                 Foreign Shares of Domestic Listed Companies Art. 22).
       99.      Furthermore, all nominees are required to know the ultimate indi-
       vidual owner of the shares and provide such information to the SRSI upon
       request (Administrative Measures for Securities Measures and Settlement
       Art. 18). In practice, the SAT is able to verify whether the legal shareholder
       and the nominee shareholder are the same person by checking the share-
       holder’s securities account information, IP address (if the share transaction is
       performed online), telephone number (if the share transfer request is made via
       telephone) and make inquires with the person/company under investigation
       or involved in the transaction. These requirements also apply to non-publicly
       listed securities (Art. 2). These legal requirements are supported by effective
       sanctions (see below paragraph 112).
       100.    There is no information from input received from China’s peers
       showing that China has not been able to respond to an international exchange
       of information request as a result of information not being maintained by
       nominee shareholders.

       Conclusion
       101.   China’s legal framework ensures the availability of the following
       ownership information in relation to companies:
                 limited liability companies must disclose the identity of their members
                 upon registration with the SAIC. Any alteration to this information
                 must be updated in the register maintained by this authority. The same
                 rule applies to joint stock companies though only the identity of their
                 initiators must be disclosed upon registration.
                 all companies must keep a register of members where details of all
                 shareholders and members are recorded. This information must under
                 the law be kept updated;
                 foreign companies must register with the SAIC, although no own-
                 ership information has to be disclosed for registration (but these
                 companies are subject to comprehensive tax requirements, see below);
                 all domestic companies must register with the SAT, provide upon
                 registration the names of their shareholders/members and update this
                 information within 30 days of alteration. The same obligations apply
                 to foreign companies where they have their seat of effective manage-
                 ment located in China. Foreign companies not having their seat of
                 effective management in China must also apply for registration (or



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
38 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

               temporary registration in certain case) with the SAT and disclose the
               identity of their members/shareholders upon registration;
               information in relation to nominees is available in China as nominees
               are required to know the name of the ultimate owners of the shares
               and provide such information to the SAT upon request.

      Bearer shares (ToR A.1.2)
      102.    Almost all enterprises in China were wholly owned by the State until
      1978 when the Chinese government introduced the “Open Door Policy”. In
      early 1980s, a small number of state owned companies started to convert
      themselves to joint stock companies and began to access the capital market
      by way of issuing shares. At the beginning, such “trial” shares were issued
      to employees only and employees were obliged to deposit their shares in
      authorised securities operation institutions. Share transfers were first per-
      missible on 5 August 1986. The Shanghai Stock Exchange was set up in
      Shanghai in 1990. The Shenzhen Stock Exchange, the second stock exchange
      in China, was formally approved on 3 July 1991. With the setting up of the
      two exchanges, China’s stock market began to take shape.
      103.     Any company that issues stock certificates in registered form shall
      prepare a shareholder’s register where all particulars in relation to holders of
      such shares must be recorded (s. 131). Since 1992 joint stock companies have
      been permitted to issue shares in bearer form (Company Law Art. 130). 21 Any
      joint stock company that issues stock certificates in unregistered form must
      record the amount, serial numbers and date of issue of the stock certificates
      (Art. 130).
      104.     While it is not possible to disclose the exact figures on bearer shares
      in this report, China’s authorities have advised that the number of securities
      issued in bearer form is strictly limited.

      Foreign investors
      105.    Specific rules apply to foreign investors. Foreign investors, who
      purchase qualified domestic company shares 22, are obliged to open foreign
      exchange accounts and specific foreign-invested security trading accounts in
      authorised institutions, i.e. a Securities Registration and Settlement Institution
      (see below) to purchase qualified domestic shares (Arts.25 and 27 Detailed
      Implementation Rules for the Order 18, Circular ZWF [1996] No. 9). Foreign

21.   As at the end of 2011, there were 205 000 joint stock companies registered in China.
22.   “Qualified domestic company shares” refers to B shares which are foreign shares
      listed in China domestically. See paragraph 41.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 39



       investors approved to purchase domestic shares must provide identity infor-
       mation and their qualification certificate for purchasing shares in the Chinese
       domestic market (Art. 4 Order 18).
       106.     Further, according to Article 22 of this Order, foreign shareholders
       who hold Chinese domestic shares must disclose all related transactions and
       beneficial ownership information to the PBOC (before 1992) or the CSRC
       (after 1992) making ownership information in relation to foreign investors
       available at all time in China.
       107.    In addition, once a single foreign investor directly or indirectly
       owns 5% or more of a company’s total listed foreign-invested shares, he/she
       needs to report to the CSRC, the security market and the company about the
       investment purpose and related investment information (Art. 38 Detailed
       Implementation Rules for Order 18, Circular ZWF [1996] No. 9).

       Registration of securities
       108.    China’s Company Law provides that all transfers of shares by a share-
       holder shall be carried out via a lawfully established stock exchange or by any
       other means prescribed by the State Council (Art.139). The State Council has
       prescribed that such transfers may also occur by way of local depository centres.
       109.     To trade securities, either listed or non-listed, registered or in bearer
       form, a shareholder must have a specific securitised trading account regis-
       tered in a relevant Securities Registration and Settlement Institution (SRSI)
       or a local depository centre:
                 for listed securities, an electronic system of securities was first intro-
                 duced in 1991. By the end of 1992, both the Shanghai and Shenzhen
                 stock exchanges adopted the system. This means that starting from
                 1992, in China; all listed shares have been electronically registered
                 in the government sponsored registers. To better control the security
                 market and maintain the ownership information, SRSIs were estab-
                 lished in 2001. They took over all registration and clearing business
                 previously handled by the Shanghai and Shenzhen Stock Exchanges;
                 and
                 for non listed securities, in 2001, the CSRC issued the rules to delegate
                 the handling of non-listed securities registration to local depositary
                 centres.
       110.     Rules for securities registration are currently governed by the Measures
       for the Administration of Securities Registration and Settlement (Order of the
       China Securities Regulatory Commission No. 65) (“the Measures”), introduced
       in 2006 and revised in 2009. Under these Measures, the functions of SRSI
       and local depository centres include: (i) the establishment and management


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
40 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      of securities accounts and settlement accounts; (ii) the keeping and transfer of
      securities; and (iii) maintenance of a roster of securities holders as well as the
      registration of securities holders’ rights and interests.
      111.     Both SRSI and local depository centres maintain electronic securities
      registration, detailing detailed identity information, including the name and
      address, of every shareholder irrespective of the number of shares held. 23
      112.     Shareholders trading their securities without permission or otherwise
      than through an authorised institution are subject to a fine of between 1 to 5 times
      the amount of the illegal revenue (Security Law Art.179). Where there is no ille-
      gal revenue or where the illegal revenue is less than CNY 300 000 (EUR 35 377),
      a fine of between CNY 300 000 (EUR 35 377) and 600 000 (EUR 70 755) can
      be imposed. To ensure compliance with these obligations, the CSRC has set up
      38 regional offices 24 (including two supervising offices established in Shanghai
      and Shenzhen stock exchanges) to identify any non-compliant trading activity.
      From January 2001 to February 2012, 475 administrative penalties in relation to
      non-compliance with the CSRC regulations concerning the trading or issuance
      of securities have been imposed by the CSRC. Further, according to the PRC
      Supreme People’s Court, 28 criminal cases for issuing shares without permission
      and/or trading shares privately were prosecuted over the same period.

      Registration of listed securities
      113.     Article 17 of the Measures provides that an investor must hold secu-
      rities through a securities account and the securities account must record
      the balance of securities held by the investor as well as information on the
      securities transaction. To open a securities account, an investor must file an
      application with a SRSI (for listed) and provide all his/her particulars, includ-
      ing name, identity number, address, contact etc. (Art. 19).
      114.    Companies issuing listed securities must entrust an SRSI to handle
      the registration of the securities (Measures Art. 26). The SRSI must confirm
      the details of persons holding securities (including name and address of every
      shareholder) and register them in the roster of securities holders (Art. 28).

23.   The securities registration information in the electronic system includes at least
      the following: the names or titles of the securities holders, the account numbers,
      valid identity certificate document numbers, the correspondence addresses of the
      securities holders, the names of the holding securities, the quantity of holding
      securities, the securities trusteeship organisations and the situations concerning
      the restricted sales, and the securities holding status such as the judicial freeze
      and pledge registration.
24.   www.csrc.gov.cn/pub/csrc_en/about/organ/#. Some of China’s 32 regions have
      established more than one office to deal with this specific topic.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 41



       Registration of non-listed securities
       115.     An investor and a seller must trade the shares with an authorised
       securities institution and must hold securities through a securities account
       opened in a local non-listed shares depository centre (Company Law
       Art. 139). To fulfil this obligation:
                 investors selling securities must register with a local depository
                 centre. This obligation is the result of Article 32 of the Chinese
                 Securities Law and Article 139 of Company Law which clearly stipu-
                 late that all shares (listed and non-listed), corporate bonds and other
                 securities shall be quoted and traded on authorised stock exchange
                 institutions or other means prescribed by the State Council 25; and
                 an investor who wants to buy securities in non-listed companies (in
                 registered or bearer form) is also obliged to hold these securities in a
                 securities account maintained by a local non-listed share depositary
                 centre and must therefore open an account to purchase these shares
                 (irrespective of the number of shares held).
       116.    According to the Measures for the Administration of Securities
       Registration and Settlement and the Security Ownership Information
       Registration Rules, upon registration with a local depository centre, the own-
       ership information, including name, identity number and address shall be
       registered.
       117.     By the end of December 2010, of China’s 32 regions, 30 had issued
       their respective local non-listed shares depositary rules and established
       regional depositary centres. China’s authorities have reported that in practice,
       joint-stock companies located in the two other regions (Tibet and Ningxia)
       are also effectively covered by neighbouring depositary centres. Chinese
       authorities have also advised that by the end of 2011, there were 1 646 joint
       stock companies (with only 4 being foreign invested joint stock companies)
       registered in these two regions (less than 1% of joint-stock companies incor-
       porated in China - 1 646 joint stock companies out of more than 205 000 such
       companies across China).

       Conclusion
       118.     Since 1992 joint stock companies have been permitted to issue shares
       in bearer form. Foreign investors are prohibited from holding bearer securi-
       ties. All securities, including bearer securities, must be held in a registered
       account (the holder of which must be identified when the account is opened)

25.    The State Council has prescribed that such transfers may also occur by way of
       local depository centres.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
42 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      and cannot be transferred anonymously. To trade such securities, both sellers
      and purchasers must register with a SRSI or a local depository centre and
      provide upon registration their particulars. These institutions are required
      under China’s laws to keep rosters of shareholders, making ownership infor-
      mation pertaining to holders of bearer securities available in China. Although
      in practice all regions are covered by such centres, two of them have not yet
      issued any legal rules for registration of such shares and China should ensure
      the availability of ownership information pertaining to such shares in all
      instances.

      Partnerships (ToR A.1.3)

      Types of partnerships
      119.     Partnerships in China are primarily governed by the Partnership Law
      (revised 2006) and its regulations. Partnerships may be established within
      China by natural persons, legal persons and other organisations (Art. 2).
      Wholly state-owned companies, state-owned enterprises, listed companies,
      institutions for public welfare purposes and social groups are prohibited from
      becoming general partners. There are four types of partnerships recognised
      in China: general partnerships, special general partnerships, limited partner-
      ships, and foreign invested partnerships (FIPs).
      120.    Partnerships can only be set up by written agreement (Partnership
      Law Arts.4, 14 and 60). General partnerships comprise general partners
      who bear unlimited joint and several liability for the debts of the partnership
      (Partnership Law Art. 2.). The Partnership Enterprise Law also provides for
      a special type of general partnership known as a special general partnership.
      Professional service institutions offering services requiring professional
      knowledge and special skills can form special general partnerships (Art. 55).
      In a special general partnership, a partner or a group of partners bear
      unlimited liability or unlimited joint liability for the debts incurred to the
      partnership due to their wilful misconduct or gross negligence. Other part-
      ners bear limited liability to the extent of their capital contributions (Art. 57).
      Rules that apply to general partnerships similarly apply to special general
      partnerships, except otherwise provided by law.
      121.    A limited partnership comprises general partners and limited part-
      ners. General partners are jointly and severally liable for the debts of the
      partnership and limited partners are liable only to the extent of their capital
      contributions (Partnership Law Art. 2). Rules that apply to general partner-
      ships similarly apply to limited partnerships, except as otherwise provided by
      law.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 43



       122.      As of 1 March 2010, it is possible to establish a FIP in China based
       on the Administrative Measures on Registration of FIP under SAIC Order
       No. 47 (2010). A FIP can be set up by two or more foreign enterprises or indi-
       viduals or between foreign enterprise(s) or individual(s) and a PRC natural
       person(s), legal person(s) or other organisation(s) (Art. 2). In addition to the
       Partnership Enterprise Law, FIPs are subject to the Administrative Measures
       on Registration of FIP and China’s foreign investment industry guidelines
       (Art. 3).
       123.     Partnerships in China do not file tax returns or pay tax as they do
       not have distinct legal personalities and are treated as pass-through arrange-
       ments for Chinese tax purposes. Partners are taxed on the basis of the profits
       or losses allocated to them under the partnership agreement (Partnership Law
       Art. 6). Partners that are legal persons are subject to CIT and individual part-
       ners are subject to IIT on their allocable share of partnership income (Issues
       Concerning the Income Tax Levied on Partners of a Partnership Enterprise
       Art. 2).

       Ownership information on partnerships

       Business registration with the SAIC
       124.     Partnerships are administered by and must register with the respon-
       sible SAIC authority before they are allowed to carry out business activities
       in China. Partnerships are provided a business license from the SAIC after
       successfully completing the registration requirements. The registration pro-
       cess is regulated by the Administrative Rules on Registration for Partnership
       Enterprises (ARRPE) (Arts.1, 2, 3). Articles 7 and 8 of the ARRPE provide
       that, among other things, the following information must be submitted to the
       responsible SAIC authority upon registration:
                 names and domiciles of the partners, methods for assuming liabili-
                 ties, and amount of financial contributions as subscribed or actually
                 paid, time limit for financial contributions, and method of financial
                 contributions;
                 identity certificate of all partners;
                 partnership agreement (in the form of a written document);
                 principal business address; and
                 name of the managing partner(s) – i.e. partner for dealing with part-
                 nership affairs.
       125.     The SAIC is obliged under Article 45 of the SAIC Order No. 47
       (2010) to record the same registration information for a FIP in its Registration


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
44 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      Book. Information maintained by the SAIC is available for the general public
      to review and make copies.
      126.     The managing partner is required to notify and make alteration regis-
      tration with the original responsible SAIC authority of any amendment to the
      originally registered information within 15 days of the date of making such
      alteration or after the decision of alteration is made (ARRPE Art. 11).
      127.    Partnerships are also required to submit documents to the responsible
      SAIC authority for inspection on an annual basis (Measures for the Annual
      Inspection of Enterprises Art. 4). A copy of the annual inspection report must
      be provided and must, among other things, include the status of the registered
      items (Arts.7, 9). Responsible SAIC local offices inspect whether partnerships
      have completed alteration registration (if applicable) (Art. 13). In practice, in
      2011, the SAIC concluded 13 207 cases for registering false information with
      more than CNY 1.1 billion (EUR 119 million) in fines collected and almost
      310 000 cases for non-compliance with registration requirements with more
      than CNY 2.6 billion (EUR 308 million) in fines collected. These statistics
      cover all types of enterprises i.e. companies and partnerships.

      Tax registration with the SAT
      128.     Partnerships are obliged to register with the SAT authorities within
      30 days of obtaining a business license from the SAIC (TRAR Art. 10).
      During the tax registration, partnerships are obliged to submit, among
      other things, a tax registration form, partnership business license, partner-
      ship agreement, and the identity cards or passports of the partners (Art. 13).
      Additionally, partnerships must record the name, nationality, identity card/
      passport number, and the permanent addresses of all the partners in the tax
      registration form (Art. 14).
      129.     Articles 18 and 19 of the TRAR provide that when any of the regis-
      tered partnership information changes, partnerships are obliged to make an
      alteration registration with the SAT authorities within 30 days of making
      the alteration registration with the competent SAIC local office. The SAT is
      obliged to maintain tax registration information for 10 years (Regulations on
      Tax Collection and Records Management). In practice, the SAT registration
      authorities verify whether registered documents are in the prescribed form
      and that their formulation is in accordance with PRC laws; those who fail
      to register or intentionally register false information are punished (TRCR,
      Arts. 44, TCAL, ART. 60).




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 45



       Information held by service providers
       130.   Financial institutions covered by the AMLL are required to undertake
       customer due diligence when establishing a relationship with a partner acting
       on behalf of a partnership (see above, section A.1.1 of this report).

       Information held by the partnership or partners
       131.     The Partnership Law (Arts.22, 60) provides, in relation to general
       partnerships and general partners in limited partnerships, that the transfer
       of all or part of an interest in a partnership to a person other than another
       partner is subject to the unanimous consent of all the partners. Any limited
       partner wishing to transfer its interest in a limited partnership to any person
       other than the partners must, prior to the transfer, inform all the partners by
       way of notice (Art. 73). This notice is to be sent 30 days prior to the effective
       transfer. These obligations ensure that the partner’s identity is known by the
       other partners at any time. Further, this information can be accessed by the
       SAT (see section B.1.1 of this report).

       Conclusion
       132.   Ownership information in relation to partnerships must be disclosed
       upon registration with the SAIC and the SAT. This information must further
       be updated with these two authorities when it is altered ensuring that this
       information is available in compliance with the Terms of Reference.

