Some foreign companies achieve the purpose of tax avoidance by importing equipment prices.
(1) In the joint venture contract, the houses and equipment invested by both Chinese and foreign parties are expensive, and the investment is artificially increased and the fixed assets are inflated, so as to achieve the purpose of accruing more depreciation and paying less income tax.
(2) Some foreign investors make profits by buying and selling equipment that investment enterprises need to introduce. In addition, foreign businessmen pass old equipment off as new equipment, inferior equipment off as perfect equipment, and obsolete equipment off as advanced equipment, all of which are priced according to new equipment, which not only affects the normal production of the joint venture, but also causes great economic losses to the joint venture and affects the national fiscal revenue.
Transfer profits through the establishment of 100% foreign-funded enterprises.
Some foreign manufacturers take advantage of the advantages of convenient transportation, sensitive information, cheap labor and preferential policies in the coastal areas of China to transfer some production activities from domestic or other areas to the coastal areas of China. Most of these foreign-funded enterprises are "two-headed" manufacturing and processing enterprises. The enterprise itself has no independent purchase and sale network and channels abroad, and relies on the overseas parent company or other subsidiaries of the parent company to purchase raw materials and underwrite products for it. Because it is a product transfer within the group company, the settlement between foreign-funded enterprises and overseas affiliated companies mostly adopts internal pricing, which avoids China's tax by raising the price of raw materials and lowering the price of products. In this way, a strange phenomenon appeared. The sales of enterprise products are not a problem, and the production is saturated, but the enterprise is losing money, or although it is profitable, its profit level is low. However, despite the loss or meager profit, the production scale has not shrunk, but has continued to expand.
The foreign party of a joint venture or cooperative enterprise controls the production and operation of the enterprise through contracting and independently obtains operating profits.
At present, some joint ventures and cooperative enterprises are also contracted, and enterprises with "two heads out" are generally contracted by foreign parties. Through contracting, although the Chinese side is guaranteed a certain income every year, it also provides conditions for the contractor to convey profits.
Transfer taxable income through transfer pricing
It is a common practice for foreign businessmen to transfer taxable income between affiliated enterprises to avoid taxes through abnormal pricing of goods purchase and sale and financial revenue and expenditure.
6. In import project contracts, tax-exempt items include taxable items.
In some import projects, due to the inexperience of Chinese negotiators or other reasons, foreign businessmen have included taxable royalties or project funds in the equipment price with the acquiescence of the Chinese side. The contract price only reflects the total equipment price, and even the technical service or installation work has no amount. By signing such contracts, foreign businessmen have evaded their due taxes.
7. Use contracted projects to avoid taxes.
Since China adopted the policy of opening to the outside world, many foreign companies have come to China to engage in contracted projects and provide labor services. With regard to the income of these foreign companies from contracting projects and providing labor services in China, the state allows them to deduct 70% of the equipment and materials costs based on the principle of preferential treatment and simple procedures, and only levy consolidated industrial and commercial tax and enterprise income tax on the remaining 30% of the income.
8. Use China's regulations on profit remittance to avoid tax.
According to China's Income Tax Law on Enterprises with Foreign Investment and Foreign Enterprises, the remitted profit income tax shall be paid when the foreign shares of an enterprise are remitted, and the remitted profits shall not be paid. In response to this regulation, some joint ventures and foreign-funded enterprises have adopted various methods to transfer profits abroad in order to avoid China's taxes.
9. Some foreign-invested enterprises are affiliated with domestic enterprises to avoid taxes.
Because foreign-invested enterprises enjoy special preferential treatment from the state, the products they produce cannot be refunded according to the export regulations of domestic enterprises. However, some foreign businessmen (including agents, middlemen and foreign representatives in some "foreign-funded" enterprises), under the banner of increasing investment and introducing equipment for domestic enterprises, do everything possible to link up with domestic enterprises, conspire with domestic enterprises, transfer products produced by foreign-funded enterprises to domestic enterprises for export, or transfer trademarks of domestic enterprises to other enterprises for export through middlemen, in order to seek tax refund. Even some foreign businessmen use "investment" and "setting up factories" as bait, and extort local governments and competent departments of enterprises eager to attract foreign investment on the condition of obtaining export tax rebate certificates to provide them with convenient conditions for export tax rebate.
10. Take advantage of the preferential terms of the tax law
According to China's Income Tax Law on Enterprises with Foreign Investment and Foreign Enterprises, "enterprises with foreign investment in special economic zones, foreign enterprises with institutions and places in special economic zones engaged in production and operation, and productive enterprises with foreign investment in economic and technological development zones are subject to enterprise income tax at a reduced rate of 15%. Productive foreign-invested enterprises located in the old urban areas of cities where coastal development zones and economic and technological development zones are located shall be subject to income tax at a reduced rate of 24%.