Indirect offshore, direct offshore and onshore disposals in an M&A context
This publication follows on from the initial article in this series, 'Beneficial Ownership and Indirect Disposals', published in March 2010. The first issue outlined the provisions of the then newly introduced circulars, Guoshuifa 601 (Circular 601) and Guoshuihan No.698 (Circular 698). The former circular deals with the beneficial ownership qualification criteria for investors seeking to claim tax treaty benefits, while the latter imposes reporting requirements and tax enforcement measures against tax-motivated disposals of offshore holding companies of PRC enterprises.
In this issue, we focus on the developments, over the past two years, in the taxation of three types of investment exits, which may be undertaken by foreign investors into the PRC and which have been the focus of the PRC tax authorities. These include an offshore indirect disposal, an offshore direct exit and an onshore exit. Contextually and by way of illustration, we draw on the KPMG China experience in helping our clients to deal with the challenges posed by these developments as they have emerged.