       Trusts (ToR A.1.4)

       Types of trusts
       133.     Chinese law allows the creation of domestic express trusts. The Trust
       Law (2001) regulates trust relations and the rights and interests of the parties
       to a trust. Financial institutions that engage in trust business are additionally
       regulated by the Administrative Rules for Trust Companies (ARTC) (Arts.1,
       2).
       134.     The Trust Law applies to all trusts where the civil, business or chari-
       table trust activities are carried out within China’s boundaries (regardless of
       whether the trust is governed by foreign trust law) (Art. 3). It covers all trust
       activities in China irrespective of the residence of the settlor or beneficiaries,
       or the location of the trust assets, provided the trust activities are performed
       in China. Thus, provided the trust activities are carried out in China, the
       Trust Law applies equally to trusts established under PRC law, Chinese or
       foreign trusts which are administered in China, and Chinese and foreign



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
46 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      trusts which have a trustee resident in China whether the trustee is acting by
      way of business or not.
      135.     Article 2 of the Trust Law defines “trust” as the act whereby the sett-
      lor, on the basis of confidence in the trustee, entrusts property rights to the
      trustee and allows the trustee to administer or dispose of such property in the
      interest of a beneficiary or for any specified purpose. Article 24 provides that
      a trustee must be a natural or legal person with full civil capacity. Article 19
      provides that a settlor can be a natural person, a legal person or an organisa-
      tion with full civil capacity. Trust assets must be identifiable and legitimately
      owned by the settlor (Art. 7). Article 43 provides that beneficiaries can be
      natural persons, legal persons or organisations. Where the trustee is also the
      beneficiary of a trust, the trustee cannot be the only beneficiary under the
      same trust (Art. 43).
      136.     A trust for public welfare purpose is a trust created for one of the
      following charitable purposes: help the poor; help disaster victims; assist the
      disabled; education, technology, culture, art and physical education devel-
      opment; medical and sanitation development; environmental protection; or
      for the benefit of the society (Trust Law Art. 60). The assets and profits of a
      public welfare trust cannot be used for non-public welfare purposes (Art. 63).
      Creation of a public welfare trust is subject to the approval of the regulatory
      agency in charge of public welfare affairs (Art. 62). Article 64 of the Trust
      Law provides that a public welfare trust must have a trust protector. The
      name of the trust protector may be contained in the trust deed. Where the
      trust deed does not contain the name of the trust protector, the trust protec-
      tor should be appointed by the relevant governmental authority. There is no
      specific requirement under the Trust Law which requires other trusts to have
      a trust protector.
      137.    Under the Trust Law, all Chinese trusts must be created using a writ-
      ten trust document (i.e. the trust deed), which must contain inter alia the
      following information (Arts.8 and 9. See also ARTC Art. 32):
               the purposes of the trust;
               names and addresses of the settlor, the trustee and the beneficiaries;
               the scope, type and status of the trust property; and
               the ways and methods by which the beneficiary receives the trust
               proceeds.
      138.     China’s authorities reported that the Trust Law was promulgated
      primarily to govern the professional management of assets and for modernis-
      ing China’s financial infrastructure. Its applicability is, however, not limited
      to trusts in the financial and investment context. Where the trust activity
      consists of managing assets, trusts are typically formed by trust companies.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 47



       Authorised trust companies are the only entities in China that are permitted
       to act as trustees by the way of business. As at the end of June 2011, there
       were 63 registered trust companies in China.
       139.     Trust companies are regulated financial institutions subject to the
       approval of and supervised by the CBRC (ARTC Arts.2, 5, 7). The ARTC is
       the primary regulation regarding the establishment and operations of trust
       companies. A trust company can take the form of a limited liability company
       or a joint stock company (Art. 6). To establish a trust company, the following
       conditions must, amongst others, be satisfied (Art. 8):
                 the company’s articles of association are in compliance with the
                 Company Law and the provisions of the CBRC;
                 it has shareholders/members who meet the capital contribution quali-
                 fication as prescribed by the CBRC;
                 it has the minimum registered capital prescribed by the ARTC
                 (CNY 300 million (EUR 35.38 million) (ARTC 10);
                 it has directors and senior management personnel with employment
                 qualifications prescribed by the CBRC and other personnel qualified
                 to engage in trust activities;
                 it has a sound organisational structure, trust business operational
                 guidelines and a risk control system in place; and
                 its business establishment, safety measures and other relevant facili-
                 ties comply with the requirements.
       140.    According to the Measures for Administration of Commissioned
       Overseas Wealth Management Business undertaken by Trust Companies,
       domestic entities or resident individuals can entrust trust companies to invest
       and manage their assets in overseas financial markets. Only qualified and
       authorised trust companies are allowed to engage in the trust business for
       overseas wealth management. 26

       Registration requirements for trusts
       141.   When provided by law, trusts must register with the relevant gov-
       ernment regulatory agency. Business trusts are obliged to register with the
       Shanghai trust registration centre. Public welfare trusts are obliged to register


26.    See Chapters I and II of the Circular of the China Banking Regulatory Commission
       and the State Administration of Foreign Exchange on the Issues Concerning
       Promulgation of the Tentative Measures for Administration of Commissioned
       Overseas Wealth Management Business Undertaken by Trust Companies.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
48 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      with the regulatory agency in charge of public welfare affairs and obtain rel-
      evant approval (Trust Law Art. 62).
      142.     The Shanghai Trust Registration Centre is the only institution
      approved by the CBRC that is responsible for registration of business trusts
      in China. Trusts must be registered with the centre within 10 business days
      of their establishment. The trust deed which, among other things, contains
      the names and addresses of the settlor, trustee and the beneficiary must be
      disclosed to the centre (Trust Law Art. 9). The Shanghai Trust Registration
      Centre maintains all registered information for 10 years (The Administrative
      Rules on the Coverage and Retention Period of Archive Files, Annex, 8.7.4).
      In addition to the trust deed, trusts are obliged to register inter alia the fol-
      lowing information with the Shanghai Trust Registration Centre (Art. 24):
               documents on creation of the trust submitted to the supervisory insti-
               tution (if any);
               ownership document of the trust assets (if any);
               any other information/document required by the Shanghai Trust
               Registration Centre.
      143.    Public welfare trusts are also obliged to register their trust deeds with
      the regulatory agency in charge of public welfare affairs and obtain relevant
      approval (Trust Law Art. 62).
      144.     There are also other strict registration requirements imposed on trust
      companies, i.e. trust companies are obliged to register with the CBRC, SAIC,
      and SAT authorities upon their establishment. In particular, trust companies
      administering trusts must register with the CBRC and obtain its approval
      before they commence operations of the trust business (ARTC Art. 7). The
      CSRC is responsible for verifying all material provided by trust companies
      (Administrative Measures of Trust Company Art. 9) and also carries out
      inspections on operations of trust companies either on a regular or random
      basis (Administrative Measures of Trust Company Art. 47). The trading
      license of a trust company will be revoked by the CBRC in case it provided
      false information during the registration process. (Administrative Measures
      of Trust Company Art. 56).

      Tax obligations
      145.     Trustees and beneficiaries fall under the general scope of China’s
      income tax laws and regulations, whereby they are required to report and file
      tax returns with the SAT authority on the taxable income they receive from
      the trust.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 49



       146.      Chinese individual tax residents are subject to IIT in respect of their
       worldwide income (IITL Art. 1; IITL Detailed Implementation Rule Art. 6).
       Where the trustee or beneficiaries are natural persons, the unit or individual
       that makes payment to the natural person is obliged to act as a withholding
       agent (i.e. withhold and pay the IIT on the beneficiaries’ behalf) (Art. 8). The
       IIT taxable income calculation method differs depending on the nature of the
       income. Article 6 provides that where the nature of the income is dividend or
       interest, the taxable income is the gross income; where the income is on the
       transfer of assets, IIT is imposed only on the gain. Service income is subject
       to deduction rules and varying rates depending on the nature of activities
       (Art. 6).
       147.    PRC-resident companies are subject to EIT on their worldwide
       income (EITL Art. 3) and are required to file annual tax returns with the local
       SAT authority (EITL Art. 54). A resident entity that acts as the trustee of a
       foreign trust is also required to file tax returns with the SAT on income it
       receives in connection with the trust (EITL Art. 3 in conjunction with Art. 54).
       148.     Trust deeds are regarded as a relevant tax documents as they con-
       tain the entitlements of the respective beneficiaries and trustees. The SAT
       is empowered under the TCAL to inspect taxpayers’ relevant tax documents
       (Art. 54) and taxpayers are obliged to provide the relevant documents to the
       SAT upon request (Art. 56). Under the TCAL, trust deeds must be retained in
       China. Where trust activities are carried out outside China, there is no spe-
       cific regulation which prohibits a Chinese person from acting as a trustee.
       However, China’s income tax law applies to trustees whether they manage a
       domestic or a foreign trust. Consequently, resident trustees of foreign trusts
       are obliged to maintain the trust deed, which contains particulars on the
       ownership of the foreign trust (Trust Law Art. 33). The SAT reports that, in
       practice, the availability of information on trusts has not posed any problems
       for exchange of information purposes.

       Ownership information held by trustees and trust service providers
       149.     Trustees are required to maintain a complete record of the trust
       activities, including the trust deed (Trust Law Art. 33). Trustees are obliged
       to report the management, utilisation and disposition of the trust property and
       the income and expenses to the settlor and beneficiary regularly every year
       (Art. 33).
       150.     Article 15 of the ARCIV further provides that when a trust company
       sets up a trust, it must understand the source of the trust assets, keep a copy
       of the settlor’s valid identity document, and register the settlor’s and ben-
       eficiary’s basic information, including: name, nationality, address, contact
       details, type of identification document, effective date of the identification



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
50 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      document, and identification document number. The CBRC is empowered to
      inspect the business activities of trust companies either periodically or on a
      random basis (ARTC Art. 47).
      151.     In addition, trust companies are considered financial institutions
      under the AMLL and are required to know their customers and to keep their
      identification and transaction information. When a financial institution enters
      into a trust arrangement with a customer it must verify and register the ben-
      eficiary’s identification documents (AMLL Art. 16).

      Conclusion
      152.     All trusts, whether created under China’s law or not fall under the
      scope of China’s Trust Law where they carry out activities within the Chinese
      territory. To fulfil the requirements set out by these laws, trustees of such
      trusts must keep documents and records and in particular trust deeds where
      information in relation to beneficiaries and settlors of trusts must be detailed.
      Finally, trustees of both foreign and Chinese trusts, have reporting obliga-
      tions with the SAT when paying income to beneficiaries and must make any
      documents relevant for tax purposes available to revenue authorities. This
      includes trust deeds of trusts they manage.
      153.    Business trusts can only be managed by trust companies. Before
      operating, they must register with the Shanghai Trust Registration Centre
      and provide ownership information upon registration (names of the settlors
      and beneficiaries). Trusts companies are also relevant entities under the
      Anti-Money Laundering Law and must perform CDD and have knowledge of
      beneficiaries of trusts they manage.

      Foundations (ToR A.1.5)

      Types of foundations
      154.     Foundation is a recognised concept in China and the Foundation
      Administrative Rules (FAR) provides the legal framework surrounding
      foundations established in China. Foundations in China are non-profit legal
      persons established for public welfare purposes (Art. 2). There are two types
      of foundations: public foundations (foundations that are allowed to raise
      funds from the general public) and private foundations (foundations that are
      prohibited from raising funds from the general public) (Art. 3). In addition,
      foreign foundations are permitted to set up a representative office in China
      (Art. 6). As at October 2011, there were 19 representative offices of foreign
      foundations registered in China.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 51



       155.     In addition to foundations formed under the FAR, there are public
       foundations formed and funded by the PRC government (e.g. the National
       Natural Science Foundation of China). These foundations also accept dona-
       tions from the general public in addition to government funding.

       Registration with the Ministry of Civil Affairs (MCA)
       156.     The Ministry of Civil Affairs (MCA, at central government level) and
       its subordinate offices (at provincial levels) (collectively referred to as MCA
       authorities) are responsible for the registration of foundations in China (FAR
       Art. 6). The MCA administers registration for the following foundations and
       representative offices of foundations:
                 public foundations operating at national level with an initial fund of
                 no less than CNY 8 million (EUR 0.976 million);
                 foundation with a non-PRC resident as a legal representative;
                 private foundations with an initial fund of no less than CNY 20 mil-
                 lion (EUR 2.44 million), and the initiators have filed application for
                 the establishment to the MCA; and
                 representative offices established by overseas foundations.
       157.     The subordinate offices of the MCA at provincial level are respon-
       sible for administering the registration of foundations that fall outside of the
       scope of the conditions listed above (FAR Art. 6).
       158.      Foundations are obliged to register with the responsible MCA author-
       ity and have to obtain its approval in the form of a registration certificate
       before carrying out activities in China (FAR Arts.11, 12, 13). Information that
       must be submitted to the MCA authority upon registration includes inter alia
       (Art. 9):
                 names of the foundation’s legal representative, council members, and
                 secretary, and documents verifying their identities (e.g. identity card
                 or passport);
                 capital verification report of the initial funding (which contains the
                 identities of founders and the amount they contributed to the foundation);
                 address information; and
                 approval letter from the responsible authorities.
       159.     Foundations are further obliged to notify the MCA authorities of any
       changes made to their originally registered information by performing an
       alteration registration with the MCA (FAR Art. 15).




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
52 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      160.    Article 36 of the FAR provides that foundations and representative
      offices of overseas foundations must submit annual work reports to the
      original MCA authority. This annual work report has to be published after
      the annual inspection via authorised media (FAR Art. 38). It must include the
      following information (Art. 36; Administrative Measures for the Information
      Disclosure of Foundations Arts.4 and 5):
               financial statements;
               audit report issued by a certified public accountant;
               donation activities performed;
               Welfare funding projects undertaken by the foundation;
               donations received;
               how the fund is spent; and
               changes to the foundation’s structure or personnel, etc.
      161.     The audit report (included in the annual work report) must contain
      inter alia the following information (Foundation 2010 Annual Audit Report
      [demonstration version]):
               name of the foundation’s legal representative(s);
               name of the foundation council member(s);
               name of person(s) whose donation accounts for more than 5% of the
               total donation received by the foundation in that particular year; and
               names of person(s) who received funds from the foundation which
               amount to 1% (or more) of the total funds paid out by the foundation
               for that particular year.
      162.     The MCA is the authority responsible for keeping the registration
      records of foundations, including the documents submitted to the MCA
      for initial registration, alteration registration, deregistration, and annual
      inspection. The registration records are maintained indefinitely (Social
      Organization Registration Records Management Approach Art. 11). The
      records are maintained by the MCA for 10 years after a foundation is liq-
      uidated, and subsequently they are transferred to the State Archive Centre
      (Art. 12).

      Tax registration with the SAT
      163.    After completing registration with the MCA authority, foundations
      are obliged to conduct tax registration with the responsible SAT author-
      ity (FAR Art. 14). For tax registration, foundations are obliged to submit,



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 53



       amongst other things, a tax registration form, an approval letter from the
       relevant responsible MCA authority, articles of association, and the identity
       card or passport of the legal representative (TRAR Art. 13). The tax registra-
       tion form must include the name, nationality, identification card/passport
       number, and the permanent addresses of the foundation’s legal representative
       (Art. 14). Articles 18 and 20 of the TRAR provide that foundations are obliged
       to make alteration registration with the responsible SAT authority within 30
       days of any change to previously registered information.
       164.    Article 26 of the EITL provides that qualified not-for-profit organi-
       sations are exempt from income tax. To qualify for the EIT exemption,
       foundations are obliged to submit inter alia the following information to the
       responsible SAT authority:
                 the foundation’s articles of association (which contain the names
                 of the foundation council members and legal representative) (FAR
                 Art. 10);
                 financial statements and audit report issued by a qualified agency;
                 a statement of the foundation’s source of income and spending; and
                 annual inspection report issued by the responsible MCA authority
                 (Circular on Issues Relating to the Recognition and Administration
                 of Tax-exemption Qualification of Non-profit Organizations Art. 3).
       165.     Information concerning the members of the foundation council has
       to be clearly specified in the foundation’s articles of association (FAR Art. 10).
       The identity of the founder is reported in the capital verification report which
       the foundation must prepare and submit to the MCA during the initial registra-
       tion (Art. 9). For tax purposes, foundations are required to complete annual
       Enterprise Income Tax returns. Foundations are obliged to maintain accounting
       records, vouchers, tax returns and other relevant information (TCAL Art. 24).
       The capital verification report and articles of association are part of the original
       supporting documents/vouchers that must be kept for tax purposes.

       Information maintained by the foundation
       166.     To comply with the registration, annual inspection, and record keep-
       ing requirements specified under the FAR, Measures for the Information
       Disclosure of Foundations, and TCAL, foundations are obliged to maintain
       the names, addresses and identity card numbers of the foundation’s founders
       and council members, people who make donations to the foundation, and
       people who receive funds from the foundation (i.e. beneficiaries) (FAR Arts.9,
       10, Measures for the Information Disclosure of Foundations Arts.4, 5; TCAL
       Art. 24).



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
54 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      167.     Article 20 of the FAR provides that a foundation must have a council
      consisting of 5 to 25 members. The head of the foundation council is respon-
      sible for ensuring that the foundation is in compliance with applicable PRC
      laws (FAR Arts.20, 43). Accordingly, the head of the foundation council will
      have knowledge and access to the aforementioned identity information.

      Information held by service providers
      168.     Financial institutions covered by the AMLL are required to undertake
      customer due diligence when establishing a relationship with a representative
      (e.g. foundation council member) acting on behalf of a foundation (see above
      section A.1.1 of this report)).

      Conclusion
      169.    China’s legal framework ensures the availability of ownership infor-
      mation in relation to foundations. Foundations are non-profit organisations set
      up for charitable purposes that are highly monitored by government authority.
      Upon registration with the Ministry of Civil Affairs or its subordinate office,
      foundations must provide the names of their founders and council members.
      This information is also required to be disclosed in the annual audit report.
      The same information must be provided to the SAT for registration and
      documentation including the identity of beneficiaries must be kept for tax
      purposes.

      Enforcement provisions to ensure availability of information
      (ToR A.1.6)
      170.     The existence of appropriate penalties for non-compliance with key
      obligations is an important tool for jurisdictions to effectively enforce obliga-
      tions to retain identity and ownership information.

