Shanghai Advance Tax Ruling
The Announcement on Issuing the Management Measures for Advance Tax Rulings of the Shanghai Municipal Tax Service (Trial Measures) was released on 29 December 2023 by the Shanghai Municipal Tax Service of the State Administration Taxation (SAT).
To further regulate the advance ruling of tax affairs and enhance the certainty of the application of tax policies of the whole Municipality, the Shanghai Municipal Tax Service has, in light of the actual circumstances of Shanghai, developed the Trial Measures, which are hereby issued for compliance and implementation. All problems encountered during the implementation shall be reported to the Shanghai Municipal Tax Service in a timely manner.
- Definition of Advance Ruling
Advance Ruling refers to a service item that, in response to the request of enterprises for the application of tax laws and regulations to specific complex tax-related matters that are expected to occur in the future, the tax authorities provide written opinions on the application of relevant policies based on existing tax laws and regulations. The service is based on the principle of mutual trust between tax authorities and enterprises.
Advance Ruling is a personalized tax service initiative for companies, which is not an administrative act that substantially affects the rights and obligations of companies and is not reviewable or litigable.
- Application Requirements and Process
Scope of application
Taxpayers of companies in Shanghai, excluding individual taxpayers.
Scope of non-application
- Matters without a pre-developed project plan or will not occur in the following two years;
- Matters without reasonable commercial purposes or expressly prohibited by relevant national laws and regulations;
- Matters to which explicit provisions in the existing tax laws and regulations may directly apply;
- Other matters to which advance rulings are not applicable.
Application and Acceptance
The authority that handles advance ruling matters is the Large Company Management Department. Companies may apply to the Large Company Management Department at the municipal or district level and submit their relevant materials as required.
Audit and Judgment
The authority handling the matter shall determine whether the application meets advance ruling requirements through means such as desk review or on-site investigation based on the materials submitted by the applicant.
If the center bureau or the tax authority makes an opinion on the advance ruling, it will issue to the applicant a «Tax Advance Ruling Opinions», which includes four parts, namely, the company involved, the tax matter, the opinion on the ruling, and the policy basis.
- Application of Opinions
Conditions
- The relevant materials submitted by the applicant are legal, true, accurate, and complete;
- The tax matter taking place in the applicant is consistent with that described in the application materials;
- The laws and regulations based on which the tax authorities make their rulings have not changed.
Restrictions
Advance ruling opinions shall only apply to the matter of application submitted by the applicant, rather than other taxpayers or other matters the ruling of which have not been made. The applicant shall not refuse to perform other tax obligations on the grounds of applying for advance rulings.
- Follow-up Management
The competent tax authority shall request the ruling authority to issue the «Notice of Termination (Cancellation) of Advance Tax Rulings» to the applicant under the following circumstances:
- The taxpayer provides illegal, untrue, inaccurate, or incomplete information;
- Substantial changes have taken place in the situation or conditions based on which the ruling was made;
- Changes have taken place in the laws and regulations on which the ruling is based, which have a substantial impact on ruling opinions.
- Significance
Enhancing the certainty of the application of tax policies and providing clear tax guidelines for companies not only help reduce their tax risks but also stabilize market expectations;
The tax advance ruling system emphasizes the communication and collaboration between the tax authorities and companies. Through advanced communication and ruling, the tax authorities can better understand the business needs of the companies and provide targeted tax guidance, which helps to enhance mutual trust between the companies, and to improve the efficiency and effectiveness of tax collection and management;
Through the tax advance ruling system, tax authorities can provide professional and authoritative tax guidance to companies and help them better understand and apply tax policies. It not only reduces the risks and costs arising from improper tax planning but also improves the tax management level of enterprises and helps them realize sustainable development.
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