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Tax Structuring Considerations for Chinese Outbound Investments — Pitfalls and Opportunities

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.