      Companies
      171.     The Company Law provides a variety of penalties to ensure that accu-
      rate information is maintained on the legal ownership and control of companies
      in China. Article 199 of the Company Law and Article 69 of ARCR provide that
      a company which obtains a business license by submitting false materials or
      concealing important facts by other fraudulent means can be subject to a fine
      of between CNY 50 000 (EUR 5 896) and CNY 500 000 (EUR 58 962). In
      serious cases, the company’s business license can be revoked (ARCR Art. 69).
      Article 212 of the Company Law and Article 73 of ARCR provide that if a
      company fails to make alteration registration with SAIC authorities of any
      changes to previously registered information (including changes in ownership),


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 55



       the company is subject to a fine of between CNY 10 000 (EUR 1 179) and
       CNY 100 000 (EUR 11 792). Foreign companies are subject to the same penal-
       ties (Registration of Enterprises of Foreign Countries (Regions) Engaged in
       Production and Business Activities within the Territory of China Art. 17; see
       also Detailed implementation Rules Art. 63). In 2011, the SAIC concluded more
       than 13 000 cases for registering false information with more than CNY 1.1 bil-
       lion (EUR 119 million) in fines collected; and concluded close to 310 000
       cases for non-compliance with registration requirements with more than
       CNY 2.6 billion (EUR 308 million) in fines collected. These statistics cover all
       types of enterprises i.e. companies and partnerships.
       172.     If the articles of association for a company are not submitted to the
       relevant PRC government bodies (SAIC and SAT local tax offices), neither
       business nor tax registration will be approved for the company (Procedures
       for the Administration of Tax Registration Arts.13, 14).
       173.     Article 158 of the Criminal Law provides that whoever, when apply-
       ing for company registration, obtains registration by deceiving the SAIC
       authorities through falsely declaring the capital to be registered with falsi-
       fied certificates or by other deceptive means can, if the amount of the falsely
       registered capital is large, be sentenced to fixed-term imprisonment of not
       more than three years or criminal detention and/or be fined between 1% and
       5% of the capital falsely declared for registration. The Chinese authorities
       report that in practice, the amount of the fine is determined on the basis of
       the nature, circumstance and consequence of the crimes. Between 2002 and
       2011, China People’s Courts concluded 2227 cases involving the provision of
       false register information, including 285 cases in 2011. Additionally, where
       a unit commits the crime as described in Article 158, it can be fined, and the
       persons who are directly in charge and the other persons who are directly
       responsible for the crime can be sentenced to fixed-term imprisonment of not
       more than three years or criminal detention.
       174.    Shareholders trading their securities without permission or not
       through an authorised institution are subject to a fine of between 1 to 5 times
       the amount of the illegal revenue (Security Law Art. 179). Where there is
       no illegal revenue or where the illegal revenue is less than CNY 300 000
       (EUR 35 377), a fine of between CNY 300 000 (EUR 35 377) and 600 000
       (EUR 70 755) can be imposed. To ensure compliance with these obligations,
       the CSRC has set up 38 regional offices 27 (including two supervising offices
       established in Shanghai and Shenzhen stock exchanges) to closely monitor
       these activities. From January 2001 to February 2012, 475 administrative
       penalties in relation to non-compliance with the CSRC regulations concern-
       ing the trading or issuance of securities have been imposed by the CSRC.

27.    www.csrc.gov.cn/pub/csrc_en/about/organ/#.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
56 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      Further, according to the PRC Supreme People’s Court, 28 criminal cases
      for issuing shares without permission and/or trading shares privately were
      prosecuted over the same period.

      Anti-money laundering
      175.     Failure to comply with anti-money laundering and customer due
      diligence obligations under the AMLL and its implementing rules subjects
      the offender (e.g. financial institution) to a fine not exceeding CNY 500 000
      (EUR 58 962). Moreover a fine not exceeding CNY 50 000 (EUR 60 976) will
      be imposed on persons directly responsible for the violation (including directors,
      management, and other directly responsible persons). Where the violation con-
      stitutes money laundering, fines not exceeding CNY 5 million (EUR 589 623)
      may also be imposed on the financial institution and the person responsible
      respectively. In addition, trading licenses of financial institutions can be revoked
      (AMLL Art. 32).
      176.     Article 31 of ARCIV provides that the PBOC is empowered to impose
      penalties specified under Articles 31 and 32 of the AMLL on the financial
      institution and on its directors, senior management and employees directly
      responsible. Furthermore, the PBOC may recommend that the CBRC, the
      CIRC, and the CSRC revoke the financial institution’s trading license, remove
      the director, senior management and the responsible employee from their
      positions and ban them from working in the financial industry.
      177.     In 2010, the PBOC received 240 million big transaction reports and
      62 million suspicious transaction reports. The PBOC also conducted 2 426
      in-field investigations on financial institutions regarding their AML imple-
      mentation. Approximately CNY 22 million (EUR 2.594 million) in penalties
      was imposed on financial institutions not fully in compliance.

      Partnerships
      178.     Where a partnership operates in China without first registering with
      the SAIC local office and obtaining a business license, the SAIC local office
      is empowered to impose a fine of up to CNY 50 000 (EUR 5 896) on the
      partnership (Administrative Measures for the Registration of Partnership
      Enterprises Art. 26). Where a partnership does not complete alteration
      registration of any amendment, the SAIC is empowered to impose a fine of
      up to CNY 20 000 (EUR 2 358) on the partnership (Art. 28). In practice, in
      2011, the SAIC concluded almost 310 000 cases (including all types of enter-
      prises) for non-compliance with registration requirements (with more than
      CNY 2.6 billion (EUR 308 million) of fines collected. These statistics cover
      all types of enterprises i.e. companies and partnerships.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 57



       179.     Article 93 of the Partnership Law provides that where partnership
       enterprise registration was obtained by submission of false documents or by
       other fraudulent means, the SAIC can order correction thereof and impose a fine
       between CNY 5 000 (EUR 590) and 50 000 (EUR 5 896). In serious circum-
       stances, the enterprise registration can be revoked and the SAIC can impose a
       fine between CNY 50 000 (EUR 5 896) and CNY 200 000 (23 585 EUR).

       Trusts
       180.     Trust deeds of business trusts must be registered with the Shanghai
       Trust Registration Centre. The trust has no lawful effect if registration is not
       performed. Under Article 10 of the Trust Law, where the trust property is
       required to be registered in accordance with the provisions of laws or admin-
       istrative regulations, such property must be registered to give lawful effect to
       the entrustment of assets.

       Foundations
       181.     Article 40 of the FAR provides that where a foundation carries out
       activities that are not registered with the MCA authorities, the MCA authori-
       ties are empowered to confiscate the foundation’s assets. Additionally, the
       MCA authorities are empowered to deregister a foundation (whereby the
       foundation will no longer be allowed to carry out its activities in China) if
       the foundation does not notify the MCA authorities of any changes to regis-
       tered information or does not perform the annual inspection (FAR Art. 42).
       The MCA authorities will also notify the responsible SAT authorities and
       ask them to request the foundation to surrender any tax incentives received
       during the period that the foundation was in violation of the FAR.
       182.    If a foundation suffers a loss as a result of the foundation council’s
       misconduct (including not completing the annual inspection), the foundation
       council members responsible for such misconduct will be liable for repay-
       ing the foundation on the loss incurred (FAR Art. 43). A fine not exceeding
       CNY 50 000 (EUR 5 896) can also be imposed on a foundation that does not
       maintain the necessary accounting documents/information as required under
       the Accounting Law (Accounting Law Art. 42).

       Tax
       183.     China’s tax laws impose a wide range of civil and criminal penalties
       for failure to comply with statutory tax filing, disclosure and registration
       requirements. Article 42 of the TRAR and other relevant tax regulations
       provide that failure to complete tax registration, alteration registration or
       providing false information during the tax registration is subject to penalties



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
58 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      provided under Article 60 of the TCAL (TRAR Art. 42). Article 60 of the
      TCAL provides that the SAT authorities can require any person to remedy
      any of the following acts within a specified time limit and may impose a fine
      not exceeding CNY 2 000 (EUR 236) on the taxpayer (for egregious offenses,
      the SAT authorities may impose a fine between CNY 2 000 (EUR 236) and
      CNY 10 000 (EUR 1 179)) that:
               fails to apply for tax registration, changes or cancels tax registration
               within a prescribed time limit;
               fails to keep or maintain accounting books, or maintain supporting
               vouchers for the accounts and the relevant information in accordance
               with the relevant provisions;
               fails to provide reports on the financial and accounting systems or
               the financial and accounting methods and accounting software to
               the tax authorities for possible reference use in accordance with the
               relevant provisions;
               fails to report all bank account numbers to the SAT as required; and
               fails to install and use tax control tools as required, or damages or
               alters tax control tools without approval.
      184.     If a taxpayer fails to accomplish tax registration, the SAT authorities
      order the taxpayer to make a correction within a specified time limit. If the
      taxpayer fails to respond as scheduled, the SAIC authorities will revoke the
      taxpayer’s business license upon request from the SAT authorities. Further,
      if a taxpayer fails to use the tax registration certificate as required or lends,
      tampers, damages, buys, sells or forges the tax registration certificate, a
      fine between CNY 2 000 (EUR 236) and CNY 10 000 (EUR 1 179) can be
      imposed.
      185.     Article 62 of the TCAL provides that where a taxpayer fails to fulfil
      tax filing requirements and submit tax payment materials within a prescribed
      time limit, the SAT authorities may impose a fine not exceeding CNY 2 000
      (EUR 236) on the taxpayer. For egregious cases, the SAT authorities may
      impose a fine ranging between CNY 2 000 (EUR 236) and CNY 10 000
      (EUR 1 179) on the taxpayer. The Chinese authorities have reported that in
      year 2011, 212 000 cases were audited by the SAT and CNY 92.35 billion
      (EUR 11 billion) of tax revenue (including late payment surcharge and fines)
      was collected during these audits. 28
      186.   Article 32 of the Provisional Measures on the Tax Collection and
      Administration of Non resident Companies and Individuals Engaging in
      Contracted Projects and Provision of Services (NRTPM) provides that the

28.   Source: www.ctaxnews.com.cn/syxw/xwxzt/201201/t20120129_1584662.htm.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 59



       SAT authority is empowered to impose the penalties specified under the
       TCAL on non-resident enterprises. Article 33 of NRTPM provides that where
       a PRC-resident entity or individual who engages a foreign company does not
       notify the SAT authority of the engagement, they are subject to a fine not
       exceeding CNY 10 000 (EUR 1 179).
       187.     Article 77 of the TCAL provides that where a criminal act is sus-
       pected, the SAT authority must transfer the case to the judicial department to
       pursue criminal liability. In 2009, there were 3 009 cases transferred to the
       judicial department. The cases are posted on the SAT’s official website. The
       Criminal Law provides for various criminal tax penalties. In particular, any
       taxpayer who fails to pay or underpays the amount of taxes payable by means
       of forging, altering, concealing or destroying account books or vouchers for
       the accounts, or overstating expenses or omitting or understating income in
       account books, or refusing to file their tax returns after the SAT authorities
       have notified them to do so or filing false tax returns will be sentenced to a
       fixed-term imprisonment not exceeding three years (Criminal Law Art. 201;
       Criminal(Amendment) Law, Art. 7). Where a unit commits a tax crime, it will
       be fined, and the persons who are directly in charge and the other persons
       who are directly responsible for the crime will be punished in accordance
       with the provisions of the Criminal Law (Art. 211.)
       188.     The SAT authorities report that most individuals and businesses vol-
       untarily meet the PRC Government’s requirements to provide complete and
       accurate information on time. China’s compliance culture is complemented
       by the SAT authority’s broad powers to compel the production of information
       from natural and legal persons (see Section B of this report). The SAT author-
       ity has powers of discovery and inspection, and can compel production from
       taxpayers and third parties of any document deemed relevant.
       189.    There is a variety of penalties under China’s laws to ensure that
       information required to be maintained is, in fact, maintained. The penalties
       appear to be largely effective and dissuasive enough to ensure compliance.
       Most of China’s laws provide a range of penalties, including small to large
       monetary fines depending on the level of infraction and imprisonment in
       serious cases. In addition, the SAT authority is able to respond to requests for
       ownership and identity information for all types of legal entities and arrange-
       ments. Information received from partner jurisdictions with an exchange of
       information relationship with China confirms this.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
60 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.
                Factors underlying
                recommendations                                 Recommendations




                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


A.2. Accounting records



      190.     The Terms of Reference sets out the standards for the maintenance
      of reliable accounting records and the necessary accounting record retention
      period. It provides that reliable accounting records should be kept for all rel-
      evant entities and arrangements. To be reliable, accounting records should:
      (i) correctly explain all transactions; (ii) enable the financial position of the
      entity or arrangement to be determined with reasonable accuracy at any time;
      and (iii) allow financial statements to be prepared. Accounting records should
      further include underlying documentation, such as invoices, contracts, etc.
      Accounting records need to be kept for a minimum of five years.
      191.    The MOF (Ministry of Finance) is responsible for developing Chinese
      accounting standards. To exercise this function, the MOF set up the Accounting
      Regulatory Department. In addition, and in line with the Certified Public
      Accounting (CPA) Law (1993), the MOF supervises and guides the CPA profes-
      sion and approves all accounting standards.

      General requirements (ToR A.2.1)
      192.    Entities operating in China are required to maintain accounting
      records under the Accounting Law, TCAL (Tax Collection and Administration
      Law) and various detailed accounting regulations and accounting standards
      specific to particular types of entities (units). The Accounting Law and TCAL
      contain provisions requiring the maintenance of accounting records that



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 61



       correctly explain all transactions, enable the financial position of relevant
       units and arrangements to be determined with reasonable accuracy at any
       time, and allow financial statements to be prepared. Other specific laws
       and regulations, as described below, add to or reinforce the record-keeping
       requirements contained in the Accounting Law and TCAL.

       Accounting law
       193.     Article 3 of the Accounting Law provides that all companies, enter-
       prises, institutions and other organisations 29 are obliged to set up accounting
       books and ensure that they are authentic and complete. Articles 21 and 50
       provide that the person responsible for the unit must ensure that accounting
       records are correct, orderly, and complete. The responsible person is defined
       as the person who is empowered to represent the unit (Art. 50). Article 10 pro-
       vides that the following business transactions and operational matters must
       be recorded in the accounting books:
                 receipt and disbursement of cash holdings and valuable securities;
                 receipt, issuance, additions, reductions and use of money and properties;
                 creation and settlement of debts and claims;
                 increases and decreases in capital and funds;
                 computation of revenue, expenditures, expenses and costs;
                 computation of financial results; and
                 other matters subject to accounting procedures and accounting
                 practice.
       194.     Article 9 of the Accounting Law provides that every unit must
       prepare accounting vouchers, accounting books and financial statements
       and reports. Accounting information must be prepared on the basis of the
       transactions and events that have actually occurred and should truly reflect
       the financial position, operating results and cash flows of the unit. In addi-
       tion, accounting treatments must be consistently applied throughout different
       accounting periods (Business Enterprise Accounting System Art. 11).
       195.     Article 42 of the Accounting Law provides that where any unit com-
       mits inter alia any of the following acts, the MOF may impose a fine between
       CNY 3 000 (EUR 354) and CNY 50 000 (EUR 5 896) upon the unit and


29.    China’s authorities reported that “other organisations” as specified in Art. 2
       of the Accounting Law includes trustees in respect of trusts they manage and
       foundations.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
62 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      between CNY 2 000 (EUR 236) and CNY 20 000 (EUR 2 358) on the per-
      sons directly in charge and other persons directly responsible:
               no account books are kept in accordance with the law;
               account books are kept secretly;
               account books are recorded on the basis of accounting vouchers
               which are not examined and verified or account books that do not
               conform to the provisions are recorded; and
               failure to keep accounting documents in accordance with the law,
               which results in destruction and loss of such accounting documents.
      196.     Committing one of the above acts is a crime, and criminal liabilities
      may be investigated in accordance with the Criminal Law (Accounting Law
      Art. 42). Where accounting personnel commit one of the above acts and the
      circumstances are serious, the MOF will revoke the practice qualification
      certificates of the accounting personnel found responsible (Art. 42).
      197.    Article 43 of the Accounting Law further provides that it is a crime
      to forge or alter accounting vouchers or account books, or to prepare false
      financial and accounting reports. Article 44 also provides that a crime
      is committed if the accounting vouchers, account books or financial and
      accounting reports that should be kept in accordance with the law are con-
      cealed or intentionally destroyed. In these cases, the MOF can impose a fine
      between CNY 5 000 (EUR 590) and CNY 100 000 (EUR 11 792) on the unit
      and between CNY 3 000 (EUR 354) and CNY 50 000 (EUR 5 896) on the
      persons directly in charge and other persons directly responsible.

      Tax law
      198.     Article 19 of the TCAL provides that all taxpayers (including compa-
      nies, partnerships, trusts, foundations, individuals) and withholding agents
      must retain accounting books in accordance with the administrative rules and
      regulations issued by the MOF and the SAT and maintain such records based
      on legitimate and valid vouchers and other documentary evidence.
      199.    Taxpayers engaged in business operations are obliged under the
      TCAL to maintain accounting records, vouchers, tax vouchers and other rel-
      evant information (Art. 24). Article 29 of the TCAL specifically provides that
      taxpayers are obliged to prepare and maintain accounting books, accounting
      vouchers, financial statements, invoices, tax payment receipts, export docu-
      mentation, and other relevant tax documents (e.g. contracts) for at least ten
      years.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 63



       200. Failure to keep or maintain accounting books, or maintain support-
       ing vouchers for the accounts constitutes a crime leading to the revocation of
       the unit’s business license and/or a fine between CNY 2 000 (EUR 236) to
       CNY 10 000 (EUR 1 179) (TCAL Art. 60). Where a withholding agent fails
       to keep and maintain accounting books for the tax withheld and remitted
       or collected and remitted, or fails to maintain supporting vouchers for the
       accounts and the relevant information in respect of the tax withheld, the SAT
       authorities can impose a fine between CNY 2 000 (EUR 236) to CNY 5 000
       (EUR 590) on the withholding agent (Art. 61).
       201.     Failure to pay or underpay the amount of taxes payable by means of
       forging, altering, concealing or destroying without authorisation account-
       ing books or vouchers for the accounts or overstating expenses or omitting
       or understating income in accounting books constitutes a criminal offence,
       subject to a prison term not exceeding 7 years (Criminal Law Art. 201)
       202. As mentioned, additional accounting record retention obligations are
       imposed in other laws and regulations that add to or reinforce the record-
       keeping requirements contained in the Accounting Law and TCAL. These
       laws and regulations are specific to particular types of legal entities and
       arrangements and are detailed below.

