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Development of the Determination of Beneficial Owners in China

Beneficial Ownership (“BO”) status is an identity which determines whether a non-China tax resident could enjoy tax treaty benefits, including preferential withholding tax rates, while deriving dividends, interests, and royalties from China. On 3 February 2018, the State Administration of Taxation (“SAT”) released SAT Announcement [2018] No. 9 to repeal the previous laws and regulations regarding determination of BO status. It introduced a more stringent standard to the determination of BO status while providing an extended scope of safe harbour rules for foreign entities. Multinational corporations (MNCs) are suggested to review their existing holding structures and business operations and take necessary actions in response to such changes.