Legal and Tax Aspects of Doing Business in China
Presented by Sabrina Zhang, National Tax Partner and Regional Manager, Dezan Shira & Associates
Learn about the latest changes in the legal and tax environment in China and their impact on foreign businesses. This seminar gives you the US and China perspective on how to structure tax-efficient entities to invest in China and helps you understand what constitutes a permanent establishment in China and managing the related tax exposure. It will cover the basics on repatriation of profits and what the indirect taxes in China are – understanding VAT, custom duties and business tax.
Investment vehicles available for foreign investors in China: The Representative Office. How to set up a representative office (RO) in China. Its features, maintenance, taxation.
The document describes the ease of doing business in India. It discusses the factor used for calculating ease of doing business index. It also mentions about the regulations restricting the ease of doing business in India and the way forward to improve the same.
Investment vehicles available for foreign investors in China: The wholly foreign-owned enterprise. How to set up a wholly foreign-owned enterprise (WFOE) in China. Its features, maintenance, taxation.
Investment vehicles available for foreign investors in China: The Representative Office. How to set up a representative office (RO) in China. Its features, maintenance, taxation.
The document describes the ease of doing business in India. It discusses the factor used for calculating ease of doing business index. It also mentions about the regulations restricting the ease of doing business in India and the way forward to improve the same.
Investment vehicles available for foreign investors in China: The wholly foreign-owned enterprise. How to set up a wholly foreign-owned enterprise (WFOE) in China. Its features, maintenance, taxation.
FDI occurs when a firm invests directly in
facilities to produce or market a product in a foreign country.
Technical processes
Competitiveness
Products
Job
FDI has Three components:
Equity
Re-invested earnings and
intercompany loans.
Sources:
Secondary Data
Limitations of the study
FDI increased 1833.82 USD million in 2015 FY.
Averaged FDI 916.07 USD million(2006-2015).
Highest 1833 USD million in 2015 & lowest 276 in 2007.
Guarantee of good governance
Accountability and Transparency
Improving the country’s image abroad
Developing Diplomatic Relation
Political Reformation
India is currently the world's fastest growing economy, with a rising middle class fueling aspirations for growth it is no surprise that investors would be looking to invest in India. India offers a great opportunity with its labour pool, market size, low cost base. There are also challenges in the form of complex tax and regulatory structure and many fold compliances to be taken care of. This presentation aims to guide the investor looking at India and educate them on the options before them.
This economy profile presents the Doing Business
indicators for Thailand. To allow useful comparison, it
also provides data for other selected economies
(comparator economies) for each indicator. The data in
this report are current as of June 1, 2014 (except for the paying taxes indicators, which cover the period January–December 2013).
LightCastle takes a look at the role of NGOs/NPOs in Impact Investment and how they can make a change in the journey of budding SMEs and small businesses.
FDI occurs when a firm invests directly in
facilities to produce or market a product in a foreign country.
Technical processes
Competitiveness
Products
Job
FDI has Three components:
Equity
Re-invested earnings and
intercompany loans.
Sources:
Secondary Data
Limitations of the study
FDI increased 1833.82 USD million in 2015 FY.
Averaged FDI 916.07 USD million(2006-2015).
Highest 1833 USD million in 2015 & lowest 276 in 2007.
Guarantee of good governance
Accountability and Transparency
Improving the country’s image abroad
Developing Diplomatic Relation
Political Reformation
India is currently the world's fastest growing economy, with a rising middle class fueling aspirations for growth it is no surprise that investors would be looking to invest in India. India offers a great opportunity with its labour pool, market size, low cost base. There are also challenges in the form of complex tax and regulatory structure and many fold compliances to be taken care of. This presentation aims to guide the investor looking at India and educate them on the options before them.
This economy profile presents the Doing Business
indicators for Thailand. To allow useful comparison, it
also provides data for other selected economies
(comparator economies) for each indicator. The data in
this report are current as of June 1, 2014 (except for the paying taxes indicators, which cover the period January–December 2013).
LightCastle takes a look at the role of NGOs/NPOs in Impact Investment and how they can make a change in the journey of budding SMEs and small businesses.
For businesses with 50 employees or less. There is a lot of confusion and misunderstanding about what the Affordable Care Act (Obamacare) is and how it will affect your business and employees. It is important to learn how it relates to you, your employees and your business. There are many moving parts and there are changes ahead. Our blog series and webinars will describe what the Affordable Care Act is "in plain English" and keep you up to date on the latest information.