       Companies
       203.    All companies operating in China (including FIEs) must comply with
       the accounting and record keeping obligations under the Accounting Law,
       TCAL, and Company law (Company Law Arts.18, 164, 165; LWFOE Art. 18;
       LEJV Art. 2; LCJV Art. 15). In addition, companies must comply with the
       Business Enterprise Accounting System which is formulated based on the
       Accounting Law, and is issued by the MOF.
       204.     Under the Company Law, companies are obliged to set up an account-
       ing system and prepare financial reports (Arts.164, 165). Companies must,
       after the end of each financial year, draft a financial report and have it audited
       by an accounting firm. The financial report must be prepared in accordance
       with PRC laws and administrative regulations (Art. 165). All shareholders/
       members are entitled to consult and copy the company’s accounting records
       and financial reports (Art. 34).
       205.     Where a company falsifies records or conceals any important matter
       in materials such as financial and accounting statements submitted to rel-
       evant PRC government authorities (e.g. SAIC, SAT), the relevant authority
       can impose a fine between CNY 30 000 (EUR 3 538) and CNY 300 000
       (EUR 35 377) on the person or persons directly responsible (Company Law
       Art. 203). Additionally, any company that maintains any set of accounts that
       differs from its statutory accounting books in violation of the Company Law


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
64 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      will be ordered to remedy the defect and also be fined between CNY 50 000
      (EUR 5 896) and CNY 500 000 (EUR 58 962) (Art. 202).
      206.    Article 161 of the Criminal Law provides that it is a criminal offence
      for a company to submit false financial and accounting records or reports
      concealing important facts to shareholders/members and the general public.
      The persons who are directly in charge and the other persons who are directly
      responsible for the crime will be sentenced to fixed-term imprisonment of
      not more than three years or criminal detention and/or be fined between
      CNY 20 000 (EUR 2 358) and CNY 200 000 (EUR 23 585).

      Partnerships
      207.    All partnerships operating in China (including FIPs) must comply
      with the accounting and record keeping obligations under the Accounting
      Law, TCAL, and Partnership Law (Partnership Law Art. 36). In addition,
      partnerships must comply with the Business Enterprise Accounting System
      issued by the MOF.
      208. Article 36 of the Partnership Law provides that partnerships are
      obliged to establish financial and accounting systems in accordance with
      PRC laws and administrative regulations. Article 11 of the Administrative
      Measures on Registration of FIP provides that FIPs must follow the relevant
      PRC laws, administrative regulations and state regulations on accounting and
      tax matters, foreign exchanges customs, and immigration issues.
      209.     Where partnership affairs are executed by one or more partners,
      those partners are obliged to regularly report to the other partners regarding
      the execution of partnership affairs. The operation and financial conditions
      of the partnership and all income from their execution of partnership affairs
      belongs to the partnership, and the expenses and losses are borne by the
      partnership (Partnership Law Art. 28). For the purpose of understanding the
      operation and financial conditions of the partnership, the partners are enti-
      tled to inspect and copy financial data including the accounting books of the
      partnership (Art. 28).
      210.    Article 31 of the Administrative Rules on Registration for Partnership
      Enterprises provides that partnerships are required to complete an annual
      inspection by the relevant SAIC authorities. Among the documents submitted
      to the SAIC are audit reports, balance sheets, and income statements.

      Trusts
      211.     Several laws require trustees in China to keep accounting records.
      First, the Trust Law contains specific rules dealing with record keeping
      requirements. Second, trusts are considered as units and trustees in China


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 65



       and must consequently comply with the accounting and record keeping obli-
       gations under the Accounting Law and the TCAL. Finally, trustees of business
       trusts must also comply with the Accounting Rules for Trust Companies
       (ARTC) and Accounting Rules for Trust Business (ARTB).
       212.     Article 29 of the Trust Law provides that a trustee must keep a sepa-
       rate account for the trust assets. More specifically, trust assets from different
       settlors must be recorded separately (Art. 29). A trustee is also required to
       maintain complete records in relation to the operation and management of the
       trust, including a record of the income and expenditure of the trust (Art. 33).
       213.     Article 30 of the ARTC provides that trust companies are obliged to
       set up accounts in accordance with PRC laws, prepare separate accounts for
       trust business and non-trust business and perform separate accounting for
       each trust business. Article 28 provides that trust companies must properly
       keep the full record of trust affairs they have handled, and periodically report
       to the settlor and the beneficiary on the status of trust property, the manage-
       ment and use, and disposal and income and expenditure thereof. The settlor
       and the beneficiary have the right to information regarding the management
       and use, disposal and income and expenditures of the trust property and to
       request the trust company to provide explanations (Art. 28).
       214.     Article 1(2) of the ARTB provides that each business trust should
       be treated as an independent unit for accounting purposes. Article 1(3) pro-
       vides that the accounts for a trust must include trust assets, trust liabilities,
       trust rights and interests, trust income, trust expenditures, and trust profit.
       Article 1(11) provides that the accounting records maintained for trusts must
       comply with Administrative Measures for Accounting Files (AMAF).
       215.    Trust companies, as financial institutions, are also obliged to comply
       with the Accounting Rules for Financial Institutions. Article 58 of the
       Accounting Rules for Financial Institutions provides that trust companies
       are obliged to submit their financial statements annually to the MOF. Annual
       financial statements must be audited by an accounting firm (art. 58).

       Foundations
       216.    All foundations operating in China must comply with the accounting
       and record keeping obligations under the Accounting Law, TCAL, and FAR
       (Accounting Law Art. 2). Foundations must also comply with the Annual
       Inspection Measures for Foundations (AIMF) and the Accounting Rules for
       Non-profit Social Organisations.
       217.    Article 36 of the FAR provides that a foundation is required to submit
       financial statements and an audit report to the MCA local office each year
       for annual inspection. Article 4 of the AIMF provides that the foundation’s



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
66 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      financial statements must comply with the Accounting Rules of Non-profit
      Social Organisations.
      218.    Article 8 of the Accounting Rules for Non-profit Social Organisations
      provides that accounting information must be prepared on the basis that
      transactions and events have actually occurred and should truly reflect the
      financial position, operating results, and cash flows of the entity. In addition,
      accounting treatments must be consistently applied throughout different
      accounting periods.

      Underlying documentation (ToR A.2.2)
      219.     Under the Accounting Law and the TCAL, all companies (including
      FIEs), partnerships (including FIPs), trusts, and foundations have a statutory
      obligation to maintain underlying accounting documentation (Accounting
      Law Arts.9, 10; TCAL Arts.24, 29). Underlying documentation required to
      be maintained includes accounting books, accounting vouchers, financial
      statements, invoices, tax payment receipts, export documentation, and
      other relevant tax documents (e.g. contracts) (Accounting Law Art. 9; TCAL
      Art. 29). Article 15 of the Accounting Law provides that accounting books
      must be recorded based on original accounting vouchers which are examined
      and verified.
      220.    The SAT has also developed non-binding statements of guidance and
      principles to assist taxpayers to meet their tax and record keeping obliga-
      tions. Such guidance is available on the SAT website as well as at each local
      branch/bureau of the SAT. In particular, the information provides guidance
      on the types of accounting records and underlying documentation required to
      be maintained.
      221.    Several of China’s exchange of information partners who provided
      input regarding the review of China noted that China has been able to provide
      underlying documentation, including receipts, invoices, transaction records,
      and contractual agreements, in response to specific requests for exchange of
      information.

      Document retention (ToR A.2.3)
      222. Article 8 of the Administrative Measures for Accounting Files
      (AMAF) provides the relevant accounting record retention obligations for all
      units. 30 The retention periods for accounting records is fixed (between 5 and

30.   Article 1(11) of the Accounting Rules for Trust Business (ARTB) specifically
      clarifies that the accounting records kept for business trusts should comply with
      the AMAF.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 67



       25 years) or indefinite and varies depending on the type of document (Art. 8).
       The Chinese authorities specify that the minimum retention periods, as cal-
       culated from the end of the relevant fiscal year is, for different accounting
       records, the following:
                    Document type                         Minimum retention period (years)
        Vouchers
                                                      15
                                                      15
                                                      15
        Accounting books
                                                      15
                                                      15
                                                      15


                                                      15
        Financial statements


        Others
                                                      5
                                                      5




       *Cash and bank journals must be kept for a minimum of 25 years.

       223.    Accounting information must be kept in China. Article 18 of the
       AMAF provides that all units operating in China must retain their accounting
       records in this country.
       224.     For tax purposes, Article 29 of the TCALIR provides that account-
       ing books, accounting vouchers, financial statements, tax payment receipts,
       invoices, exportation documents and other tax related information (e.g. con-
       tracts) must be maintained for at least 10 years.
       225.   Information received from China’s peers notes that in all cases China
       has been able to provide the requested accounting records.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
68 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.

                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


A.3. Banking information



      226.     The CBRC, the regulatory authority for the banking sector since
      2003 is a ministerial-level organisation subordinated to the State Council. It
      is entrusted with the regulation and the supervision of banking institutions,
      asset management companies, trust companies and non-bank financial insti-
      tutions in China.
      227.     Commercial banks, by law, are authorised to provide the follow-
      ing services: accept public deposits, fund short-term, medium-term and
      long-term loans, settle both domestic and overseas accounts, handle bill
      acceptance and discount, issue financial bonds, issue and sell government
      bonds as agents, buy and sell government bonds and financial bonds, engage
      in inter-bank lending and borrowing, buy and sell foreign exchange, provide
      bank card services, provide letter of credit service and guarantees, handle
      receipts, payments and insurance business as agents, provide safe deposit
      boxes, and undertake other business as approved by the banking regulatory
      authority under the State Council (Law of the People’s Republic of China on
      Commercial Banks (revised 2003) Art. 3).
      228.    A commercial bank or financial institution may be established
      solely with the approval of the CBRC. Non-compliance will be considered
      an offence under criminal law and prosecuted accordingly. Article 174 of
      the Criminal Law provides that whoever establishes a commercial bank or
      any other banking institution without the approval of the CBRC will be sen-
      tenced to a fixed-term imprisonment of not more than three years or criminal
      detention and/or fined between CNY 20 000 (EUR 2 358) and CNY 200 000
      (EUR 23 584). Under serious circumstances, the offender will be sentenced
      to fixed-term imprisonment between three years and ten years and fined
      between CNY 50 000 (EUR 5 896) and CNY 500 000 (EUR 58 962).




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 69



       Record-keeping requirements (ToR A.3.1)
       229.    The AMLL requires banks and other financial institutions 31 to
       perform customer due diligence. To this extent, financial institutions must
       verify and maintain the records of the identities and transactions of all their
       customers (AMLL, Art. 16 and 19). Article 9 of the AMLRFI provides that
       financial institutions must understand their client’s aim for carrying out the
       transaction and understand the nature of the transaction. Article 3 of ARCIV
       also provides that a financial institution must act with due diligence and take
       appropriate measures to know its customers and the purpose and nature of the
       transaction carried out by them. When the customer is likely to be engaged
       in money laundering or terrorism financing, the financial institution must
       identify the natural person who is actually controlling the customer (i.e. the
       ultimate shareholder where the customer is not a natural person), and persons
       actually benefiting from the transaction.
       230.     Financial institutions must maintain a number of records facilitating
       the proper identification of their clients. Records on a customer being a natu-
       ral person must contain the client name, nationality, address, contact details,
       type of the identification document, effective date of the identification docu-
       ment, and identification document number (ARCIV Art. 33). Records on a
       legal person or other organisation must contain the name, address, business
       scope, organisation identification code, tax registration certificate number,
       business license (or other types of license which allows the entity to conduct
       operations) number, name and identification document of the client’s actual
       shareholder with controlling power, and name and identification document of
       the client’s legal representative (Art. 33).
       231.     For every transaction conducted, financial institutions must main-
       tain such records as are reasonably necessary to facilitate reproducing that
       transaction readily (ARCIV Art. 3). Where a customer remits money, finan-
       cial institutions are obliged to record remitter’s name, address and account
       number and the receiver’s name, and address (or the address of the organisa-
       tion receiving the transfer) (Art. 10). If a financial institution receives money
       remitted from abroad, it should record the name, account number and address
       of the person making the remittance. If the person making the remittance
       did not open a bank account overseas, the financial institution should record
       other information necessary to ensure the transaction can be traced (Art. 10).
       232.    Financial institutions must maintain customers’ identity details, data
       information, business vouchers and books for all transactions within stipu-
       lated periods: client identity details must be maintained for at least five years

31.    The term “financial institutions” refers to policy banks, commercial banks, credit
       cooperatives, post and saving institutions, trust and investment companies, securi-
       ties firms, futures brokerage companies, and insurance companies (AMLL Art. 34).


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
70 – COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

      from the date the business relationship terminates and transaction informa-
      tion must be maintained for at least five years from the date the transaction
      terminates (AMLL Art. 19).
      233.     Failure to conduct anti-money laundering and customer due diligence
      obligations under the AMLL and its implementing rules subjects the offender
      (e.g. financial institution) to a fine of up to CNY 500 000 (EUR 58 962). In
      addition persons who are directly responsible for the violation (including
      directors, management, and other directly responsible persons) will be pun-
      ished by fine up to CNY 50 000 (EUR 5 896). Where the violation constitutes
      money laundering, fines of up to CNY 500 000 million (EUR 58 962) and
      CNY 5 million (EUR 589 623) may be imposed on the financial institution
      and the person responsible, respectively. In addition, trading licenses of
      financial institutions can be revoked (AMLL Art. 32).
      234.    Article 31 of the ARCIV provides that the PBOC is empowered to
      impose penalties specified under Articles 31 and 32 of the AMLL on the
      financial institution and on its directors, senior management and employees
      directly responsible. Furthermore, the PBOC may recommend the CBRC,
      the CIRC, and the CSRC to remove the financial institution’s trading license,
      remove the director, senior management and the direct responsible employee
      from their positions, and ban them from working in the financial industry.
      235.    Article 176 of the Criminal Law provides that whoever illegally takes
      in deposits from the general public or does so in disguised form will be sen-
      tenced to fixed-term imprisonment of not more than three years or criminal
      detention and/or fined between CNY 20 000 (EUR 2 358) and CNY 200 000
      (EUR 23 585). Where a unit commits the crime, it will be fined, and the
      persons who are directly in charge and the other persons who are directly
      responsible for the crime shall be punished, according to Article 176.
      236.     There are sufficient legal obligations in place for banks and other
      financial institutions to maintain all records pertaining to accounts as well
      as to related financial and transactional information in China. Furthermore,
      input received from China’s peers indicates that China is able to exchange
      bank records for all types of legal entities and arrangements. China reports
      that bank information is maintained for all clients and that its competent
      authority has not encountered issues regarding availability of bank informa-
      tion, both for domestic tax cases and for providing exchange of information
      assistance.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION – 71



                   Determination and factors underlying recommendations

                                        Phase 1 determination
        The element is in place.

                                              Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                       COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 73




B. Access to Information



Overview

       237. A variety of information may be needed in a tax enquiry and jurisdic-
       tions should have the authority to obtain all such information. This includes
       information held by banks and other financial institutions as well as infor-
       mation concerning the ownership of companies or the identity of interest
       holders in other persons or entities, such as partnerships and trusts, as well
       as accounting information in respect of all such entities. This section of the
       report examines whether China’s legal and regulatory framework gives the
       authorities access powers that cover all relevant persons and information
       and whether rights and safeguards are compatible with effective exchange of
       information. It also assesses the effectiveness of this framework in practice.
       238.    China’s tax authorities (the SAT) have the necessary powers to obtain
       bank, ownership, identity, and accounting information and have enforce-
       ment measures to compel the production of such information. The ability
       of the SAT authorities to obtain information for exchange of information
       purposes is derived from their general access powers under the TCAL and
       the SAT Notice on Protocol for International Exchange of Tax Information
       coupled with the authority provided by the relevant exchange of information
       agreements.
       239.     There is no limitation on the SAT authorities’ power to obtain infor-
       mation either from taxpayers or from third parties in possession or control of
       information. The SAT authorities have rights to make enquires, inspect docu-
       ments, and search and seize information when necessary. When conducting
       tax inspections in accordance with PRC laws and for providing assistance
       under China’s exchange of information agreements, the SAT authorities have
       the right to require all units and individuals to disclose tax related informa-
       tion, regardless of a domestic tax interest.
       240.   China’s competent authority (the Director of the Global Co-operation
       and Compliance Division of the International Taxation Department of the
       SAT), when requested by a foreign counterpart, can access information with



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
74 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      the assistance of the SAT officials at or below provincial level, which have
      the necessary powers to access information from taxpayers and third parties
      in China. The co-ordination procedures between China’s competent author-
      ity and the SAT officials at or below provincial level are clearly defined and
      effective in practice.
      241.    No bank secrecy or other provisions in China’s laws and regulations
      unduly prevent the competent authority from obtaining, directly or indirectly,
      account information maintained by banks or other financial institutions for
      tax purposes. Banks and other financial institutions are obliged to disclose
      relevant information upon request from the SAT authorities.
      242.    The volume of specific requests for exchange of information both
      to and from China’s exchange of information partners has been increasing
      over the past several years. The requests vary in complexity and cover a wide
      range of material. Over the last three years, there have been no cases where
      China has not provided information requested by exchange of information
      partners due to difficulties in accessing requested information.
      243.   Rights and safeguards (e.g. notification, appeal rights) in China do
      not unduly prevent or delay effective exchange of information.

