Abstract

Based on the theoretical review of general taxation methods and taxation systems for CIVs, this study examined China's taxation regulation for its CIVs, the characteristics of China's taxation system for its CIVs in light of the relevant provisions of OECD model treaties and Korea-China taxation treaty, and the provisions of South Korea's relevant taxation law, as well as the applicability of Korea-China taxation treaty to the CIVs, relevant problems and improvement measures. Such examination results are outlined below. First, China provides that with regard to the income belonging to collective investment institutions and CIVs, formed in China, as well as to the investors' income paid out by CIVs, all corporate income taxes are exempted, and that in case the capital gains such as the dividend payout income and interest income except the income from stock assignment belong to individuals, the income shall be taxed. This is presumably because China's tax law bases its taxation on CIVs on the Conduit Theory for Taxation of Trust Income and on the method of power of attorney. Second, considering the current tax regulations of both nations and the provisions of Korea-China Tax Treaty, QFII fund and other CIVs of South Korea are not included in the scope of the targets - subject to the application of the Tax Treaty - such as residents, beneficiary owners, and "people" according to the Tax Laws of both nations, so the current provisions of Korea-China Tax Treaty alone would make it difficult to resolve the double taxation problems between the two nations. Thus, Korea-China Tax Treaty should be amended or a protocol should be signed so as to cleary define regulations on CIVs and relevant targets such "people," "residents," and "beneficiary owners," under Korea-China Treaty. Third, a provision on the public-private partnership-type CIVs should be added to Article 13 - Section 2 of the Framework Act on National Tax. According to this regulation, South Korea's CIVs do not belong to the organizations seen as corporations. In case the original tax-collection nation impose taxes on the earnings that CIVs - which aims for international investment - acquire in the nation invested, however, the Tax Treaty cannot apply, so there is a need to establish a provision under which the public-private partnership-type CIVs, formed domestically, should be regarded as the organizations seen as corporations. Fourth, the current OECD model treaty and tax laws of major nations regard public investment funds and other CIVs - if they are authorized under the enforcement system - as beneficiary owners so as to apply the tax treaty to them. However, South Korea's tax law does not specify a provision on beneficiary owners, thus creating the problem of being unable to apply the tax treaty to such. Some recent judiciary precedents present the concept of beneficiary owners, but to ensure legal stability and predictability, a provision on beneficiary owners should be established in Article 14 - Section 4 of the Framework Act on National Tax or in Article 2 - 2 of the Act on International Tax Adjustment. Fifth, Article 5 - Section 1 of the Corporate Tax Act (the Act) provides that the Act should apply to beneficiaries of trusts, thereby creating the problem of being unable to apply the Act to CIVs, so the Act should be amended to be applied to public-private partnership-type CIVs formed domestically, and accordingly, the special regulation on the revenues, costs and losses of CIVs needs to be legislated. In addition, according to Article 57 - Section 3 of the Act, CIVs may be interpreted to be regarded as "people" for the purpose of taxation, but this may contradict the interpretation of Article 13 - Section 2 of the Framework Act on National Tax and of Article 5 - Section 1 of the Act. Thus, as mentioned above, Article 13 - Section 2 of the Framework Act on National Tax, Article 5 - Section 1 of the Act, and Article 57-2 - Section 3 of the Act should be rationally amended to be highly compatible among them.

Keywords

• 집합투자기구
• 한중조세조약
• 수익적 소유자
• 신탁과세이론

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