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TAX & FINANCE: Release of the Administrative Measures on the Thousand Groups List
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Release of the Administrative Measures on the Thousand Groups List

Clearer scope and more regulated work procedures

By Kelvin Lee, PwC Tianjin


近日,国家税务总局发布了《千户集团名册管理办法》,即国家税务总局7号公告。7号公告首次对千户集团名册管理事项作出了明确的规定。千户集团项目自2015年底启动,经过一年多的摸索实践,现已逐步规范化。


7号公告统一了千户集团的选取条件和进出机制,同时还对如何确定集团内纳入大企业管理的成员企业统一了标准。对于总部及境内外全部成员企业年度缴纳税额达到标准的企业集团、全部中央企业、中央金融企业、达到上述年度缴纳税额标准的单一法人企业都可以参与到千户集团的选取范围内。已入选千户集团名单的企业集团总部,应于每年5月31日前向省税务机关报送集团总部《千户集团名册信息表》,并于10月纳税申报结束前向省税务机关报送集团成员企业《千户集团名册信息表》。同时千户集团名单将采用自下而上的管理流程,由省税务机关审核新增符合条件的千户集团,以及由于各种原因未达标准而需调出的企业集团,并上报税务总局。


企业需要注意的有:确定成员企业名册,定期上报相关信息。强化科技水平,提升信息处理能力。制定并完善风险内控制度,防范涉税风险。

BT 201706 FINANCE 02In brief


The State Administration of Taxation (SAT) released the Administrative Measures on the Thousand Groups List (the "List") (the SAT Public Notice [2017] No.7, PN 7), which clarifies administrative matters for the List for the first time, including the applicable scope, relevant work procedures in determining the list, major roles and responsibilities of tax authorities and enterprises in the Thousand Groups etc. PN 7 shall take effect from 1st May 2017. Meanwhile, as the SAT has expanded its administration scope of Large Business Enterprises (LBE) from 45 target entities to Thousand Groups, the Administrative Measures on the List of LBEs Directly Managed by the SAT (the SAT Public Notice [2013] No.18) will be abolished at the same time.


At the end of 2016, SAT released the Public Notice Regulating Financial Accounting Statements that Accompanied the CIT Returns Filed by the Thousand Groups and Enterprises within These Groups (the SAT Public Notice [2016] No.67 or "PN 67"), which specifies the regulation on information reporting. The release of PN 7 further clarifies the administrative rules of the List and establishes a solid foundation for improving administration and service by facilitating tax authorities to precisely identify their LBE targets, which will have a huge impact on those entities that feature in the List.


In detail


Clarification of Administrative scope for the Thousand Groups


BT 201706 FINANCE 01The Thousand Groups Project was launched at the end of 2015, the administration of which has been gradually regulated and normalised after explorations and practices over the past year. However, prior to release of PN 7, the selection criteria and "entry and exit" mechanism of the List were not clarified. Furthermore, for LBE groups with complicated shareholding structures, there is a lack of consistent standards in practice to determine the member enterprises to be covered under the LBE management. These uncertainties make it difficult for tax authorities to precisely determine their targets and also bring about potential compliance risks to the LBEs. In response, PN 7 sets forth a set of consistent implementation standards which clarify the administrative scope of the Thousand Groups, including:

- Selection criteria: Under PN 7, enterprises that satisfy any one of the following conditions shall fall into the scope of Thousand Groups administration:


1. Corporate groups with annual tax payments by the headquarters and its member enterprises exceeding the threshold set by the SAT;


2. All central enterprises and central financial enterprises;


3. Single corporate enterprises that satisfy the above mentioned annual tax payment threshold.


PN 7 has not provided the specific threshold standard for the annual tax payment. However, it is reported that the annual tax payment for those groups that have been selected is over RMB 300 million1. It remains to be seen whether such threshold will be adjusted in future.