B.1. Competent Authority’s ability to obtain and provide information




      Bank, ownership, and identity information (ToR B.1.1) and
      accounting records (ToR B.1.2)
      244. The SAT is responsible for the administration of China’s taxes and
      consists of local state taxation bureaus (LSTBs) and local taxation bureaus
      (LTBs) at the provincial level. The LSTBs, LTBs and their local branches at
      various levels are responsible for the collection and administration of taxes in
      respect of the taxes they respectively manage. Tax branches are representa-
      tive offices of the county offices and established on the basis of economic
      districts, administrative districts, or sectors. Generally, every SAT office at
      provincial level comprises the following bureaus: a Tax Investigation Bureau,
      a Collection Bureau, a Foreign Investment Tax Bureau, and/or an Import and
      Export Tax Administration Bureau. The SAT Headquarters conducts vertical
      leadership over the offices of the SAT with respect to organisation, size, per-
      sonnel, and budgets, and assists local governments by way of dual leadership
      over the LTBs.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                       COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 75



       245.    As at the end of 2011, there were approximately 700 000 tax officials
       serving in approximately 61 tax offices (or bureaus) at provincial level, 30
       municipal tax offices (or bureaus) at vice-provincial level, 664 tax offices (or
       bureaus) at municipal level, 4 176 tax offices at county level, and more than
       55 466 tax branches. Approximately 70% of the total tax officials are tax
       collectors.
       246.     The SAT and its authorised representatives, i.e. the Director General,
       the Deputy Director General of the International Taxation Department of
       the SAT and Director of the Global Co-operation and Compliance Division
       (GCCD) of the International Taxation Department of the SAT, are the “com-
       petent authority” under China’s DTCs and TIEAs. Requests received by the
       Director General or the Deputy Director General of the International Taxation
       Department are forwarded to the GCCD. The officials in GCCD then examine
       the request to ensure that it meets the requirements provided by the respec-
       tive exchange of information (EOI) agreement and that it provides sufficient
       information to action the request. The competent authority of the requesting
       jurisdiction is notified of any deficiencies concerning its request. If the request
       is valid, the GCCD will seal an official SAT Headquarters document to dis-
       patch the request to provincial tax authorities where the taxpayer or third party
       possessing the information resides to make further investigations.
       247.     The LSTBs and LTBs have their own responsibilities in relation to
       EOI matters. Investigation and examinations for all EOI requests are handled
       by the lower working level tax authorities (LSTBs and LTBs). There is at least
       one specialist in each tax bureau at provincial level in charge of assisting the
       competent authority in carrying out investigations in each respective prov-
       ince. The procedures used to access information are generally the same for all
       types of information and categories of record keepers from which the infor-
       mation is to be obtained. The local tax authorities send a notice to the person
       or entity that has control of the information and request the information to
       be provided within a prescribed time limit, normally 7 to 30 days depending
       on the difficulty of access to information. If the information is already in the
       hands of the tax authorities, the requested information is normally sent to the
       competent authority of the requesting jurisdiction within 60 days. If another
       government department in China (e.g. the SAIC) maintains the information,
       the SAT sends a formal letter requesting information to be provided within 7
       to 30 days, depending on the difficulty of access to information. The SAIC is
       obliged to co-operate with the SAT by providing all information maintained
       in its registries (e.g. registration information) to the SAT, both automatically
       and upon request. 32

32.    See Notice on Business Registration and Tax Registration Information Exchange
       and Sharing by State Administration of Taxation and State Administration of
       Industry and Commerce [Guo Shui Fa [2003] No. 81.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
76 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      248.     When the requested information is received by the responsible local
      tax bureau, the information, together with a report, is submitted to each upper
      level tax bureau until it reaches the SAT Headquarters. Each level of tax
      bureau goes through the documents submitted to ensure that it contains the
      information requested in the request. At each step, if the reviewing official
      considers that the information collected is not sufficient, or where further
      research is necessary, the local tax bureau is required to take the necessary
      steps to deliver the additional information until it fully meets the require-
      ments of the requesting party. After the GCCD’s review, the information is
      sent to the competent authority for final approval.

      Powers to obtain information
      249.    China’s tax authorities have the necessary information gathering powers
      under the TCAL, the SAT Notice on Protocol for International Exchange of Tax
      Information (the SAT Protocol) (Guo Shui Fa [2006] No. 70), and its exchange of
      information agreements. The TCAL and the SAT Protocol provide the statutory
      authority for China’s competent authority to exchange information for tax pur-
      poses with foreign jurisdictions pursuant to the provisions of a DTC or TIEA.
      250.    Article 57 of the TCAL provides that when conducting tax inspections
      in accordance with the law, the SAT authorities have the right to require units
      and individuals to disclose tax related information. Article 56 of the TCAL
      provides that all units and individuals are obliged co-operate with the SAT
      authorities when they conduct tax inspections in accordance with the law.
      251.    Article 54(2) of the TCAL provides that the SAT authorities are
      empowered to inspect a unit’s or individual’s commodities, goods or other
      properties at the unit’s or individual’s place(s) where production or business
      operations are conducted. Article 58 of the TCAL further provides that when
      investigating a tax case, the SAT authorities may record, tape-record, video
      tape, photograph and photocopy information relevant to the case.
      252.    The SAT Protocol, promulgated in 2006, provides detailed proce-
      dures and requirements relating to China’s EOI program based on the OECD
      Manual for EOI. In particular, the SAT Protocol provides the procedures used
      by the SAT authorities from the date an EOI request is received to the date
      the information is provided to the requesting jurisdiction.
      253.    Article 10 of the SAT Protocol provides that under no circumstances
      can the SAT authorities at or below provincial level decline to supply infor-
      mation to the competent authority, nor shall the competent authority decline
      to supply information to the contracting parties solely because:
               it has no domestic interest in such information;




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                       COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 77



                 lack of reciprocity in the quantity and quality of the exchanged infor-
                 mation ;
                 tax authorities have secrecy obligations to taxpayers;
                 banks have secrecy obligations to client information; or
                 tax information is kept by an agent, intermediary organisation or a
                 third party.
       254.     Article 142 of the General Principles of the Civil Law provides that,
       in case of inconsistency with domestic civil tax laws, China’s bilateral trea-
       ties/agreements prevail over domestic civil laws. Further, Article 91 of the
       TCAL provides that China’s international treaties/agreements prevail over
       domestic tax laws in case of inconsistency with domestic tax laws. Thus, the
       information exchange rules in China’s DTCs and TIEAs override any incon-
       sistent domestic tax laws or secrecy provisions.
       255.    Article 5 of the TCAL provides that all relevant PRC government
       departments and units must support and assist the SAT authorities when they
       carry out duties in accordance with the law. Article 6 of the TCAL further
       provides that individuals, withholding agents and other units concerned must
       truthfully report to the SAT authorities on matters concerning tax filing
       and payment, withholding tax and the collection of tax on behalf of the SAT
       authorities.
       256.      China’s competent authority is able to respond to an EOI request that
       relates to information regarding a criminal tax matter in the requesting juris-
       diction. Requests for information pertaining to a criminal tax matter in the
       requesting jurisdiction are treated seriously and other PRC government authori-
       ties (e.g. government security agencies) may be involved in case investigations,
       particularly when search and seizure is necessary.

       Bank information
       257.     There are no limitations on the ability of China’s tax authorities to
       obtain information held by a bank or other financial institution for either civil
       or criminal tax purposes in response to a specific exchange of information
       request.
       258.    Article 54(6) of the TCAL provides that the SAT authorities are
       empowered to investigate the deposit accounts opened by any unit, individual
       or withholding agent, upon the issuance of a national standard bank account
       investigation warrant. Article 87 of the TCALIR provides that the deposit
       account investigation warrant is produced by the tax bureau commissioner
       at county/district level or above. Consent of other authorities or regulatory
       bodies is not required. Warrants are typically produced on the same day they



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
78 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      are requested. There are no other special procedures used to access informa-
      tion held by banks or other financial institutions. There is also no need for
      court approval when officials from the SAT authorities request information
      from banks or other third party financial institutions. Article 17 of the TCAL
      expressly provides that banks and other financial institutions are obliged to
      assist the SAT authorities when investigation of unit’s or individuals’ bank
      accounts is necessary.
      259.      There is no explicit requirement to specify particular details when
      making an EOI request for bank information to China. As a matter of prac-
      ticality, however, sufficient details would need to be provided to enable the
      SAT authorities to action the request. The SAT reports that it is possible to
      action a request for bank information if the requesting jurisdiction provides
      a combination of information to specify the identity of the account holder
      (e.g. account number or similar identifying information). In rare occasions,
      providing only a name in Pinyin 33 will not be enough information as it may
      match multiple identities in China. It is not uncommon that more than one
      person bears the same name. For example, more than 100 000 people in
      China have the same name of “Zhang Ming”. Under these circumstances,
      China sends letters to its treaty partners requesting additional information to
      enable the competent authority to effectively process the requests.
      260.     The SAT authorities have a good relationship with financial institu-
      tions in China and report that banks are co-operative with regard to requests
      for information. There have been no cases where banks have refused to
      provide information to the tax authorities for EOI purposes. However, one
      of China’s peers mentioned during the course of this review that in one
      specific case China was not in a position to provide the requested banking
      information.

      Ownership and identity information and accounting records
      261.     There are no limitations on the ability of the tax authorities to obtain
      ownership and identity information and accounting records from taxpayers
      or third parties for civil or criminal tax purposes. There is no need for court
      approval when officials from the tax authorities request information from
      taxpayers or third parties.
      262.    Article 54(1) of the TCAL grants the SAT authorities the power to
      inspect a unit’s or individual’s accounting books, supporting vouchers, state-
      ments, and other relevant information. The SAT authorities can also inspect
      a withholding agent’s accounting books, supporting vouchers, or other

33.   Pinyin is the official system to transcribe Chinese characters into Latin script
      used in China.


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                       COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 79



       documentary evidence and relevant information in respect of the amount of
       taxes being withheld and remitted or collected and remitted.
       263.     Article 86 of the TCALIR provides that when the SAT authorities exer-
       cise their powers provided under the provisions of Article 54(1) of the TCAL,
       the tax authority is empowered to do so at the business premises of a unit,
       individual, or withholding agent. When deemed necessary and upon approval
       of the head of the tax bureau at district level or above, the SAT authority is
       entitled to take the unit’s, individual’s or withholding agent’s accounting
       books, supporting vouchers, financial statements and other relevant materi-
       als from previous years to the tax bureau office for examination. Upon the
       approval of the head of the tax bureau at city level or above, the SAT author-
       ity is empowered to take the taxpayer and withholding agent’s current year’s
       accounting information back to the tax bureau office for inspection purposes.

       Use of information gathering measures absent domestic tax interest
       (ToR B.1.3)
       264. The concept of “domestic tax interest” describes a situation where a
       contracting party can only provide information to another contracting party
       if it has an interest in the requested information for its own tax purposes.
       China has no domestic tax interest with respect to its information gathering
       powers. Information gathering powers provided to China’s tax authorities
       under the TCAL can be used to provide EOI assistance regardless of whether
       China needs the information for its own domestic tax purposes (SAT Protocol
       Art. 10).

       Compulsory powers (ToR B.1.4)
       265.    As previously described, the SAT authorities have the necessary
       powers to obtain information from natural and legal persons and have
       enforcement measures to compel the production of such information. Under
       the TCAL, the SAT authorities are entitled to inspect a unit’s or individual’s
       commodities, goods or other property at the unit’s or individual’s place(s) and
       to record, tape-record, video tape, photograph and photocopy information rel-
       evant to the case. Upon approval of the head of the tax bureau at district level
       or above, the SAT authority is entitled to take the unit’s, individual’s or with-
       holding agent’s accounting books, supporting vouchers, financial statements
       and other relevant materials from previous years to the tax bureau office for
       examination.
       266.    Article 70 of TCAL further provides that if a taxpayer or with-
       holding agent refuses to co-operate with or obstructs a tax inspection, the
       SAT authority is empowered to impose a fine not exceeding CNY 50 000
       (EUR 5 896).


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
80 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      267.     Article 73 of the TCAL provides that if a bank or other financial
      institution in which a taxpayer or withholding agent has opened an account,
      refuses: (i) to allow the SAT authorities to investigate the taxpayer’s or with-
      holding agent’s deposit account, or (ii) refuses to act in accordance with the
      SAT authorities request to freeze the taxpayer’s or withholding agent’s deposits
      or withhold tax from the account, or (iii) after receiving a written notification
      from the SAT authorities, helps the taxpayer or withholding agent to trans-
      fer deposits and thereby causing a loss of tax revenue, the SAT authorities
      may impose a fine between CNY 100 000 (EUR 11 792) and CNY 500 000
      (EUR 58 962), and impose a fine between CNY 1 000 (EUR 118) and
      CNY 10 000 (EUR 1 179) on the persons directly responsible.

      Secrecy provisions (ToR B.1.5)
      268.    There are no provisions under China’s laws relating to the secrecy of
      ownership, identity or accounting information. Article 54 of the TCAL and
      Article 10 of the SAT Protocol override confidentiality provisions applicable
      to banks and other financial institutions.
      269.     All of China’s EOI agreements permit China to decline a request if
      responding to the request would disclose any trade, business, industrial, com-
      mercial or professional secret or trade process, or information, the disclosure
      of which would be contrary to public policy. This follows the standards set
      forth in Article 26 of the OECD Model Tax Convention and the OECD Model
      TIEA. Information that falls within these categories remains protected under
      PRC domestic law and EOI requests for such information will generally be
      declined.
      270.     Among the situations in which China is not obliged to supply infor-
      mation in response to a request is when the requested information would
      disclose confidential information protected by attorney-client privilege. The
      concept of “attorney-client privilege” is not well defined under PRC law. The
      Lawyer Law and the PRC Code of Ethics for Attorneys both only provide that
      attorneys are obliged to keep confidential trade secrets obtained from their
      clients and the privacy of their clients. This obligation does not apply when
      the clients’ or other persons’ actions or plans are harmful to state security,
      public security or when personal and property safety of others may be seri-
      ously harmed. The limited scope of the attorney-client privilege does not
      exempt attorneys from being forced to disclose information in a judicial
      action (Civil Procedure Law Art. 70). In addition, PRC law does not protect
      any legal document or correspondence that is marked “confidential and
      privileged”. Moreover, the SAT authorities report that, in practice, an EOI
      request will not be declined because the information requested is maintained
      by an attorney. The SAT authorities can, with approval from the head of a tax



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                       COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION – 81



       bureau at or above district/county level, compel the production of information
       from an attorney pursuant to their general access powers under the TCAL.
       271.     There are no cases, either domestic tax cases or for responding to EOI
       requests, where the attorney-client privilege prevented the SAT from accessing
       information. Input received from China’s peers confirms this. There are no other
       professional privileges in China, for example relating to accountants or tax advis-
       ers, which may hinder these professionals providing information to government.

                   Determination and factors underlying recommendations

                                        Phase 1 determination
        The element is in place.

                                              Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


B.2. Notification requirements and rights and safeguards
                                 e.g



       Not unduly prevent or delay exchange of information (ToR B.2.1)
       272.     The SAT authorities are not statutorily obliged to inform the person
       concerned of the existence of an EOI request. Likewise, the SAT authorities
       are not obliged to inform the taxpayer concerned prior to contacting third
       parties to obtain information.
       273.    Generally, taxpayers have no special rights to intervene against the
       SAT authorities’ information-gathering powers under the TCAL and the SAT
       Protocol. However, if a taxpayer considers any specific administrative action
       by the SAT authorities to infringe their legal rights, the taxpayer can file a
       tax administrative review petition with the SAT administrative reviewing
       authority (i.e. the tax bureau one level higher than the tax bureau that con-
       ducted the original action) (TCAL Art. 8). The scope of tax administrative
       review covers: tax collection actions, tax administrative permits and approv-
       als, administration on invoices, tax guarantee measures and enforcement
       measures, tax administrative penalties, and others specific tax administrative
       actions. Taxpayers are obliged to provide any information requested by the
       SAT authorities before any decision can be made during the administrative
       review proceedings (Art. 88).



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
82 – COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

      274.    Although there have been no administrative review proceedings
      regarding the exercise of the SAT authorities’ information-gathering powers
      for EOI purposes, China’s competent authority reports that, in practise, it will
      not respond to an EOI request until resolution of the administrative review
      proceedings. Typically, administrative review proceedings are completed
      within one month depending on the facts of the case.
      275.    The SAT authorities report that, to date, there have been no cases
      where taxpayers or third party record keepers refused to provide requested
      information in response to the tax authorities’ information-gathering powers
      under the TCAL.

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.

                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 83




C. Exchanging Information



Overview

       276.     Jurisdictions generally cannot exchange information for tax purposes
       unless they have a legal basis or mechanism for doing so. A jurisdiction’s
       practical capacity to effectively exchange information relies both on having
       adequate mechanisms in place as well as an adequate institutional frame-
       work. This section of the report assesses China’s network of exchange of
       information agreements against the standards and the adequacy of its institu-
       tional framework to achieve effective exchange of information in practice.
       277.    China has a comprehensive network of bilateral agreements that pro-
       vide for exchange of information in tax matters, and is currently engaged in
       negotiations to establish new agreements as well as renegotiations of its older
       agreements. Currently, China has a network of 97 DTCs, 95 of which are in
       force, and two agreements 34 containing information exchange requirements.
       In addition, China has entered into TIEAs with eight jurisdictions, seven of
       which are in force with Argentina, The Bahamas, the British Virgin Islands,
       Bermuda, the Cayman Islands, Guernsey, the Isle of Man, and Jersey. China’s
       agreements cover its major trading partners and China has not refused to
       enter into an exchange of information agreement with any Global Forum
       member seeking to do so. The large majority of China’s agreements meet
       the international standards. However, China’s DTCs with Austria (1991),
       Brunei (2004), Estonia (1998), Jamaica (1996), Luxembourg (1994), Malaysia
       (1985), Switzerland (1990), and Trinidad and Tobago (2003) do not meet the
       standard because of limitations in place in the domestic laws of China’s treaty
       partners. A protocol amending the DTC with Switzerland was initialled in
       March 2012. It is recommended that China continue its program of updating
       its exchange of information agreements to incorporate wording in line with
       Article 26 of the OECD Model Tax Convention.


34.    With Hong Kong Special Administrative Region (Hong Kong SAR) and Macau
       Special Administrative Region (Macau SAR).


