What is a Tax Exemption?

Tax exemption refers to an incentive or special care given by the state to certain taxpayers or taxation objects in order to achieve certain political and economic policies. Tax reduction is the reduction of part of the tax levied; tax exemption is the exemption of the entire tax. Our country is vast and the economic situation varies widely. It may be because of the requirements of national economic policies, it is necessary to give certain support and encouragement to the development of certain industries, enterprises or products; it may be because some taxpayers suffer unexpected losses from natural disasters and need special care; or it may be because of conditions of production and operation Major changes have occurred, and the tax rate stipulated by the tax law is not suitable for adjustment at the moment, special care needs to be given, etc. This requires tax reduction and exemption measures to combine the uniformity of the tax law and the necessary flexibility to treat taxation according to local conditions Various special cases in. ^[1]

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Duty-free in economic life,

Specific tax exemption is a tax exemption clause for specific and special circumstances based on changes in political and economic conditions and the need to implement tax policies. This type of tax exemption is generally a policy measure that cannot or should not be enumerated one by one in the tax law, or it is a supplementary tax exemption clause made after changes in economic conditions. Such tax exemptions are generally authorized by tax legislative bodies, and decisions are made by the state or regional administrative agency and the state's tax authority within the prescribed scope of authority. Its tax exemption scope is small, the tax exemption period is short, and the tax exemption objects are specific. Most of them are aimed at specific individual taxpayers or some specific taxation objects and specific business operations. This tax exemption rule is flexible, uncertain, and relatively restrictive. Generally, taxpayers must first submit an application, provide relevant certification documents and relevant information that meet the tax exemption conditions, and be reviewed or reported step by step by the local competent tax authority Only the highest competent tax authority can review and approve the tax exemption. For example, according to Caishuizi [1998] 33,

In the context of China's rapid economic development, rising incomes of residents, and the rapid development of the tourism industry, China's tax-free industry has ushered in new development opportunities as a high-growth sector in the tourism industry. On April 20, 2011, the "Announcement on the Pilot Implementation of Duty-Free Shopping Policies for Hainan Outlying Island Tourists" was launched to help China's tax-free industry achieve leapfrog development, and China's tax-free industry ushered in broader development opportunities.

Since 1994, the duty-free industry has gradually moved towards marketization, with qualitative leaps in retail networks, business forms, shopping environment, commodity structure, and operation management. The overall strength of the industry has rapidly increased, and total sales have ranked among the top in the world.

Especially since 2000, due to the sustained and stable growth of the global economy, the rapid development of inbound and outbound tourism, the construction and upgrade of airports and ports, and the opening of duty-free shops in the city, China's duty-free goods industry has grown rapidly, significantly faster than the global duty-free period. In 2010, China's tax-free industry rose from 22nd in the previous year to fifth in the world. In 2010, China's duty-free industry has spread to more than 90 airports, ports and border crossings in 29 provinces, municipalities and autonomous regions, with annual sales of 1.73 billion US dollars, accounting for 4.4% of the global duty-free industry.

The analysis believes that the rapid development of China's tax-free industry needs to grasp the correct development direction. First of all, it is necessary to actively strive for a new policy of tax-free business and broaden the development space of tax-free shops' tax-free business; As China's tourism industry continues to rise in the global tourism industry, the duty-free industry, which is closely related to the tourism industry, is bound to gain greater development space.

In 2010, the development of China's tax-free industry meant the opening of a new market. The construction of Hainan International Tourism Island is gradually bringing the policy of "tax-free shopping for outlying tourists" closer.

Duty-free goods business involves the supervision of duty-free goods, the collection of state taxes, and foreign exchange management. The sales of duty-free goods have unique business ideas and methods of operation. China's sales of duty-free goods are subject to centralized and unified management by the state. Policy, China's tax-exempt business mainly includes the two methods of state-designated state-owned professional companies unified by administrative means and the government's determination of China's tax-exempt industry franchise through international bidding.

There are mainly five duty-free operators approved in China, namely: China Exempted Company, Shenzhen State-owned Duty Free Commodities (Group) Co., Ltd., Zhuhai Duty Free Enterprise Group Co., Ltd., Rishang Duty Free (Shanghai) Co., Ltd. and the newly established Hainan Provincial Duty Free Operation Company. Among them, only China exempted companies can operate duty-free business at major airports, ports and border crossings across the country, and there are no geographical restrictions, while other companies act as tax-exempt operators operating on a regional or tender basis.

Although the tax-exempt industry is booming, based on policy dependence and relatively single format, the continued development and tapping of market potential is still an important topic at the moment.

This report uses the market data collected by the forward-looking information on the tax-free industry for a long time to comprehensively and accurately structure the analysis system for you from the overall height of the industry. The report starts from the current macroeconomic situation of the duty-free industry, and relies on the development and operation of the duty-free industry and the trend of industry demand. It analyzes in detail the development of China's tax-free industry and its industry demand, development speed and competition situation. Out of scientific predictions.

For the general public, tax refund refers to tax free shopping, refund of value-added tax and consumption tax, the tax rate is concentrated at 5% to 20%; and tax exemption is the import duty (duty, tariff), the tax rate is concentrated 20% ~ 100%.

Implemented on a pilot basis in Hainan Province

Due to the different tax rates used in the implementation of tax exemption laws, tax exemption laws can be divided into two forms:

The tax exemption law is called "Foreign Tax Exemption", also known as the "exemption law". It refers to the method by which the government of the country of residence exempts the income of the residents of the country from overseas and has paid taxes to the source country.

Duty Free: Free Trade Zone

Most countries in continental European law adopt tax exemption laws. In fact, it is the country of residence of the taxpayer that recognizes the right of the country of origin as a priority and renounces the taxation right of its own country.

The guiding principle of the tax exemption law is to recognize the exclusivity of the tax jurisdiction of the source of income, and to completely abandon the exercise of resident (citizen) jurisdiction over the portion of the income of a transnational taxpayer living in the country who has come from abroad and has been taxed by a foreign government. Domestic income tax is levied. This fundamentally eliminates double taxation caused by double tax jurisdiction.

For example, the taxpayer's income is 1.5 million yuan, of which 500,000 yuan is not paid in the country of origin, of which 1 million yuan has paid 300,000 yuan abroad, and the remaining 1.2 million is returned to the motherland. In the motherland, 1 million yuan Taxes are no longer collected, and only taxes of 500,000 yuan are paid.

Some countries do not charge taxes on foreign income, such as Panama and Argentina.

There are some countries that do not collect taxes under certain conditions for certain foreign income, such as Germany, France, and Spain.

The OECD Model Model Agreement on Double Taxation of Income and Property and the United Nations Model Model Agreement on Double Taxation between Developed and Developing Countries particularly recommend this approach.

Generally speaking, tax exemption laws can prevent national transnational taxpayers from avoiding international double taxation, and can also guarantee the preferential taxation rights of countries that have jurisdiction over the tax jurisdiction. However, this method of avoiding international double taxation cannot guarantee the country of residence ( (Or country of nationality) fully exercising resident (citizen) jurisdiction may affect the country's fiscal revenue, so this method is only used by a few countries.

On May 17, 2019, the Ministry of Finance, the Ministry of Commerce, the Ministry of Culture and Tourism, the General Administration of Customs and the State Administration of Taxation issued and issued the "Interim Measures for the Administration of Duty Free Shops at Ports" to regulate the management of Duty Free Shops at ports ^[2] .