The Study on Current Chinese Partnership Tax Law System — Focus on The Theoretical Issue of “Fiscally Transparent Entity” and “Special Allocation” Rules of Partnership ―

In China, following the enactment of the “Partnership Enterprise Law” in 1997, especially after the large-scale reformation of partnership enterprise law in 2005, there has been an appreciable increase in economic activities using the form of partnership enterprises as an investment vehicle. However, according to current Chinese partnership tax legislation, the usual way to determine whether an economic organization is an entity or not is based on private law form, and is not based on its economic substance in accordance with tax law criterion. It is for this reason that the concept of “transparent entity” is not defined clearly in the Chinese tax system. Therefore, it is required to create some special rules for “transparent entity” and should be designed into the tax code for small business enterprises with its economic substance and economic nature.