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
84 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     278.     China’s policy is to negotiate exchange of information agreements
     to the international standard. In particular, China’s practice is to include an
     exchange of information article in conformity with the 2005 update of the
     OECD Model Tax Convention. Considering China’s comprehensive treaty
     network, many of them do not contain the last version of Article 26 of the
     OECD Model Tax Convention. However, China’s capacity to access a wide
     range of information (as detailed in section B.1. of this report), in particu-
     lar bank information, without reference to a domestic tax interest ensures
     China’s ability to exchange information in line with the international stand-
     ard. All of China’s TIEAs are based on and closely follow the OECD Model
     TIEA.
     279.     All exchange of information articles in China’s agreements contain
     confidentiality provisions and China’s domestic legislation also contains
     relevant confidentiality provisions. These provisions apply equally to all
     information and documentation forming the requests received by China as
     well as to responses received from counterparties.
     280.    China’s agreements ensure that the contracting parties are not obliged
     to provide information which would disclose trade, business, industrial, com-
     mercial or professional secrets or information which is the subject of attorney
     client privilege or to make disclosures which would be contrary to public
     policy.
     281.     Input received from China’s peers indicates that in many cases China
     is able to respond to requests for information within 90 days of receipt by
     providing the information requested or an update on the status of the request.
     China’s domestic procedures for handling exchange of information requests
     are well defined and generally effective in practise. However, there are a
     small number of cases reported where China’s competent authority did not
     provide the requesting jurisdiction with a status update when the request
     could not be responded to within 90 days. The Chinese authorities explained
     that failure to provide a status update in some cases was the result of insuffi-
     cient personnel resources within the GCCD at the SAT Headquarters. In light
     of the growing number of inbound requests received by China, China should
     ensure that it has an appropriate number of staff working within the GCCD
     to ensure effective management of China’s exchange of information requests.
     282.    In general, the responses to the peer questionnaire from China’s
     exchange of information partners suggest that China’s practices in terms
     of exchange of information are to a high standard. Information provided by
     peers shows that China is able to respond to the vast majority of requests it
     receives in a thorough and comprehensive manner.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 85



C.1. Exchange-of-information mechanisms



       Other forms of exchange of information
       283.     Beyond meeting the standard of effective exchange of information assis-
       tance in response to specific requests, China engages in exchange of information
       practices that go beyond the standard, including automatic and spontaneous
       exchanges of information. Input received from China’s peers indicates that
       China actively exchanges information on a spontaneous and automatic basis.
       284.     Since 2004, China has been exchanging information on an automatic
       basis with several of its key treaty partners. The SAT sends out approxi-
       mately 10 000 pieces of information through automatic exchange each year.
       The information generally covers certain types of payments, e.g. dividend,
       interest, royalty, salary, and pension payments. Each single piece of automatic
       information exchanged is manually translated from Chinese into English.
       285.    China has also developed a spontaneous exchange of information
       relationship with a number of treaty partners. The SAT sends out approxi-
       mately 35 pieces of information through spontaneous exchange each year.
       286.   The processes and procedures applied to automatic and spontaneous
       exchanges follow the guidance under the SAT Protocol and the circular on
       EOI Directive Rules and are the same as applied to exchange of information
       on request.
       287.    Several of China’s exchange of information partners provided positive
       feedback regarding China’s spontaneous and automatic exchange of informa-
       tion practices. China’s competent authority reports that some of its specific
       requests for exchange of information relate to information provided on a spon-
       taneous or automatic basis.

       Joint International Tax Shelter Information Centre
       288.   China actively participates in the Joint International Tax Shelter
       Information Centre (JITSIC). JITSIC was established in 2004 to supplement
       the ongoing work of its members in identifying and curbing tax avoidance
       and shelters and those who promote them and invest in them. 35 Delegates
       from each of the member jurisdictions are based in either Washington, DC or
       London and exchange information on abusive tax schemes, their promoters
       and investors, consistent with the provisions of bilateral tax conventions. 36

35.    JITSIC Memorandum of Understanding.
36.    JITSIC Terms of Reference.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
86 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     Pursuant to the domestic procedures of the parties, the delegates of JITSIC
     from each respective member jurisdiction are delegated the ability to act as
     competent authorities for purposes of bilateral exchanges of information.
     289.    China joined JITSIC in September 2008 as an observer country by
     sending a delegate to the JITSIC London office for three months. China sent
     another delegate to the JITSIC London office in 2010. In 2010, China formally
     joined JITSIC and became JITSIC’s seventh member country, after Australia,
     Canada, Japan, the United Kingdom, the United States and Republic of Korea.
     290.     China currently has one delegate with competent authority status at
     the JITSIC London office. China’s JITSIC delegate is primarily involved in:
     (i) identifying abusive tax avoidance schemes by regularly exchanging anony-
     mous details of new schemes within the JITSIC framework, both bilaterally
     and multilaterally; (ii) carrying out case specific exchange of information
     on abusive tax avoidance schemes within China’s current framework of
     its existing bilateral tax agreements; (iii) facilitating a platform for direct
     communications between experts and field auditors in home countries; and
     (iv) sharing the expertise, best practices and experience in tax administration
     to combat abusive tax schemes.

     Tax examinations abroad
     291.      The TIEAs concluded by China include provisions that tax officials
     of a requesting jurisdiction can be present during examinations of taxpayers
     and third parties upon a requested jurisdiction’s consent. The SAT approved
     one incoming authorised visit from a treaty partner and is currently drafting
     its first internal directive on handling overseas audits.

     Foreseeably relevant standard (ToR C.1.1)
     292.     The international standard for exchange of information envis-
     ages information exchange upon request to the widest possible extent.
     Nevertheless it does not allow “fishing expeditions,” i.e. speculative requests
     for information that have no apparent nexus to an open inquiry or investiga-
     tion. The balance between these two competing considerations is captured in
     the standard of “foreseeable relevance” which is included in Article 26(1) of
     the OECD Model Tax Convention set out below:
               The competent authorities of the contracting states shall exchange
               such information as is foreseeably relevant for carrying out the
               provisions of this Convention or to the administration or enforce-
               ment of the domestic laws concerning taxes of every kind and
               description imposed on behalf of the contracting states, of their
               political subdivisions or local authorities, insofar as the taxation



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 87



                 thereunder is not contrary to the Convention. The exchange of
                 information is not restricted by Articles 1 and 2.
       293.     China’s DTCs are generally patterned on the OECD Model Tax
       Convention and its commentary as regards the scope of information that
       can be exchanged. DTCs initially signed or amended by protocol after 2008
       generally use the “foreseeably relevant” standard (Belgium (2009); the Czech
       Republic (2009); Finland (2010); Hong Kong, China (2010); Malta (2010);
       Singapore (2010); Syria (2010); Tajikistan (2008); Turkmenistan (2009); the
       United Kingdom (2011); Zambia (2010)). Older DTCs generally use the term
       “as is necessary” or “as is relevant” in lieu of “as is foreseeably relevant”. The
       terms “as is necessary” and “as is relevant” are recognised in the commen-
       tary to Article 26 of the OECD Model Tax Convention to allow for the same
       scope of exchange as does the term “foreseeably relevant”. 37
       294.     China’s DTC with Switzerland (1990) incorporates additional lan-
       guage: “such information (being information which is at their disposal under
       their respective taxation laws in the normal course of administration) as
       is necessary…”. This wording imposes a restriction on the partner’s abil-
       ity to respond to a request as it may be interpreted in a restrictive manner.
       Furthermore, the scope of this treaty is limited to the application of the
       Convention. This treaty does not meet the standard. China and Switzerland
       initialled a protocol amending this DTC in March 2012.
       295.    All of China’s TIEAs (with Argentina, Bahamas, Bermuda, British
       Virgin Islands, Cayman Islands Guernsey, the Isle of Man, Jersey) meet the
       foreseeably relevant standard as they are patterned on the OECD Model
       TIEA and its commentary regarding the scope of information that can be
       exchanged.
       296.    In cases where a request is unclear or incomplete, China’s competent
       authority reports that it routinely seeks clarifying or additional information
       from the requesting jurisdiction before declining a request. Information
       received from partner jurisdictions with an exchange of information relation-
       ship with China confirms this.

       In respect of all persons (ToR C.1.2)
       297.     For exchange of information to be effective, it is necessary that a
       jurisdiction’s obligation to provide information is not restricted by the resi-
       dence or nationality of the person to whom the information relates or by the

37.    The word “necessary” in Article 26(1) of the 2003 OECD Model Tax Convention
       was replaced by the phrase “foreseeably relevant” in the 2005 version. The com-
       mentary to Article 26 recognises that the term “necessary” allows for the same
       scope of exchange as does the term “foreseeably relevant”.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
88 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     residence or nationality of the person in possession or control of the informa-
     tion requested. For this reason, the international standard for exchange of
     information envisages that exchange of information mechanisms will provide
     for exchange of information in respect of all persons.
     298.     All but one of China’s DTCs and all of its TIEAs provide for
     exchange of information with respect to all persons. With the exception of
     China’s DTC with Switzerland, none of China’s agreements restricts the
     jurisdictional scope of the exchange of information provisions to certain per-
     sons, for example those considered resident in one of the contracting States.
     The China-Switzerland DTC limits the scope of exchange of information to
     residents of the contracting states.

     Obligation to exchange all types of information (ToR C.1.3)
     299.    Jurisdictions cannot engage in effective exchange of information if
     they cannot exchange information held by financial institutions, nominees or
     persons acting in an agency or a fiduciary capacity. The OECD Model Tax
     Convention, which is an authoritative source of the standards, stipulates that
     bank secrecy cannot form the basis for declining a request to provide infor-
     mation and that a request for information cannot be declined solely because
     the information is held by nominees or persons acting in an agency or fiduci-
     ary capacity or because the information relates to an ownership interest.
     300.     Only China’s DTCs signed or amended by protocol after 2008 include
     paragraph 26(5) of the OECD Model Tax Convention, which provides that a
     contracting state may not decline to supply information solely because the
     information is held by a bank, other financial institution, nominee or person
     acting in an agency or a fiduciary capacity or because it relates to ownership
     interests in a person (e.g. Barbados (2010); Belgium (2009); the Czech Republic
     (2009); Finland (2010); Hong Kong, China (2010); Malta (2010); Singapore
     (2010); Syria (2010); Tajikistan (2008); the United Kingdom (2011) and Zambia
     (2010)). China’s policy is to include Article 26(5) in all of its new agreements.
     301.      Although China’s other DTCs do not include such a provision, there
     are no limitations in China’s laws with respect to access to bank informa-
     tion, information held by nominees, and ownership and identity information.
     There are, however, such limitations in place in the domestic laws of some
     of its treaty partners (e.g. Austria (1991), Estonia (1998), Luxembourg (1994),
     Malaysia (1985) and Switzerland (1990)). In these cases, the absence of a
     specific provision requiring exchange of bank information unlimited by bank
     secrecy may serve as a limitation on the exchange of information which can
     occur under the relevant DTC. It is recommended that China continue to
     renegotiate the DTCs with Austria, Estonia, Luxembourg, and Malaysia to
     include paragraph 26(5) of the OECD Model Tax Convention and bring these



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 89



       EOI mechanisms to the international standard. A protocol updating the DTC
       with Switzerland was already concluded in March 2012.
       302.     All China’s TIEAs include the provisions contained in Article 5(4)
       subparagraphs (a) and (b) of the OECD Model TIEA, obliging the contracting
       parties to exchange all types of information.

       Absence of domestic tax interest (ToR C.1.4)
       303.      The concept of “domestic tax interest” describes a situation where a
       contracting party can only provide information to another contracting party
       if it has an interest in the requested information for its own tax purposes. An
       inability to provide information based on a domestic tax interest requirement
       is not consistent with the international standard. Contracting parties must use
       their information gathering measures even though invoked solely to obtain
       and provide information to the other contracting party.
       304.    China’s DTCs with Barbados (2010); Belgium (2009); the Czech
       Republic (2009); Finland (2010); Hong Kong, China (2010); Malta(2010);
       Singapore (2010); Syria (2010); Tajikistan (2008); United Kingdom (2011) and
       Zambia (2010) incorporate wording in line with Article 26(4) of the OECD
       Model Tax Convention, obliging the contracting parties to use information-
       gathering measures to exchange requested information without regard to a
       domestic tax interest. China’s other DTCs do not contain such a provision.
       There are, however, no domestic interest restrictions on China’s powers to
       access information. China is able to exchange information, including in cases
       where the information is not publicly available or already in the possession of
       the governmental authorities as noted in section B.2 of this report.
       305.    There is a domestic tax interest requirement for some of China’s
       treaty partners (Brunei (2004), Jamaica (1996), Trinidad and Tobago (2003)).
       In such cases, the absence of a specific provision requiring exchange of infor-
       mation unlimited by domestic tax interest will serve as a limitation on the
       exchange of information that can occur under the relevant DTC. It is recom-
       mended that China continue to renegotiate its DTCs with Brunei, Jamaica,
       and Trinidad and Tobago to include paragraph 26(4) of the OECD Model Tax
       Convention and to bring these EOI mechanisms to the international standard
       306.   All of China’s TIEAs allow information to be obtained and exchanged
       notwithstanding it is not required for any domestic tax purpose.

       Absence of dual criminality principles (ToR C.1.5)
       307.    The principle of dual criminality provides that assistance can only be
       provided if the conduct being investigated (and giving rise to an information
       request) would constitute a crime under the laws of the requested country if


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
90 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     it had occurred in the requested country. In order to be effective, exchange of
     information should not be constrained by the application of the dual criminal-
     ity principle.
     308.   There are no dual criminality requirements in China’s agreements for
     exchange of information in tax matters.

     Exchange of information in both civil and criminal tax matters
     (ToR C.1.6)
     309.    Information exchange may be requested both for tax administration
     purposes and for tax prosecution purposes. The international standard is not
     limited to information exchange in criminal tax matters but extends to infor-
     mation requested for tax administration purposes (also referred to as “civil
     tax matters”).
     310.   All of China’s exchange of information agreements provide for
     exchange of information in both civil and criminal tax matters.
     311.     China’s competent authority is able to respond to an EOI request that
     relates to information regarding a criminal tax matter in the requesting juris-
     diction. China’s authorities reported that in practice requests for information
     pertaining to a criminal tax matter in the requesting jurisdiction are treated
     seriously and that there are no differences between civil and criminal tax
     matters in the manner the information relating to these cases will be collected
     and further exchanged by China.

     Provide information in specific form requested (ToR C.1.7)
     312.    Exchange of information mechanisms should allow for the provision
     of information in the specific form requested (including depositions of wit-
     nesses and production of authenticated copies of original documents) to the
     extent possible under a jurisdiction’s domestic laws and practices.
     313.    There are no restrictions in the exchange of information provi-
     sions in China’s DTCs and TIEAs that would prevent China from providing
     information in a specific form, as long as this is consistent with its own
     administrative practices.
     314.     China’s competent authority is prepared to provide information in the
     specific form requested to the extent permitted under PRC law and admin-
     istrative practice. Information received from partner jurisdictions with an
     exchange of information relationship with China indicates that China is able
     to respond to such requests.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                     COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 91



       In force (ToR C.1.8)
       315.    Exchange of information cannot take place unless a jurisdiction has
       exchange of information arrangements in force. Where exchange of infor-
       mation agreements have been signed the international standard requires
       that jurisdictions must take all steps necessary to bring them into force
       expeditiously.
       316.    China has a comprehensive network of 107 bilateral agreements that
       provide for exchange of information in tax matters, comprising 97 DTCs, 2
       arrangements and 8 TIEAs. Ninety-five of China’s DTCs, its two arrange-
       ments and seven TIEAs are in force. China’s agreements with Belgium (new
       DTC), Ethiopia, the Cayman Islands, and Uganda are awaiting ratification.
       317.     It normally takes under 12 months for China to ratify a DTC or a
       TIEA. In fact, approximately 85% of China’s agreements entered into force
       within 12 months of signing.For seventeen of China’s agreements, it took
       more than 24 months before they entered into force. 38 From an update pro-
       vided by China, it appears that 10 of these agreements were ratified by China
       within one year and three more within two years. In practice, a signed DTC
       or TIEA is submitted to the State Council via the Ministry of Foreign Affairs
       to be ratified. After the ratification, a note for entry into force will be sent to
       the contracting state through diplomatic channels. China dispatches its note
       indicating its completion of its internal procedures for the entry into force to
       its treaty partner who will acknowledge receipt of the notification and may
       confirm it has also completed its internal procedure for the same purpose.
       When China receives the second notification, the treaty (either DTC or TIEA)
       will be in force.
       318.     The SAT authorities report that in some instances ratification has
       been difficult when a TIEA is signed between China and a jurisdiction which
       is either a crown dependency or an overseas territory of a sovereign jurisdic-
       tion. There have been miscommunications with regard to the issue of entry
       into force. However, the SAT authorities report that all miscommunications
       have been rectified. Only one of China’s recent TIEAs is pending ratification,
       that with the Cayman Islands, signed on 26 September 2011.




38.    Australia (26 months), Belarus (21 months), Belgium (29 months), Croatia
       (77 months), Greece (42 months), Hungary (31 months), Italy (50 months), Morocco
       (48 months), Nepal (117 months), Nigeria (84 months), Portugal (26 months), Qatar
       (92 months), Russia (35 months), Trinidad and Tobago (25 months), United States
       (31 months), Venezuela (45 months).


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
92 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     In effect (ToR C.1.9)
     319.    For exchange of information to be effective, the contracting parties must
     enact any legislation necessary to comply with the terms of the agreement.
     320.    All of China’s agreements which have been signed and concluded by
     both parties are in effect in China.
     321.     As noted previously in this report, China’s legal and regulatory
     framework is in place to ensure availability and access to information
     required for international tax matters. Treaties are given the full force and
     effect of law in China and must be faithfully observed. International agree-
     ments, such as DTCs and TIEAs override domestic laws in the case of
     conflict (TCAL Art. 91). As such, China’s international agreements have been
     given effect to in its national legislation.
     322.     China’s competent authority has a developed institutional framework
     that supports effective exchange of information. It has written administrative
     procedures to be followed by exchange of information staff for processing,
     co-ordinating, and responding to incoming requests. The SAT Protocol
     provides procedures for the co-ordination between the competent author-
     ity, Regional Taxation Bureaus, and Tax Offices. The guidelines establish
     a commitment by the tax authorities to provide exchange of information
     assistance in a timely manner. Agreements between China’s SAT and other
     relevant PRC government agencies provide procedures for assistance in rela-
     tion to exchanging information (e.g. Notice on Business Registration and Tax
     Registration Information Exchange and Sharing by State Administration of
     Taxation and State Administration of Industry and Commerce).

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.

                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


C.2. Exchange-of-information mechanisms with all relevant partners



     323.   Ultimately, the international standard requires that jurisdictions exchange
     information with all relevant partners, meaning those partners who are


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 93



       interested in entering into an information exchange arrangement. Agreements
       cannot be concluded only with counterparties without economic significance. If
       it appears that a jurisdiction is refusing to enter into agreements or negotiations
       with partners, in particular ones that have a reasonable expectation of requiring
       information from that jurisdiction in order to properly administer and enforce
       its tax laws it may indicate a lack of commitment to implement the standards.
       324.    China has a comprehensive treaty network that covers all of its major
       trading partners (European Union; United States; Japan; ASEAN 39 member
       states except Cambodia and Myanmar; Hong Kong, China; Republic of
       Korea; Australia; Russia; India. 40). China has signed exchange of information
       agreements with 33 of the 34 OECD 41 countries (not with Chile), all the G20
       countries, and 63 of the 106 Global Forum members. 42
       325.     China has signed TIEAs with eight jurisdictions (Argentina,
       Bahamas, British Virgin Islands, Bermuda, Cayman Islands, Guernsey, Isle
       of Man, Jersey) and has established a detailed agenda of negotiation for addi-
       tional exchange of information agreements. In addition, seven existing DTCs
       will be renegotiated. In all cases, China expects that the outcome in terms
       of exchange of information provisions will be to the international standard.
       There is no indication that China has not entered into an agreement with a
       jurisdiction when requested to do so.