There is a lot of confusion and misunderstanding about what the Affordable Care Act (Obamacare) is and how it will affect your business and employees. It is important to learn how it relates to you, your employees and your business. There are many moving parts and there are changes ahead. Our blog series and webinars will describe what the Affordable Care Act is "in plain English" and keep you up to date on the latest information.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Taurus Zodiac Sign_ Personality Traits and Sign Dates.pptxmy Pandit
Explore the world of the Taurus zodiac sign. Learn about their stability, determination, and appreciation for beauty. Discover how Taureans' grounded nature and hardworking mindset define their unique personality.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
1. CHINA LEGAL AND TAX UPDATE
Presented by Sabrina Zhang, Partner, Beijing office
March 2014, Boston
2. AGENDA
Where is China Today
Opportunity For Growing
Establishing China Business
Recent Key Regulatory Updates
Profit Repatriation
Cross Boarder Transaction and PE Risk
van
www.dezshira.com 2
6. Economic Snapshot
2014-3-27 www.dezshira.com 6
Chinese Real GDP Growth: 1979-2013
Source: IMF.
Note: * Data for 2013 is the IMF‟s projection made in July 2013.
16
14
12
10
8
6
4
2
0
7. Economic Snapshot
2014-3-27 www.dezshira.com 7
Annual FDI Flows to China: 1985-2012
($ billions)
Source: United Nations Conference on Trade and Investment and Invest in China.
Note: Excludes FDI in financial services.
40
120
100
80
60
40
20
0
8. Economic Snapshot
2014-3-27 www.dezshira.com 8
Major Recipients of Global FDI Inflows in 2012
($ billions)
Source: United Nations Conference on Trade and Investment.
Note: The United Nations’ data on China’s FDI inflows differ from China’s official data
9. China: Projected growth pattern assuming steady reforms and no major shock
Indicator 1995–2010 2011–15 2016–20 2021–25 2026–30
GDP growth (percent per year) 9.9 8.6 7 5.9 5
Labor growth 0.9 0.3 –0.2 –0.2 –0.4
Labor productivity growth 8.9 8.3 7.1 6.2 5.5
Structure of economy (end of period, %)
Investment/GDP ratio 49 42 38 36 34
Consumption/GDP ratio 47 56 60 63 66
Industry/GDP ratio 46.7 43.8 41 38 34.6
Services/GDP ratio 43.1 47.6 51.6 56.1 61.1
Share of employment in agriculture 36.7 30 23.7 18.2 12.5
Share of employment in services 34.6 42 47.6 52.9 59
Economic Snapshot
2014-3-27 www.dezshira.com 9
Sources: NBSC and DRC.
10. China in 1992
Av. age of worker: 23
GDP growth rate: 12-14 %
Employment by SOEs: >60%
Ranking by Nominal GDP: 11th
China in 2012
Av. age of worker: 37
GDP growth rate: 7.9%
Employment by SOEs: <20%
Ranking by nominal GDP: 2nd
An Aging Population…
2014-3-27 www.dezshira.com 10
11. Arising Labor Cost
2014-3-27 www.dezshira.com 11
Average Monthly Wages for Selected Countries: 2000-2012
(U.S. dollars)
800
700
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
China
Philippines
Mexico
Thailand
Indonesia
Vietnam
Malaysia
Source: Economist Intelligence Unit.
12. Senior managers in 1st tier cities reaches HK level
Arising Labor Cost
2014-3-27 www.dezshira.com 12
15. Opportunities For Growing
2014-3-27 www.dezshira.com/de 15
Industry restructure and upgrade
Increase the middle class and acceleration of urbanization
Move into 2nd & 3rd tier cities and inland
16. Opportunities For Growing
2014-3-27 www.dezshira.com/de 16
New Drivers in the 12th Five-Year Plan
Old Drivers Exports
Fixed-Asset
Investment
Low-End
Manufacturing
New Drivers
Industrial
Upgrading
Green and High
tech Development
Domestic
Consumption
Service Sector
Development
17. Opportunities For Growing
2014-3-27 www.dezshira.com/de 17
Services, value added, as a share of GDP (2010)
100
90
80
70
60
50
40
30
20
10
0
43
75
54
52 50
79 78
72 71
58
China
High-
income
countries
Upper-
middle-
income
countries
Lower-
middle-
income
Countries
Low-
income
countries
France United
States
Japan Germany Korea,
Rep.
Agriculture Industry Services
Source: World Bank World Development Indicators 2011.
