By King & Wood Mallesons
The tax treatment of carried interest – the profit share used to reward successful fund managers – has been a hot topic in the private equity and venture capital industry for some time and, as the industry has expanded globally, many jurisdictions have been grappling with the question of how
By Zhao Yan and Daisy Duan , King & Wood Mallesons’ Taxation Group
After several rounds of revisions and consultations in the past few years, the State Administration of Taxation (“SAT”) has recently promulgated the Bulletin on Several Issues concerning the Enterprise Income Tax (“EIT”) on Indirect Asset Transfer by Non-Resident Enterprises (“Bulletin 7”)[1]. Tax matters occurred but have not been settled before 3 February 2015, the date of implementation of Bulletin 7, shall be governed by Bulletin 7. Meanwhile, the relevant provisions of Guo Shui Han [2009] No. 698 (“Circular 698”)[2] and SAT Bulletin [2011] No. 24 (“Bulletin 24”)[3] concerning indirect equity transfers shall be revoked accordingly.
In accordance with Bulletin 7, indirect transfer of China taxable assets conducted by non-resident enterprises through arrangements that do not have reasonable commercial purposes, which results in avoidance of EIT, shall be deemed as direct transfer of China taxable assets and thus subject to tax in China. As an upgrade to Circular 698, Bulletin 7 shall have profound impacts on the tax costs, investment structuring and exit plan of foreign enterprises making investments into China and of domestic enterprises setting up “red-chip” structures for overseas listings.
Continue Reading A New Milestone for Taxation on Indirect Asset Transfer by Non-resident Enterprises — A Review of the Past and Present of Bulletin 7
By Zeng Xianwu King & Wood’s Foreign Direct Investment (FDI) Group
Since the reform and opening-up policy was introduced in 1978, especially in the past ten (10) years, the People’s Republic of China (the "PRC" or "China") has undergone significant changes. China is a growth engine for the worldwide economy, fueling global expansion via higher output and trading relationships with other nations as well as greater contributions from domestic consumption. Over last nine (9) months of 2011, China has already attracted contractual inbound foreign direct investment of USD177.8 billion. Notwithstanding China’s status as one of the world’s largest economies, and the massive amounts of foreign money invested in China, the basic laws and rules in China governing foreign investment seems mysterious for those who want to invest in China or are accustomed to laws of their countries.Continue Reading Overview of Doing Business in China
By Mark Schaub, Partner, Corporate, King & Wood Shanghai
See also: King & Wood‘s Tax Practice.
On February 20, 2010, the State Administration of Taxation (SAT) issued the “Measures for the Administration of Taxation on Representative Offices of Foreign Enterprises” (Guo Shui Fa [2010] No. 18) (the “Rep Office Tax Measures”) to reform the taxation rules applicable to representative offices of foreign enterprises in China (“Rep Office”). The Rep Office Tax Measures, which are retroactively effective from January 1, 2010, revise existing Rep Office taxation rules inter alia by abolishing previous tax exemptions and increasing the minimum deemed profit rate. Prior to effectiveness of the Rep Office Tax Measures, Rep Offices were taxed in one of three ways, (i) based on their actual profits (“Actual Profit Method”), (ii) based on their “deemed profits” (“Deemed Profit Method”) or (iii) not subject to tax (“Tax Exemption”) when certain criteria were met. The major changes brought about by the Rep Office Tax Measures include:
Continue Reading China imposes tougher tax rules and administrative restrictions on Representative Offices
By Tony Dong and Alice Zhang, King & Wood’s Tax Department
It is common for multinational companies to deploy offshore holding structures or set up special purpose vehicles ("SPVs") in tax havens to make investments, enter into cross border transactions or to list their IPOs. There are various reasons for companies to utilize offshore SPVs, and tax optimization is clearly one of the top considerations. For example, a company may take advantage of preferential tax treaty provisions or align profits to a low-tax jurisdiction or tax haven. However, in recent years, governments around the world have been tightening their tax administration of cross-border tax avoidance arrangements with TPG’s recent tax dispute in Australia is the latest example. The Chinese government has been actively involved in the game, and the State Administration of Taxation ("SAT") has issued a series of regulations in 2009 to strengthen tax scrutiny on non-residents.Continue Reading China Weaves a Tax Net over Offshore SPVs
China’s crack down on tax anti-avoidance took another major step forward with the release of a new Circular by the SAT which may severely restrict the ability of offshore holding companies to take advantage of tax treaty benefits.
Continue Reading China Launches Latest Attack on Offshore Holding Companies