39.    The Association of Southeast Asian Nations (ASEAN) has 10 member states:
       Brunei, Cambodia, Indonesia, Lao P.D.R., Malaysia, Myanmar, Philippines,
       Singapore, Thailand, and Vietnam (See www.aseansec.org/).
40.    http://english.mofcom.gov.cn/static/column/statistic/ie.html/1.
41.    Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia,
       Finland, France, Germany, Greece, Hungary, Iceland, Israel, Italy, Japan, Korea,
       Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal,
       Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom,
       United States.
42.    Argentina; Australia; Austria; Bahamas; Bahrain; Barbados; Belgium; Bermuda;
       Brazil; Brunei; Cayman Islands; Canada; Cyprus; Czech Republic; Denmark;
       Estonia; Finland; France; FYROM; Georgia; Germany; Greece; Guernsey; Hong
       Kong, China; Iceland; India; Indonesia; Ireland; Isle of Man; Israel; Italy; Jamaica;
       Japan; Jersey; Korea; Luxembourg; Macao, China; Malaysia; Malta; Mauritius;
       Mexico; the Netherlands; New Zealand; Nigeria; Norway; Philippines; Portugal;
       Qatar; Russia; Saudi Arabia; the Seychelles; Singapore; Slovak Republic; Slovenia;
       South Africa; Spain; Sweden; Switzerland; Trinidad and Tobago; Turkey; United
       Arab Emirates; United Kingdom.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
94 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.
                Factors underlying
                recommendations                                 Recommendations




                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed


C.3. Confidentiality



     Information received: disclosure, use, and safeguards (ToR C.3.1)
     326.    Governments would not engage in information exchange without the
     assurance that the information provided would only be used for the purposes
     permitted under the exchange mechanism and that its confidentiality would
     be preserved. Information exchange instruments must therefore contain
     confidentiality provisions that spell out specifically to whom the information
     can be disclosed and the purposes for which the information can be used.
     In addition to the protections afforded by the confidentiality provisions of
     information exchange instruments, jurisdictions with tax systems generally
     impose strict confidentiality requirements on information collected for tax
     purposes.
     327.    All exchange of information articles in China’s DTCs have con-
     fidentiality provisions modelled on Article 26(2) of the OECD Model Tax
     Convention. Likewise, all of China’s TIEAs have confidentiality provisions
     modelled on Article 8 of the OECD Model TIEA. China’s DTCs and TIEAs
     override domestic PRC law in case of inconsistency (TCAL Art. 91).
     328.    The confidentiality provisions in China’s DTCs and TIEAs are
     backed by general confidentiality provisions in China’s domestic legisla-
     tion. Article 8 of the TCAL imposes an obligation on China’s tax authorities
     to maintain strict confidentiality in respect of any information obtained
     through their work. Article 87 provides that if any tax information is divulged
     due to any violation of the confidentiality provisions under the TCAL, the


       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 95



       responsible personnel will be punished according to the relevant administra-
       tive laws, and may be liable to up to 7 years imprisonment if such violation
       constitutes a crime. Tax information under exchange of information is gov-
       erned by the Law on Guarding State Secrets, the State Administration for
       Protection of State Secrets on the Confidentiality Administration of Carriers
       of State Secrets, and other relevant laws and regulations. According to the
       Law on Guarding State Secrets, any tax authority who violates the confi-
       dentially provisions under the TCAL is subject to a fine between CNY 1 000
       (EUR 118) and CNY 5 000 (EUR 590). In addition, the SAT authorities will
       circulate an internal notice of warning naming the tax authority that divulged
       such information to raise awareness of the importance of confidentiality.
       329.     The SAT Protocol provides specific rules for safeguarding the con-
       fidentiality of information for exchange of information purposes during the
       collection, storage, transmittal, and use of information. The detailed safe-
       guards are as follows (Arts.15 – 30):
                 information being exchanged is treated as a national secret and is
                 protected under the Law on Guarding State Secrets;
                 the information received must be handled as confidential documents
                 in conformity with the procedures provided by relevant domestic law
                 (e.g. TCAL);
                 only authorised officials can access the information and these offi-
                 cials must have taken training courses on confidentiality;
                 tax authorities are not allowed to disclose information received to
                 irrelevant persons or departments unless the competent authority
                 approves such disclosure;
                 no taxation authority at any level may disclose the source and con-
                 tents of the tax information in any public taxation document; and
                 information being exchanged must be transmitted through the National
                 Secret Channel, including an independent mailing system and phone
                 system;
       330.     In each tax bureau of the SAT (61 across China’s territory), there is
       at least one computer used exclusively for dealing with exchange of informa-
       tion requests in order to ensure the confidentiality of all information received
       and provided. In addition all information related to exchange of information
       requests is packed and sealed for transmission and delivered according to the
       relevant confidentiality provisions (i.e. through the National Secret Channel).
       In packing and sealing tax information, a confidential seal is affixed on the
       envelope and the serial number and names of the receiving and dispatching
       units are indicated.



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
96 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     All other information exchanged (ToR C.3.2)
     331.    The confidentiality provisions in China’s exchange of information
     agreements and domestic law do not draw a distinction between information
     received in response to requests or information forming part of the requests
     themselves. As such, these provisions apply equally to all requests for such
     information, background documents to such requests, and any other docu-
     ment reflecting such information, including communications between the
     requesting and requested jurisdictions and communications within the tax
     authorities of either jurisdiction.

                Determination and factors underlying recommendations

                                      Phase 1 determination
      The element is in place.

                                           Phase 2 rating
      To be finalised as soon as a representative subset of Phase 2 reviews is
      completed.


C.4. Rights and safeguards of taxpayers and third parties



     Exceptions to requirement to provide information (ToR C.4.1)
     332.    Each of China’s exchange of information agreements ensures that
     the parties are not obliged to provide information which would disclose any
     trade, business, industrial, commercial or professional secret or information
     which is the subject of attorney client privilege or information the disclosure
     of which would be contrary to public policy.
     333.    As noted in section B.1 of this report, China’s domestic law permits
     the disclosure of information to the extent that it is required to be disclosed
     by a DTC or TIEA. China’s DTCs and TIEAs specifically provide that trade,
     business, industrial, commercial or professional secrets are not required to
     be disclosed. Similarly, they do not require the disclosure of information
     that would be contrary to public policy. Therefore, information that falls into
     these categories remains protected under China’s domestic laws and requests
     for such information are declined. As noted previously in section B.1, legal
     professional privilege does not prevent the access to information by Chinese
     authorities.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 97



                   Determination and factors underlying recommendations

                                        Phase 1 determination
        The element is in place.

                                              Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.


C.5. Timeliness of responses to requests for information



       Responses within 90 days (ToR C.5.1)
       334.     In order for exchange of information to be effective, it needs to be
       provided in a timeframe, which allows tax authorities to apply the informa-
       tion to the relevant cases. If a response is provided after a significant lapse
       of time the information may no longer be of use to the requesting authorities.
       This is particularly important in the context of international co-operation
       as cases in this area must be of sufficient importance to warrant making a
       request.
       335.    There are no provisions in China’s laws or in its DTCs pertaining to
       the timeliness of responses or the timeframe within which responses should
       be provided. China’s TIEAs include an obligation to either respond to the
       request, or provide a status update within 90 days of receipt of the request.
       As such, there appear to be no legal restrictions on the ability of China’s
       competent authority to respond to requests within 90 days of receipt by pro-
       viding the information requested or by providing an update on the status of
       the request.
       336.    China receives a relatively high volume of requests for informa-
       tion. Over the last three years, China received around 300 inbound requests
       a year: 296 in 2009, 221 in 2010 and 345 in 2011, and the SAT expects the
       number of inbound requests to continue to grow in future years. Information
       received from partner jurisdictions with an exchange of information relation-
       ship with China indicates that 85% of the requests are answered in 90 days.
       In the majority of other cases, China’s competent authority provides a status
       update, within 90 days. In a few cases China responds to requests within 180
       days. Only in exceptionally rare cases does China respond within one year.
       China gives priority to urgent requests and requests relating to criminal tax
       matters in the requesting jurisdiction. Requests that cannot be fulfilled within



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
98 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     90 days typically relate to requests that involve a large number of taxpayers
     who are geographically dispersed in different provinces, cities, or districts
     in the country. Notwithstanding, the SAT authorities report that any delay is
     not the result of any particular type of information requested or the particular
     investigative measures used to access information.

     Monitoring and reporting
     337.     China’s competent authority uses measures to internally monitor its
     exchange of information program. The GCCD maintains a national database
     of all requests and correspondence classified by the name of the EOI partners.
     The national database is an application that allows for statistics generation
     and facilitates tracking and review. All local tax authorities (LSTBs and
     LTBs) are also obliged to establish similar recording systems at the local
     level. To ensure every request is responded to in a timely manner, the GCCD
     closely monitors each case and progress is tracked and updated in the national
     database. The GCCD will request follow-up reports from the relevant local
     tax bureaus in cases where a request is long outstanding. This system appears
     to be working efficiently.
     338.    In order to monitor China’s EOI program and evaluate the perfor-
     mance of all tax authorities at the provincial level that have participated in
     EOI, the SAT issues an annual EOI report, in which the following indicators
     are assessed:
               number of requests (including statistics by EOI partners and by pro-
               vincial tax authorities);
               length of time for providing a response (the SAT requires provin-
               cial tax authorities to finish investigations within 40 to 60 days,
               depending on the circumstances of each case, any delay by local tax
               authorities will be addressed in the report);
               quality of requests and replies (according to the DTC, TIEA, as well
               as the OECD standard); and
               application of domestic procedures in collecting information.
     339.     China’s competent authority has procedures to produce a status
     report or an interim report for requests that take longer than 90 days to pro-
     vide a response. However, this process is monitored manually and it may, in
     some cases not be entirely accurate. Nevertheless, the competent authority is
     in the process of updating its system to allow for automatic status reporting.
     340.    When the responsible local tax bureau obtains requested information,
     the information, together with a report, is submitted to each higher level of
     tax bureau until it reaches the competent authority at the SAT Headquarters.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                    COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 99



       In each step, if the reviewing official believes that the information collected
       is not sufficient, or further audit is necessary, the information is returned to
       the local responsible tax bureau for further collection or audit until it fully
       meets the requirements of the requesting jurisdiction.
       341.    China’s competent authority has periodical meetings with jurisdic-
       tions with which it has a significant EOI relationship or has strong mutual
       economic ties in order to update the status of requests, as well as to exchange
       views pertaining to matters of interest for both jurisdictions regarding EOI.
       For example, the competent authority reports that the tax attaché of the
       United States in Beijing has made frequent visits to the SAT to discuss the
       practical operation of the EOI article under the existing United States – China
       DTC. In addition, the SAT has meetings with officials from Japan on EOI
       topics two or three times each year.

       Organisational process and resources (ToR C.5.2)
       342.    China’s legal and regulatory framework relevant to exchange of
       information for tax purposes is presided over by the SAT. The GCCD is
       delegated authority to act as competent authority under China’s EOI agree-
       ments. China’s competent authority is clearly identifiable to its exchange of
       information partners. The competent authority’s name and address is listed
       on the SAT’s website in English, and additional information can be found on
       the website in Chinese (www.chinatax.gov.cn).
       343.    The GCCD is based in Beijing and is comprised of a specialised
       team of three experts in international taxation. The GCCD oversees all EOI
       matters in China. In addition, for each level of tax authorities, there are des-
       ignated specialists working exclusively or concurrently on EOI matters. All
       EOI personnel are obliged to have bachelor’s degree or above in related fields,
       as well as more than five years experience in international taxation.
       344. All staff engaged in EOI matters receive training specific to EOI
       issues in order to provide quality service to China’s EOI partners. The
       training is specifically designed to cover essential topics in EOI, including
       obligations under EOI mechanisms, internal processing of requests and con-
       fidentiality obligations. One of the most significant training programs is the
       Seminar on EOI under the OECD Outreach Program, which is held once a
       year with approximately 100 staff participating. In addition, there are several
       other seminars held each year in China on selective EOI topics (e.g. interna-
       tional practice in EOI and case studies). According to the statistics provided
       by China’s tax authorities, approximately 450 tax officials received EOI train-
       ing in the past three years.
       345.     In 2006, the SAT published a comprehensive circular on EOI directive
       rules, namely the SAT Protocol, which provides procedures and requirements


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
100 – COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

     for all categories of China’s EOI program. The SAT Protocol is based on the
     OECD Manual on Information Exchange. In particular, the SAT Protocol sets
     forth the procedures used from the date an EOI request is received to the date
     that the information is provided to the requesting jurisdiction. The SAT also
     released a circular on EOI Model Templates in order to provide additional
     guidance for EOI requests and replies. The model templates explain the spe-
     cific requirements on how to prepare a valid request and response and also
     provides templates for EOI documents and correspondence, including cover
     letter, memorandum, acknowledgement, etc.
     346.     When a request is received by the Director General or the Deputy
     Director General of International Taxation Department, the request is sent
     directly to the GCCD. The experts in the GCCD then examine the request to
     ensure that the request is in line with the respective DTC or TIEA between
     China and the requesting jurisdiction. If a request is deficient in any respect,
     the competent authority of the requesting jurisdiction will be notified.
     China’s competent authority never simply declines an invalid request without
     asking for clarification or additional information from the requesting jurisdic-
     tion. If a request is identified as valid, the GCCD will immediately seal an
     official SAT Headquarters document to dispatch it to the relevant provincial
     tax authorities to make further investigations.
     347.     As described in section B of this report, the tax administration
     system in China is divided into five levels from the Central Government at
     the top level to the local tax authorities at the lower working levels, all of
     which have their own responsibilities in relation to EOI matters. Investigation
     and examinations for all EOI requests are handled by the lower working level
     tax authorities and reported to each upper level. The specialists in each tax
     bureau at the provincial level have been trained especially for the purpose
     of assisting China’s competent authority to complete investigations in their
     respective provinces. There is adequate financial and technical support at the
     provincial level dedicated to providing EOI assistance. For example, there is
     at least one computer exclusively used for dealing with EOI requests in each
     tax bureau in order to ensure the confidentiality of all information received
     and provided.
     348.    The three international tax specialists in the GCCD, who work
     exclusively for matters concerning EOI in China, are facing challenges
     posed by the gradual increase in the number of inbound requests. From 2009
     to 2010, the number of inbound requests received by China increased by
     approximately 100. The SAT authorities report that they expect the number
     of inbound requests to continue to grow in future years. Under staffing of the
     GCCD may result in longer response times, especially if large quantities of
     requests are received in a short time. The SAT authorities report, however,
     that they are currently considered adding additional personnel in the GCCD.



       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                   COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION – 101



       349.    Overall, China has dedicated appropriate financial and technical
       resources to the various areas of EOI regime. However, considering the
       increasing volume of inbound requests China receives, it is recommended
       that China devote additional personnel resources to the GCCD to ensure
       effective management of China’s EOI program. Notwithstanding, all compe-
       tent authority staff maintain high professional standards and have adequate
       expertise and training specific to EOI.

       Absence of restrictive conditions on exchange of information
       (ToR C.5.3)
       350.    There are no laws or regulatory practices in China that impose unrea-
       sonable, disproportionate, or unduly restrictive conditions on exchange of
       information.

                   Determination and factors underlying recommendations

                                        Phase 1 determination
        The assessment team is not in a position to evaluate whether this
        element is in place, as it involves issues of practice that are dealt with in
        the Phase 2 review.

                                              Phase 2 rating
        To be finalised as soon as a representative subset of Phase 2 reviews is
        completed.
                  Factors underlying
                  recommendations                                  Recommendations




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                   SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 103




              Summary of Determinations and Factors
                 Underlying Recommendations 43


                                       Factors underlying
      Determination                    recommendations                        Recommendations

                                                                         (ToR A.1)
 Phase 1
 determination: The
 element is in place.




 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.

                       (ToR A.2)
 Phase 1
 determination: The
 element is in place.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.




43.    The ratings will be finalised as soon as a representative subset of Phase 2 reviews
       is completed.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
104 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

                                    Factors underlying
     Determination                  recommendations                         Recommendations
                                                                          (ToR A.3)
Phase 1
determination: The
element is in place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.




                                                                                               (ToR B.1)
Phase 1
determination: The
element is in place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.
                                 e.g.
                                                                                               (ToR B.2)
Phase 1
determination: The
element is in place.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.

(ToR C.1)
Phase 1
determination: The
element is in place.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                   SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS – 105



                                       Factors underlying
      Determination                    recommendations                        Recommendations
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.

           (ToR C.2)
 Phase 1
 determination: The
 element is in place.

 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.

                                                              (ToR C.3)
 Phase 1
 determination: The
 element is in place.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.

                                 (ToR C.4)
 Phase 1
 determination: The
 element is in place.
 Phase 2 rating: To be
 finalised as soon as a
 representative subset
 of Phase 2 reviews is
 completed.




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
106 – SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

                                    Factors underlying
     Determination                  recommendations                         Recommendations

        (ToR C.5)
The assessment team
is not in a position to
evaluate whether this
element is in place, as
it involves issues of
practice that are dealt
with in the Phase 2
review.
Phase 2 rating: To be
finalised as soon as a
representative subset
of Phase 2 reviews is
completed.




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 107




      Annex 1: Jurisdiction’s Response to the Review Report*


           China would like to express its heartfelt appreciation for the hard work
       done by the Secretariat, assessment team and all PRG members in the whole
       peer review process of China.
            While long committed to transparency and exchange of information for
       tax purposes, China will continue to develop its exchange of information
       network with all relevant partners. The country has recently signed its 98th
       Double Tax Agreement with Botswana and is in the process of completing
       its internal procedures for the entry into force of the just signed. Meanwhile,
       China is also speeding up the completion of its internal procedures for
       the entry into force of other Double Tax Agreements and TIEAs that have
       already been signed but are not in force yet. In addition, China has already
       devoted one more staff to the GCCD to ensure effective management of its
       EOI program.
           To sum up, China will join hands with all Global Forum members and
       other relevant jurisdictions to push forward transparency and effective
       exchange of information for tax purposes.