18. China’s Rising Middle Class…
2014-3-27 www.dezshira.com/de 18
Differs widely between cities, but middle class is generally defined as
income of over RMB30,000 to RMB50,000 per annum (5-8,000 $ pa)
19. Move into 2nd & 3rd tier cities and inland
2013 H1 Results
2014-3-27 www.dezshira.com/de 19
Top 5 Cities H1 GDP Growth
Tianjin 14.1%
Xining 14.1%
Chongqing 14.0%
Lanzhou 13.4%
Xiangyang 13.2%
Growth Moving Inland
21. Establish Operation In China
2014-3-27 www.dezshira.com/de 21
The traditional legal form of foreign direct investment
Representative Offices (ROs)
Equity Joint Ventures (EJVs)
Cooperative Joint Ventures (CJVs)
Wholly Foreign Owned Enterprises (WFOEs)
Branch under WFOEs
22. Representative Office (RO)
RO
2014-3-27 www.dezshira.com 22
Typical function
Marketing, Research, Liaising, Sourcing
Hiring of employees in China (visa, residence permit, working permit)
No commercial activity
Advantages Disadvantages
√ Incorporation quick and easy to
setup (2-3 months)
× Cannot receive revenue RMB
√ Inexpensive
× No possibility to issue invoices in
RMB (Fapiao)
√ Easy to be funded by HQ
× Must go through HR agency to
employ local staff; direct hiring of
expates, but limited to 4
× High tax implications for growing
operations
23. Wholly Foreign Owned Enterprise (WFOE)
WFOE
2014-3-27 www.dezshira.com 23
Typical function
Can engage in manufacturing, processing & assembly, services &
consulting and/or trade
Advantages Disadvantages
√ Direct hiring of employees possible
(unlimited expat hire)
× Application & incorporation
procedure: 3-6 months ( depending
on WFOE type)
√ Can receive revenue RMB × Equity-Debt ratio limited to 70:30
√ Can issue VAT invoices (Fapiao) for
clients
× Cash flow management and
funding
24. Foreign Invested Commercial Enterprise (FICE)
FICE
2014-3-27 www.dezshira.com 24
Typical function
Special type of WFOE used for trading
Import, export, distribution and domestic retailing (both wholesale and
retail)
Advantages Disadvantages
√ Direct hiring of employees possible
(unlimited)
× Application & incorporation
procedure: 4-5 months ( at least )
√ Can issue invoices in RMB (Fapiao) × Equity-Debt ratio limited to 70:30
√ Can import/export as well as sell to
the domestic market
× Operation complicated due to
Custom and VAT issues
√ VAT refunds available for export
× Cash flow management and
funding
25. Joint Venture (JV)
A Joint Venture in China is an entity involving a Chinese and a foreign party
JV
2014-3-27 www.dezshira.com 25
Why do I need a partner?
Legally required
Other advantages: network, sales
channels, infrastructure facility
“Same bed, different dreams”!
Proper evaluation of your partner
Difficult to exit
26. WFOE Establishment Procedure
2014-3-27 www.dezshira.com 26
Company now legally exists
Online Name Pre-approval
(at least 10 working days)
Receive Legalized Documents From
Client (Depends on client; often
several weeks)
Approval Letter from BOC (District
Level, at least 20 days)
Enterprise Code
(1 Working Day)
Certificate of Approval
(5-7 Working Days)
Online Registration
(5 Working Days)
„Temporary‟ Business License
(5-10 Working Days)
Carve Company Chop, Financial Chop , Invoice (“Fapiao”) Chop, and
Legal Representative Chop (3-4 days)
Enterprise Code Certificate (1-2 days)
Foreign Exchange Registration
Certificate (5-20 working days)
Tax Registration Certificates (2-3
days)
Foreign Capital Account
(20 working days)
RMB Basic Account
(Depends On Bank)
Capital Injection
Business License Renewal
(5 working days)
Financial Registration Certificate (3 working days)
Capital Verification Report
(depends on accounting firm)
Statistic Registration Certificate (3-5 working days)
File with COC for Foreign Trade Operator (2-3 working days)
Basic Customs Registration (5 working days)
General VAT Taxpayer Application (30 working days)
General VAT Taxpayer Invoice Quota (30-60 working days)
2-3Months
2-4+Months
Advanced Customs Registration (30-60 days)
Pre-licensing
Post-licensing
Financial Formalization
27. Business License
2014-3-27 www.dezshira.com 27
Company Name:
Address:
Legal Representative:
Registered Capital: USD 400,000
Paid-in Capital: USD 400,000
Company Type: Limited Liability
Company (Sino-foreign equity
joint-venture)
Business Scope:
Repair and Maintenance of
medical equipment, medical
apparatus & instruments.
