Purpose for GAAR
One possible motivation was to empower the Chinese State Administration of Taxation (SAT) to combat cross-border tax planning. Tax avoidance has been closely associated in China with foreign investors, especially multinational corporations.
Although the Enterprise Income Tax Law and Regulations include some well-known specific anti-avoidance rules, such as transfer pricing, thin capitalization, controlled foreign corporations and anti-tax-haven rules, the drafters were concerned with the types of avoidance transactions that can circumvent the application of these rules. China's tax base, hence its national interest, would be harmed by such transactions.
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