       * This Annex presents the Jurisdiction’s response to the review report and shall
       not be deemed to represent the Global Forum’s views.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
108 – ANNEXES




     Annex 2: List of All Exchange-of-Information Mechanisms
                              in Force


                                 Type of EOI
No.      Jurisdiction            Agreement                Date Signed                 Date in force
1



                                      DTC
3




                                      DTC
5                                     DTC
                                      DTC
                                      DTC
                                      TIEA
                                      DTC
                                      DTC
11                                    DTC


                                      DTC
13                                    DTC


                                      TIEA

15                                    DTC

                                      DTC




        PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 109



                                   Type of EOI
No.        Jurisdiction            Agreement               Date Signed                 Date in force
                                       TIEA

                                        DTC
                                        DTC
                                        DTC

                                       TIEA
                                        DTC
                                        DTC
                                        DTC
                                        DTC

                                        DTC

                                        DTC
                                        DTC
                                        DTC
                                        DTC
31                                      DTC

                                        DTC
33                                      DTC
                                        DTC



44.    1. Footnote by Turkey: The information in this document with reference to
       “Cyprus” relates to the southern part of the Island. There is no single authority
       representing both Turkish and Greek Cypriot people on the Island. Turkey rec-
       ognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and
       equitable solution is found within the context of the United Nations, Turkey shall
       preserve its position concerning the “Cyprus issue”.
       2. Footnote by all the European Union Member States of the OECD and the
       European Commission: The Republic of Cyprus is recognised by all members
       of the United Nations with the exception of Turkey. The information in this
       document relates to the area under the effective control of the Government of the
       Republic of Cyprus.”
45.    Former Yugoslav Republic of Macedonia.


PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
110 – ANNEXES

                                Type of EOI
No.     Jurisdiction            Agreement                Date Signed                 Date in force
35                                   DTC
                                     TIEA
                                     DTC




                                     DTC
                                     DTC
                                     DTC
                                     DTC
                                     DTC
                                     DTC
                                     TIEA
                                     DTC
                                     DTC
                                     DTC
                                     DTC
                                     TIEA
                                     DTC
51                                   DTC
                                     DTC
53                                   DTC
                                     DTC
55                                   DTC
                                     DTC
                                     DTC
                                     DTC



                                     DTC


                                     DTC




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 111



                                   Type of EOI
No.        Jurisdiction            Agreement               Date Signed                 Date in force
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC



                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC
                                        DTC



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
112 – ANNEXES

                                 Type of EOI
No.       Jurisdiction           Agreement                Date Signed                 Date in force
                                      DTC
                                      DTC
                                      DTC

                                      DTC
                                      DTC
                                      DTC
                                      DTC
                                      DTC
                                      DTC

                                      DTC


                                      DTC
                                      DTC
                                      DTC
                                      DTC
                                      DTC

* China continues to apply the provision of the treaty with the former Yugoslavia for its relationships
with Bosnia and Herzegovina.

** Serbia and Montenegro ceased to exist on 5 June 2006. Serbia is the legal successor of the state union
of Serbia and Montenegro. This treaty was concluded by the former Yugoslavia and continued to apply
in relations between Serbia and Montenegro and China. This treaty remains applicable in relations
between Serbia and China. Montenegro has declared that it will honor all tax treaties that applied
with respect to Serbia and Montenegro. However, application of the treaty with Montenegro has to be
confirmed by China.




        PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 113




                     Annex 3: List of all Laws, Regulations
                        and Other Relevant Material


Accounting

            Accounting Law of the People’s Republic of China (Order of the
               President of the People’s Republic of China [1999] No. 24)
            Circular of the Ministry of Finance and the State Archives
                Administration Regarding the Release of the Procedures for the
                Administration of Accounting Archives (Cai Kuai Zi [1998] No. 32)
            Circular of the Ministry of Finance on Printing and Distributing the
                Accounting System for Non-governmental Non-profit Organizations
                (Cai Kuai [2004] No. 7)
            Financial Rules for Financial Enterprises (Order of the Ministry of
                Finance [2006] No. 42)

Anti-money laundering

            Anti-Money Laundering Law of the People’s Republic of China (Order of
               the President of the People’s Republic of China [2006] No. 56)
            Rules for Anti-money Laundering by Financial Institutions (Order of the
               People’s Bank of China [2006] No. 1)

Company Law

            Company Law of the People’s Republic of China (Order of the President
               [2005] No. 42)
            Company Law of the People’s Republic of China (1993 Version)
            Regulations of the People’s Republic of China on the Administration
               of Company Registration (Amended in 2005) (Order of the State
               Council [2005] No. 451)



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
114 – ANNEXES

          Wholly Foreign-owned Enterprise Law of the People’s Republic of China
            (2000 Revision)
          Detailed Implementing Rules for the Law of the People’s Republic of
             China on Wholly Foreign-owned Enterprises (Revised) (Order of
             State Council [2001] No. 301)
          Detailed Implementation Rules for the Administrative Regulations of the
             People’s Republic of China on the Registration of Enterprise Legal
             Persons
          Sino-foreign Equity Joint Venture Law (2001 Revision) (Order of the
              President [2001] No. 48)
          Sino-Foreign Co-operative Joint Venture Law of the People’s Republic of
              China (Order of the President [2000] No. 40)
          Circular of the State Administration for Industry and Commerce, the
              Ministry of Commerce, the General Administration of Customs and
              the State Administration of Foreign Exchange on the Issue of the
              Implementing Opinion on Several Issues Concerning the Application
              of Law in the Administration of the Examination, Approval and
              Registration of Foreign-invested Companies (Gong Shang Wai Qi Zi
              [2006] No. 81)
          Administrative Measures for the Registration of Enterprises of Foreign
            Countries (Regions) Engaged in Production and Business Activities
            within the Territory of China (Order of the State Administration for
            Industry and Commerce [1992] No. 10)
          Provisions of the Supreme People’s Court about Several Issues on the
             Application of the Company Law of the People’s Republic of China
             (i) (Fa Shi [2006] No. 3)
          Circular of the Ministry of Foreign Trade and Economic Cooperation and
              the State Administration for Industry and Commerce on Printing and
              Issuing Several Provisions for the Alteration of Investors’ Equities in
              Foreign Investment Enterprises (Wai Jing Mao Fa [1997] No. 267)

Constitution/Legislation/Court

          The Constitution of the People’s Republic of China (Amended 2004)
          Legislation Law of the People’s Republic of China (Order of the President
             [2000] No. 31)




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 115



            Organic Law of the People’s Courts of the People’s Republic of China
               (Revised in 2006) (Order of the President of the People’s Republic of
               China No. 59)
            General Principles of Civil Law of the People’s Republic of China (Order
               of the President [1986] No. 43)
            Criminal Law of the People’s Republic of China (1997 Version) (Order of
               the President [1997] No. 83)
            Civil Procedure Law of the People’s Republic of China (Revised in 2007)
                (Order of the President of the People’s Republic of China [2007]
                No. 75)
            Several Provisions of the Supreme People’s Court on Evidence in Civil
               Proceedings
            Administrative Litigation Law of the People’s Republic of China
            Interpretations of the Supreme Court on Certain Issues Concerning the
                Application of the Administrative Procedure Law of the People’s
                Republic of China

Financial industry

            Regulation of Deposit Saving Administration (Order of the State Council
               [1992] No. 107)
            People’s Bank of China Law of the People’s Republic of China (2003
               amendment) (Order of the President [2003] No. 12)
            Law of the People’s Republic of China on Commercial Banks (Revised in
               2003) (Order of the Present [2003] No. 13)
            Administrative Measures for Identifying the Financial Institutions’
              Clients and Preserving Their Identity Information and Transaction
              Records (Joint Order of the People’s Bank of China, the China
              Banking Regulatory Commission, the China Securities Regulatory
              Commission and the China Insurance Regulatory Commission
              [2007] No. 2)
            Implementing Measures of China Banking Regulatory Commission
               for Administrative Licensing Matters Concerning Chinese-funded
               Commercial Banks (Revised 2006) (Order of China Banking
               Regulatory Commission [2006] No. 7)




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
116 – ANNEXES

          Order of the China Banking Regulatory Commission on the Release of
             the Measures for the Administration of Financial License Control
             (Order of the China Banking Regulatory Commission [2003] No. 2)
          Administrative Rules for the Reporting by Financial Institutions of
            Large-value and Suspicious Transactions (Order of the People’s Bank
            of China [2006] No. 2)
          Measures for the Administration of Financial Institutions’ Reports on
             Suspicious Financing Transactions for Terrorist-related Activities
             (Order of the People’s Bank of China [2007] No. 1)

Foreign exchange

          Foreign Exchange Administrative Regulations of the People’s Republic of
              China (2008 Revision) (Order of the State Council No. 532)
          Circular on Certain Issues Relating to Strengthening the Administration
              of Capital Account Foreign Exchange Business (Hui Fa [1998]
              No. 21)

Foundation

          Regulation on the Administration of Foundation (Order of the State
             Council [2004] No. 400)
          Measures for Annual Inspection of Foundations (Order of the Ministry of
             Civil Affairs [2005] No. 30)
          Measures for the Information Disclosure of Foundations (Order of the
             Ministry of Civil Affairs [2006] No. 31)

Fund

          Law of the People’s Republic of China on Securities Investment Fund
             (Order of the President of the People’s Republic of China [2003]
             No. 9)
          Measures for the Administration of Securities Investment Fund
             Management Companies (Order of the China Securities Regulatory
             Commission [2004] No. 22)




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 117



Individual income tax

            Circular of Civil Aviation Administration on the Issuance of the
                Measures (Trial) on Individual Income Tax (IIT) Self Declaration
                (Guo Shui Fa [2006] No. 162)
            Circular of the Ministry of Finance and the State Administration
                of Taxation on Printing and Distributing the Provisions on the
                Collection of Individual Income Tax on Investors of Individual
                Proprietorship and Partnership Enterprises (Cai Shui [2000] No. 91)
            Individual Income Tax Law of the People’s Republic of China (2011
                Revision) (Order of the President of the People’s Republic of China
                No. 48)
            Regulations for the Implementation of the Individual Income Tax Law of
               the People’s Republic of China (2011 Revision)

Insurance law

            Insurance Law of the People’s Republic of China (Amended) (Order of
                the President of the People’s Republic of China No. 11)

Miscellaneous

            Lawyer Law of the People’s Republic of China (2007 Amendment) (Order
               of the President [2007] No. 76)
            Code of Ethics for Lawyers

Partnership
            Partnership Enterprise Law of the People’s Republic of China (2006
                Amendment) (Order of the President of the People’s Republic of
                China [2006] No. 55)
            Decision of the State Council on Revising the Administrative Measures
               of the People’s Republic of China for the Registration of Partnership
               Enterprises (Order of State Council No. 497)
            The Regulations on the Administration of Registration of Partnership
               Businesses (1997) (The order of the State Council No. 236)




PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
118 – ANNEXES

          Administrative Measures on the Establishment of Partnership Enterprises
             in China by Foreign Enterprises or Individuals (Order of the State
             Council of the People’s Republic of China No. 567)
          Circular of the Ministry of Finance and the State Administration of
              Taxation on Issues Concerning the Income Tax Levied on Partners
              of a Partnership Enterprise (Cai Shui [2008] No. 159)

SAIC – Measures for the Annual Inspection of Enterprises

          Measures for the Annual Inspection of Enterprises (Order of the State
             Administration for Industry and Commerce [2006] No. 23)

Securities

          Securities Law of the People’s Republic of China (Order of the President
             of the People’s Republic of China No. 43)
          Measures for the Administration of Securities Registration and
             Settlement (2009 Revision) (Order of the China Securities Regulatory
             Commission No. 65)

Tax

          Law of The People’s Republic of China Concerning the Tax
             Administration and Tax Collection (Decree of the President [2001]
             No. 49)
          Detailed Rules for the Implementation of the Law of the People’s
             Republic of China on Tax Administration and Collection (Order of
             the State Council [2002] No. 362)
          Procedures for the Administration of Tax Registration (Order of the State
              Administration of Taxation [2003] No. 7)
          The Law of the People’s Republic of China on Enterprise Income Tax
             (Order of the President [2007] No. 63)
          The Circular of the State Administration of Taxation Regarding the
             Issuance of the Interim Procedures for the Administration of Source
             Withholding for Non-Resident Enterprise Income Tax (Guo Shui Fa
             [2009] No. 3)




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
                                                                                             ANNEXES – 119



            Provisional Measures for Tax Administration on Contracting Engineering
                Operation and Providing Labour Services of Non-residents (Order of
                the State Administration of Taxation [2009] No. 19)
            Circular on Printing and Distributing the Tentative Administrative
                Measures on Tax Convention Treatments for Non-Residents (Guo
                Shui Fa [2009] No. 124)
            The Release of Regulations on the Implementation of Enterprise Income
               Tax Law of the People’s Republic of China by the State Council
               (Order of the State Council [2007] No. 512)
            Circular of the State Administration of Taxation on Issues Concerning
                the Identification of China-controlled Overseas-registered
                Enterprises as Resident Enterprises on the Basis of the Standard of
                Actual Management Organization (Guo Shui Fa [2009] No. 82)
            Circular on Issues Concerning Tax Credit for Enterprises’ Overseas
                Income (Cai Shui [2009] No. 125)
            Announcement on Promulgating the Operating Guidelines on Tax
               Credit for Enterprise Offshore Income (Announcement of the State
               Administration of Taxation [2010] No. 1)
            Circular of the State Administration of Taxation on Issues Concerning
                the Identification of China-controlled Overseas-registered
                Enterprises as Resident Enterprises on the Basis of the Standard of
                Actual Management Organization (Guo Shui Fa [2009] No. 82)
            Working Regulations for the International Exchange of Tax Intelligence
               (State Administration of Taxation June 12, 2006)

Trust
            Trust Law of the People’s Republic of China (Order of the President of the
                People’s Republic of China [2001] No. 50)
            Procedures on the Administration of Trust Companies (Order of the
               China Banking Regulatory Commission [2007] No. 2)
            Circular of the Ministry of Finance on Printing and Issuing the
                Accounting Rules of Trust Business (Cai Kuai [2005] No. 1)
            Circular of the China Banking Regulatory Commission and the State
                Administration of Foreign Exchange on the Issues Concerning
                Promulgation of the Tentative Measures for Administration of
                Commissioned Overseas Wealth Management Business Undertaken
                by Trust Companies (Yi Jian Fa [2007] No. 27)



PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
120 – ANNEXES




        Annex 4: People Interviewed During On-Site Visit


          Banking Regulatory Commission
          Guangdong Local Taxation Bureau
          Jiangsu Municipal Office of the State Administration of Taxation
          Ministry of Commerce
          Ministry of Justice
          Ministry of Finance
          Ministry of Public Security
          People’s Bank of China
          Securities Depository and Clearing Corporation Limited
          Securities Regulatory Commission
          Shanghai Trust Registration Centre
          State Administration for Industry and Commerce
          State Administration of Taxation
          State Counsel Legislative Affairs Office
          The National People’s Congress of the People’s Republic of China




       PEER REVIEW REPORT – COMBINED PHASE 1 AND PHASE 2 REPORT – THE PEOPLE’S REPUBLIC OF CHINA © OECD 2012
          ORGANISATION FOR ECONOMIC CO-OPERATION
                     AND DEVELOPMENT
     The OECD is a unique forum where governments work together to address the
economic, social and environmental challenges of globalisation. The OECD is also at the
forefront of efforts to understand and to help governments respond to new developments
and concerns, such as corporate governance, the information economy and the challenges of
an ageing population. The Organisation provides a setting where governments can compare
policy experiences, seek answers to common problems, identify good practice and work to
co-ordinate domestic and international policies.
     The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the
Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland,
Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland,
Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom
and the United States. The European Union takes part in the work of the OECD.
     OECD Publishing disseminates widely the results of the Organisation’s statistics gathering
and research on economic, social and environmental issues, as well as the conventions,
guidelines and standards agreed by its members.




                        OECD PUBLISHING, 2, rue André-Pascal, 75775 PARIS CEDEX 16
                          (23 2012 24 1 P) ISBN 978-92-64-17825-0 – No. 60105 2012
Global Forum on Transparency and Exchange of Information
for Tax Purposes
PEER REVIEWS, COMBINED: PHASE 1 + PHASE 2
PEOPLE’S REPUBLIC OF CHINA
The Global Forum on Transparency and Exchange of Information for Tax Purposes is the
multilateral framework within which work in the area of tax transparency and exchange of
information is carried out by over 100 jurisdictions which participate in the work of the Global
Forum on an equal footing.
The Global Forum is charged with in-depth monitoring and peer review of the implementation
of the standards of transparency and exchange of information for tax purposes. These
standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of
Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax
Convention on Income and on Capital and its commentary as updated in 2004, which has
been incorporated in the UN Model Tax Convention.
The standards provide for international exchange on request of foreseeably relevant
information for the administration or enforcement of the domestic tax laws of a requesting
party. “Fishing expeditions” are not authorised, but all foreseeably relevant information must
be provided, including bank information and information held by fiduciaries, regardless of the
existence of a domestic tax interest or the application of a dual criminality standard.
All members of the Global Forum, as well as jurisdictions identified by the Global Forum as
relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1
reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange
of information, while Phase 2 reviews look at the practical implementation of that framework.
Some Global Forum members are undergoing combined – Phase 1 plus Phase 2 – reviews.
The ultimate goal is to help jurisdictions to effectively implement the international standards
of transparency and exchange of information for tax purposes.
All review reports are published once approved by the Global Forum and they thus represent
agreed Global Forum reports.
For more information on the work of the Global Forum on Transparency and Exchange of
Information for Tax Purposes, and for copies of the published review reports, please visit
www.oecd.org/tax/transparency and www.eoi-tax.org.


 Please cite this publication as:
 OECD (2012), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer
 Reviews: People’s Republic of China 2012: Combined: Phase 1 + Phase 2, OECD Publishing.
 http://dx.doi.org/10.1787/9789264178267-en
 This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical
 databases. Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.




                                                    ISBN 978-92-64-17825-0
                                                             23 2012 24 1 P       -:HSTCQE=V\]WZU:

								
To top