China

How our International Tax team can assist you 

With our deep knowledge and experience, we can provide you with value-added assistance throughout the investment cycle, and help you withstand the PRC tax challenges and maximise tax opportunities. Depending on your areas of interest, below is a summary of the critical tax issues that you should consider and how we can make a difference. 

 

Entry

 

 Critical issues  How we can help 
  • Where should you invest in China?
  • What type of presence you should have in China, e.g., representative office, branch, subsidiary, or partnership?
  • What direct and indirect taxes will you need to pay in China?
  • What tax incentives are available to you and how do you qualify?
  • What tax planning is available to reduce your PRC tax burden and withholding taxes?
  • How do you structure and finance your investment in China?
  • Do you need an onshore or an offshore investment holding company, and if so, where?
  • How should you set up a tax efficient supply chain?
  • Assist with location analysis and help you identify the appropriate investment sites in China.
  • Negotiate on tax incentives and financial subsidies and conclude collaboration agreements with the local governments on your behalf.
  • Advise on the appropriate mode of presence based on your contemplated business operation in China.
  • Advise on the formation procedures and process to establish the local presence.
  • Advise on the structure of the investment, including holding structure, financing structure, and supply chain arrangement, from both tax and regulatory standpoints.

 

Financing

 

 Critical issues  How we can help 
  • What is the tax cost in using different funding methods such as equity, related-party loan or third-party loan financing?
  • How can you better achieve day-to-day cash management within and outside China?
  • Should you establish a treasury vehicle in China and in the Asia Pacific region?     
  • Advise on potential cash pooling mechanism to better utilise excess cash within the group.
  • Advise how to comply with the thin capitalisation rules in the tax and business regulations, as well as various foreign exchange requirements.
  • Advise on potential hybrid financing arrangement and negotiate with the local foreign exchange and tax authorities on your behalf.

 

Operation   

 

 Critical issues  How we can help 
  • Are you kept aware of Chinese tax developments and procedural changes that impact your PRC tax reporting responsibilities?
  • How do you manage your PRC tax compliance?
  • How do you control the PE exposure of overseas affiliates in China?
  • How do you account for deferred taxes and uncertain PRC tax positions, and calculate the proper tax provisions in China based on the FASB ASC 740 and the IFRS principles?   
  • Inform you on the latest rules and requirements that may impact your PRC tax compliance status.
  • Assist your China tax team to review, co-source or outsource the preparation of tax returns in accordance with the PRC tax regulations and local practices.
  • Help you develop protocols and working guidelines to control specific tax risks such as PE exposure.
  • Assist your China team to identify deferred tax issues and tax risks, advise on proper tax provision calculations, and provide periodic in-house training in tax accounting.

 

Internal re-organisation

  

 Critical issues  How we can help 
  • How should you structure the internal restructuring – transfer of assets or equity interests?
  • What are the PRC tax outcomes for the parties to the re-organisation? Can the restructuring receive tax deferral/exemption treatment?
  • How do you know if the restructuring satisfies the business purpose requirement?
  • Are tax incentives and tax attributes (e.g., net operating losses) still valid or available after the restructuring?
  • Advise on the appropriate types of reorganisation that may be pursued, and the corresponding preconditions.
  • Advise on the direct and indirect tax implications of the restructuring and seek assurance from the Chinese tax authorities in advance on the tax treatment of the reorganisation.
  • Advise on the regulatory procedures for completing the restructuring.
  • Advise on post-restructuring integration issues and identify planning opportunities.

 

Profit repatriation

 

 Critical issues  How we can help
  • How do you redeploy profits effectively and efficiently within China and the Asia Pacific region?
  • How should you repatriate your profit?
  • Should you consider other repatriation methods besides dividends, such as cross-charging of service and royalty fees?
  • How do you reduce the PRC tax costs incurred during repatriation?  
  • Advise on tax efficient repatriation of profits through the proper structuring of supply chain and allocation of business functions, assets and risks.
  • Advise how to build up commercial substance in an offshore holding company to satisfy the beneficial ownership requirements for treaty qualification.
  • Advise on the procedures for seeking treaty benefits and assist on preparing treaty application packages.
  • Assist with seeking clearance from the Chinese tax and foreign exchange authorities on outbound remittances.

 

Exit

 

 Critical issues  How we can help
  • If needed, how should you exit the Chinese investment? Should you sell assets and liquidate or transfer equity?
  • In the case of liquidation, what are your defence strategies if you are audited during exit?
  • In the case of equity transfer, shall you engage in direct transfer or indirect transfer of equity interest?
  • In the case of direct transfer, are you eligible to any treaty relief?
  • In the case of indirect transfer, are you subject to the mandatory reporting requirement? How likely will the indirect transfer be recast into a direct transfer?
  • Advise on exit strategy planning and the tax implications.
  • Advise on the Chinese tax and regulatory issues upon liquidation of the local entity.
  • Assist with PRC tax filings and any exit tax audit defence.
  • In the case of direct transfer, assess the applicability of an income tax treaty and assist with seeking treaty relief.
  • In the case of indirect transfer, advise how to build up substance in an intermediate holding company outside China, assist with preparing the required reporting package, and conduct subsequent negotiations with the tax authorities.

 

Service Brochure 

 

  

Contact us

Khoon Ming Ho

Khoon Ming Ho

Partner in charge, Tax - China & HK SAR

+86 (10) 8508 7082

Abe Zhao

Abe Zhao

International Tax Country Leader, China

+86 (10) 8508 7096