What is the structure of Chinese tax system?
The answer to this question lies in legal theory: Since China is a civil law country, judges are not authorized to create new rules or principles that are to be followed as binding law. Legal rules are codified and not based on precedent. As far as taxation, the main sources of legislation are national statutes and regulations and various rulings by the State Administration of Taxation (SAT). Legislation regarding specifically foreign enterprises are issued by the National People's Congress and the State Council. China's tax system is complex and non-compliance may trigger serious penalties. It is therefore not as simple as to say that all tax issues can be negotiated and it is highly important to understand and follow the statutes and SAT rulings. The main source of legislation is the Law on Administration of Taxation of the People's Republic of China, effective from May 2001.
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