Technical Services, Technical
Consulting and Technical
Training
Shareholder (the Initiator): ---
28. Establish Operation In China
2014-3-27 www.dezshira.com 28
Key Taxes for Foreign Invested Enterprises
Tax Rate
Corporate Income Tax (CIT) 25% of profit
Individual Income Tax (IIT) 3% - 45%
Withholding Tax (WHT) 5% - 10%
Value Added Tax (VAT) 3%, 6% - 17%
Business Tax (BT) 3 or 5%
Surcharges 1 - 7% on turnover tax (VAT & BT)
29. Establish Operation In China
2014-3-27 www.dezshira.com 29
Changes in investment vehicles
Restructure of investment in China: RO vs. WFOE
On-shore/Off-shore holding company of multiple subsidiaries
Regional headquarters
Re-investment in China through existing China operation
Foreign Invest Partnership (FIP)
31. Recent Key Regulatory Updates
2014-3-27 www.dezshira.com 31
BT/VAT reform expanded to the rest of China
Approval of massive FTZ in Shanghai
New Exit-Entry Administration Law
Stricter punishments for foreigners illegally employed/staying in China
Revision on Labor Contract Law
tightens loopholes on hiring dispatched workers and offers better
protection to the interests of such workers
Procedures Further Relaxed for Outbound Investments
Non-resource related investments <USD10m no longer requires
approval from NDRC, just from MOFCOM and SAFE
State Council Relaxes Registered Capital Restrictions
State Council released Announcement on Publishing the Registered
Capital Registration System Reform Scheme
Aug 13
Dec 12
July 13
July 13
Feb 14
32. VAT Reform – Original Two Turnover
Tax System
2014-3-27 www.dezshira.com 32
Domestic supply of
goods and services
Trading tangible
goods
Processing & repair &
replacement
Export-related activities
Input VAT may be
deductible
Export exemptions or
refunds
Value Added
Tax (VAT)
0%, 3%-17%
Business Tax
(BT) 3%-5%,
20%
Consumption Tax
Goods harmful to health, social order
and the environment - 5% on alcohol
in general, 40% on large vehicles, etc.
Stamp Tax
Documents - .005% to 0.1%.
Surcharges
On indirect taxes themselves (Urban
Construction and Maintenance,
Education Surcharge, Riverine, etc.) –
1%-7%
Provision of
services and non
VAT-taxable
services
Transfer of
intangible assets
Some immovable
properties
No input deductions
(“sunk costs”)
Usually 3-5% / up to
20% for
entertainment sector
34. VAT and BT Burden On Supply
Chain
2014-3-27 www.dezshira.com 34
Pass-on Tax
Total VAT Costs = 600 *6 = 3,600
Price = 10,000 *6= 60,000
Effective Tax Rate = 3,600 / 60,000 = 6%
1st TE:
10,000*6%=
600
2nd TE:
600
3rd TE:
600
4th TE:
600
5th TE:
600
6th TE:
600
Assume the value added is 10,000 at each taxable event (TE).
Under the current VAT regime:
35. VAT Pilot Program Industry
Implementation
Transportation &
Modern Services
Broadcasting,
cinematic and
television services
Post & Railway
transportation
Telecoms
Real estate
Construction
Financial services
….
After April 2014
2013
Jan 2014
37. Key Changes
Capital contribution requirements removed
Except for special restricted industry, there is not minimum registered
capital requirement
Capital verification report is not required, and the shareholder can
subscribe the capital flexible
Total investment rules still apply to FIEs – unclear to be removed or not
The annual inspection procedure has been changed to annual report filing
Reform On Investment Administration
System
38. Reform On Investment Administration
System
No paid-in capital
No annual inspection file form
No shareholder information
QR code is printed
New Version Of Business License
39. 2014-3-27 www.dezshira.com 39
Shanghai Free Trade Zone
Established 29 September 2013 with total coverage 28.78 km2
Pre-establishment national treatment
Negative list: Imposes 190 restrictions in 18 sectors of
foreign investment
The List is effective through December 31, 2013
Simplified registration
No minimum registered capital requirement
Outbound investment
Liberalized interest rates and exchange rates
Opening of service industry: banking, financial leasing,
shipping, medical service, education…
40. Simplified Forex Regulations
Approval-oriented
forex control
Hands-on SAFE
More responsibilities
for banks
Registration-based
forex control
Transform to
Delegate to
New Rules
• SAFE: A series of rules on foreign debts, FDI, trade services
• PBOC: Investments in financial institutions using offshore RMB,
simplifying cross-border RMB procedures
42. Profit Repatriation
When The Profit Is Allowed To Be Repatriated?
