The KPMG International Annual Review demonstrates our achievements and reflects the insights and expertise KPMG professionals bring to client relationships and our broader communities.
KPMG Capital focuses on investments and opportunities in the Data & Analytics space.
KPMG's Global IFRS Institute provides information and resources to help Board and Audit Committee Members, Executives, Management, Stakeholders and Government Representatives gain insight on the evolving global financial reporting framework.
KPMG goes beyond the data, taking you from insight to opportunity.
Mining organizations need to adapt across the mining asset lifecycle, from expansion to closure, as changing economic, political and regulatory environment demand greater flexibility.
The Chemical industry’s landscape is changing fast - global companies are developing or launching new products and services – and appear optimistic - setting sights on geographic expansion.
A series that explores how governments must respond to the global megatrends driving change into 2030.
The Change Readiness Index assesses the ability of 90 countries (developed and developing) to manage change and cultivate the resulting opportunity.
The global job search tool allows you to search available career opportunities within many of our 150 member firms worldwide.
KPMG's International Case Competition (KICC) is a chance for students to challenge yourself to solve a real business issue and an opportunity to meet new people across the globe.
GAAR is first introduced in the Chinese corporate income tax law in 2008. So the literal aid means that for a transaction to be recognized for tax purposes then it needs to demonstrate a legitimate business purpose. So it cannot be designed to eliminate or reduce or defer Chinese corporate income tax because that’s like the literal definition. In reality, the tax authorities would follow the substance over formal doctrine to apply the GAAR principle. So they can actually combine two different entities into one entity. They can actually combine two transactions into one transaction if they think that doing so would really reflect the true essence of the transaction.
So perhaps the best example of GAAR application in China is the indirect transfer rule situation. So if you have a UK company that owns a Hong Kong company and the Hong Kong company in turn owns China, so this is the holding structure, and then you have the UK company sell the shares in the Hong Kong company – so normally this transaction doesn’t…taxation from China because this is an offshore transfer of a non-Chinese equity interest.
But under Chinese tax rule, the Surplus 698 which is issued under the GAAR, then the Chinese tax authority will actually ask the UK transferor to submit a set of documents to describe the transaction as to the purpose of why having Hong Kong in the middle. And if the documents can’t demonstrate a lot of the commercial substance in Hong Kong, then the Chinese tax authority can ignore the existence of the Hong Kong entity. So the transfer of Hong Kong by the UK company will be re-characterized as a transfer by the UK company of the underlying Chinese subsidiary. So that is a direct transfer and it attracts a 10 percent holding tax on the built in gain. So that is a typical situation in an indirect transfer case.
For companies, how to deal with this kind of a challenge, the basic advice is that we need to satisfy the substance requirement because this indirect transfer rule is designed out of the GAAR principle. GAAR means what? GAAR means to defeat taxpayers’ attempt to avoid tax. So you have to demonstrate that this is not for tax avoidance purpose and the best proof you have available is to show that there is a substance in the company. So you have to show this Hong Kong company how people, has operation, that actually it has valuable assets and they also bear risks.
So that is the main point that we need to pay attention.
KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.