Soft Launch/Pilot Program For Advance Tax Rulings In China

Under mainland China's tax system, tax bureaus have relatively strong discretionary power in the application of tax laws. Additionally, because the informal rulings of tax authorities are almost never disclosed to the public, and considering that judicial judgements involving tax laws are relatively few and of limited referential value, many companies doing business in China often face the predicament of not having any precedents to follow when judging whether they are entitled to tax incentives or whether they are subject to potential tax risks. In practice, this information mismatch routinely results in tax disputes between companies and PRC tax authorities.

In light of this background, in recent years, more and more tax bureaus in China have issued policies that allow taxpayers to apply for "advance tax rulings", which help to enhance tax certainty and reduce the tax risks faced by companies in their business decision-making processes.