Column: PRC Technical Column(s)

Many countries have extensive tax treaty networks with their trading partners. Currently, China has tax treaties or agreements with 95 countries and regions. As the Chinese State Administration of Taxation (“SAT”) increasingly focuses on the taxation of non-Chinese tax residents, the interpretation of tax treaties has become an important instrument for strengthening its tax administration....

In a global economy that is increasingly knowledge based, the contribution of intellectual property (“IP”) is often of great importance to business success. IP, such as cutting-edge technology or a well-known brand name associated with high standard of quality, brings additional incremental value to businesses. The quality of revenue, business sustainability, and growth are all highly related to IP....

This paper was composed with the sole purpose of studying the term “beneficial ownership” (BO) in the context of the prevailing China tax regulations and highlighting the assessment of BO under current international practices, including the OECD model and other jurisdictions. This paper conducts an in-depth discussion on Circular 601 and Announcement 30 promulgated in Mainland China and also the related articles of the OECD Model Convention. Relevant practical and court cases are provided to demonstrate the way(s) tax authorities observe the relevant rules from different perspectives. At the end of the paper, an attempt is made to summarise the development trend of Chinese tax rules on BO assessment, compare the tax regimes in other jurisdictions with regard to the determination of BO, and provide a general p icture of our findings and insights....

The Chinese Government has set the structural transformation of the Chinese economy as one of its national priorities.2 As part of that endeavour, China wants to move away from being a manufacturing hub to one that occupies multiple and more value-added functions in the global supply chain. To that end, it is focusing on research and development (R&D), high-end manufacturing, and service sector development. This direction presents a unique opportunity to companies in the high-tech industry. Since 2008, most tax incentives have been directed at companies with advanced technology. On the other hand, this has also made these companies more visible to the Chinese authorities, including the transfer pricing authorities....

In recent years, business restructuring has become a hot topic for multinational corporations (MNCs) and tax administrators around the globe. To MNCs, globalisation means establishing their footprint in different parts of the world, but this is just the beginning of the process. The competitive environment MNCs face may require them to improve cost efficiency, enter new markets or exit from existing ones, or better develop, protect, and manage their intellectual property in order to maintain their ability to perform successfully on a global basis. It is this setting that forces businesses onto the path of restructuring, whether along commercial, operational, and/or legal lines....

Chinese outbound investments have grown rapidly over the past few years. While most recent outbound transactions have been made by state-owned enterprises, there is also growing participation by privately owned Chinese enterprises seeking overseas acquisitions to expand their global market share or to diversify their supply chain, amongst other objectives. From a tax-efficiency perspective, it is important for Chinese acquiring enterprises to carefully evaluate, examine, and design appropriate acquisition and holding structures, financing arrangements, and operating models with a view to minimising overseas and homeland tax leakages. In view of recent Chinese tax law developments, this article focuses on the major tax issues requiring the investor’s consideration in effecting the acquisition and holding structures of a Chinese outbound investment....

China has developed its tax administration and collection regime for non-tax resident enterprises (“non-TREs”1) in recent years, particularly since 2008 following the enactment of the new Corporate Income Tax (“CIT”) Law. To some extent, the complications in China’s tax scheme and the inconsistent local interpretation of circulars by tax authorities have further increased uncertainty about the tax situation and thus have created the need for non-TREs to gain an in-depth understanding of China’s tax regime in order to ascertain the tax position in China and the tax cost of doing business with or in China....

“Outsourcing” is a recent popular term. What does it mean? Why does the Chinese Government consider it so important? What tax incentives are available for outsourcing? The authors will answer all of these questions in this article....

The new Social Insurance Law (“SIL”) was issued on 28 October 2010 and took effect on 1 July 2011. Under the new SIL, any expatriate working in a mainland China registered company is required to make monthly social insurance contributions to the local authority. In this article, we review the history and development of China’s social security system for foreigners, including for Hong Kong residents; discuss the pitfalls of the existing legislation in respect of social security contributions; and analyse both the employers’ and employees’ considerations from difference perspectives....

Undertaking investment activities in the Chinese market through mergers and acquisitions (M&A) or corporate restructuring may raise issues of tax anti avoidance, which could be sceptically and stringently viewed by the Chinese tax authorities, who have recently formulated new regulations to tackle such attempts to avoid taxes. Investors intending to acquire shares of Chinese enterprises or to enter into joint ventures with them need to not only concern themselves with operational strategies but also to design their investment portfolios and structure their corporate frameworks to achieve tax-planning efficacy. This article uses two recent cases to illustrate a few major Chinese tax issues from an anti-avoidance perspective. It aims to remind foreign investors of the potential tax risks when they enter the Chinese market through the different approaches of M&A or corporate restructuring....