China alert - Issue 5, April 2012
According to recent Chinese media reports, the Jincheng State Tax Bureau (Jincheng STB) in the Shanxi province recently collected tax in the amount of RMB 403 million from the indirect disposal of shares, in a Chinese coal enterprise, by a BVI company. The disposal was effected through the disposal, by the BVI company, of a Hong Kong company, which held the equity interest in the Chinese enterprise. The very substantial amount of tax involved makes this the single largest tax imposition in an offshore indirect transfer case to date, exceeding even the amount collected in the Master Kong Beverages case of 2011, in which RMB 306 million was collected, and the Evergrande case in January of this year, in which RMB 299 million was collected. The Jincheng case comes at a time when the PRC tax authorities are enforcing Circular 698 with vigour and draws attention to a number of recent developments of note in the application of the measure.