- Scope of member enterprises: PN 7 sets forth different scope for member enterprises of domestic and foreign corporate groups taking into consideration their different shareholding structures. For domestic corporate groups, member enterprises shall include those enterprises that are included in the "consolidated accounting statement" (the "Statement"), and all levels of domestic branches and subsidiaries controlled by groups that have obtained business or tax registration in China, foreign companies and other tax-related organizations controlled by the group even though they are not included the Statement. For foreign corporate groups, member enterprises shall include all levels of branches and subsidiaries controlled by global headquarters that have obtained business or tax registration in China and other tax-related organizations.

BT 201706 FINANCE 03 2
Work procedure is further regulated


Reporting of the List shall be implemented in two steps according to PN 7. The headquarters of the selected corporate groups shall file the Information Form for the Thousand Groups (the "Information Form") (for headquarters) to the provincial-level tax authority2 before 31st May each year, and file the Information Form (for member enterprises) to the provincial-level tax authority by the end of 31st October filing date. The above information shall be reported upward to the SAT after review and consolidation by the provincial-level tax authority. Meanwhile, a dynamic and bottom-up management mechanism for the List shall be adopted, which means the provincial-level tax authority shall examine the newly added corporate groups meeting the thousand groups conditions, exclude corporate groups that do not meet the criteria due to merger and acquisitions, restructuring, bankruptcy, deregistration or contributing tax payment lower than the SAT threshold for five consecutive years and then report upward to the SAT accordingly.


Besides, PN 7 also requires provincial-level tax authorities to enhance collaboration and information sharing and proactively cooperate with finance, business, commerce and state-owned asset departments to tighten the List administration in multiple ways. It is worth noting that PN 7 also mentions that the Thousand Groups List will be released regularly but without disclosing the timing and mode of the release.


Besides clarifying the accountability of tax authorities at all levels, PN 7 also sets forth the requirement of a designated person within the corporate group responsible for the List administration. Corporate groups that fail to submit the necessary information, provide a fraudulent list or refuse to report shall be penalised according to the Tax Collection and Administration Law. At the same time, their tax payment credit rating may also be negatively impacted and therefore the relevant taxpayers shall pay close attention to it.


The takeaway


BT 201706 Finance 05According to the SAT's work plan, China will "profoundly promote the modernisation of LBE's tax services and administration, comprehensively improve tax risk analysis and taxation economic analysis of the Thousand Groups as well as the quality of LBE's services"3. Clarification on the administrative scope of the Thousand Groups establishes a solid ground for tax authorities to precisely detect their targeted LBEs and facilitate their related work.


The above tax risk analysis and subsequent risk resolutions will directly have a more direct and significant impact on taxpayers. Currently the SAT implements a four-step administration on corporate groups in China, i.e., "data collection, risk analysis, distribution and resolution, feedback and assessment"4. Upon clarification of the scope of the Thousand Groups, taxpayers have to regularly report information of the corporate groups and member enterprises on the List in accordance with PN 7 and the data collection on the LBEs in China will improve continuously. Using such data as the foundation and coupled with the improvement in the risk analysis indicators and technology the tax authority's analytical capability and precision will continue to improve. Hence taxpayers shall be well prepared by constantly improving their own tax management, enhancing compliance level and preventing against tax risks which include:


- Determining the list of member enterprises and regularly submitting the relevant information - PN 7 classifies the List into group list and member enterprise list by setting forth their respective reporting deadlines. For the scope of member enterprises, the criterion for domestic and foreign-invested corporate groups also varies. LBEs shall assess their own conditions by referring to regulations under PN 7, confirm the list of target member enterprises, arrange a designated person responsible for the list management, as well as timely and accurately report the relevant information pursuant to the new regulations of PN 7.


- Improving their own capacity in scientific technology and data processing -


Enterprise group shall leverage on technologies to enhance their data processing capability, improve data storage, management and reporting capacity.


- Formulating and improving internal risk control system as well as preventing against tax-related risks - Enterprises can prevent and control tax risks at source through scientific design and efficient operation of the tax risk system. In addition to enhancing the compliance level, enterprises should also be able to analyse the tax information of their corporate group and member enterprises using the high-tech data processing system so as to identify potential tax risk areas and promptly adopt relevant measures to address these risks.


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