The WFOE‟s registered capital has been injected within the time limits as
set out in the Article of Association;
The WFOE‟s prior year‟s loss has been fully made up;
The WFOE has drawn 10% of the rest after-tax profits as the company's
statutory common reserve;
The WFOE‟s relevant taxes have been fully paid up;
The WFOE has sufficient cash for dividend distribution;
The WFOE‟s board of directors approved the distribution through a board
resolution.
45. Taxes Involved With Cross – Border
Transactions
Sale Goods Into China
• Import Value Added Tax (VAT)
• Custom Duty (CD)
• Consumption Tax (CT)
• Payment term decides who takes tax burden
Provide Service or Charge Passive Income to Chinese Customer
• Value Added Tax (VAT) or Business Tax (BT) and its surcharges
• Corporate Income Tax (CIT)
• Individual Income Tax (IIT)
• Withholding Tax (WHT)
• If no specification on payment terms, normally foreign company shall bear the tax
burden
46. CIT Liabilities Of Foreign
Enterprises
A non-resident enterprise (NRE) with an establishment or place of
business in china shall pay corporate income tax on its china-sourced
income derived by such establishment or place of business.
An establishment or place of business includes but are not limited to:
• A management establishment, a business establishment or an office
• A factory, farm, or place of extraction of natural resources
• A place where services are provided
• A place where a project of construction, installation, assembly, repair, exploration,
etc, is carried out
• Other establishments or places of business where production and business operations
are carried out
An establishment or place of business is equivalent to the concept of a
Permanent Establishment (PE) in tax treaties.
47. PE Test
“For a period or periods aggregating more than 6 months / 183 days within
any 12-months period” relevant to service PE
6 months within any 12-months period GUOSHUIHAN [2007] NO.403
• from the first month arrived until the last month of service
• do not necessarily have to be six full months, one day in a month could be also
counted
• if no expatriate in China for performing service within consecutive 30 days, one
month is deducted
183 days within any 12-months period GUOSHUIFA [2010] NO.75
• from the first day arrived until the last day of service
• more than one employee is counted as one day
48. How are PEs Taxed – Deemed
Taxation
Scope of profits taxable in source country: only profits of an NRE
attributable to its PE in China are taxable in China.
If A PE does not keep separate accounts and profit apportioning is not
customarily used, profits of A PE will be determined on A deemed basis.
Taxable Income = Gross Revenue X Deemed Profit Rate (DPR)
DPR range
15%-30% Project engineering, designing and consulting services
30%-50% Management services
≥ 15% Other services
50. Mixed Sales - Guoshuifa [2010]
No.19
Where a non-resident enterprise has entered into a sale contract for machinery
and equipment or goods with a Chinese resident enterprise, and concurrently
provides labor services such as installation of equipment, assembly, technical
training, guidance, supervision services, etc, and the sale of goods contract
does not list the fee amount for the aforesaid labor services, or the pricing is
unreasonable, the tax authorities in charge may:
Assess the income from provision of labor services based on the actual
circumstances and with reference to the pricing standards for identical or
similar business.
Or there are no reference standards, the non-resident enterprise‟s income
from provision of labor services shall be determined in accordance with the
principle of not less than 10% of the total price in the sale of goods contract.
51. Procedures For Outward Payment
On Overseas Transactions
Contract Registration
Tax Assessment
Treaty Benefit Application*
WHT filing and Payment
Payment Registration*
3-5 working days
15-20 working days
15-20 working days
2-3 working days
3-5 working days
52. 2014-3-27 www.dezshira.com 52
Our Global Presence
11 China offices, 2 India offices, 2 Vietnam offices, Hong Kong and Singapore
Liaison offices in Italy and the United States
53. 2014-3-27 www.dezshira.com 53
Asia Briefing Publications
Asia Briefing, a subsidiary of Dezan Shira & Associates, publishes business magazines and
guides for China, India, Vietnam, Singapore and other key nations in emerging Asia.
Topics include Corporate Establishment, Financial Risk, Tax, Accounting & Compliance
issues.
Written in association with the legal, accounting, and auditing professionals at Dezan
Shira & Associates
Available in our online bookstore www.asiabriefing.com/store
55. Welcome to Emerging Asia
Sabrina Zhang
Regional Partner
Dezan Shira & Associates
+86 6566 0088 #601
sabrina@dezshira.com
Paul Oliveira, CPA
Shareholder & Director of Tax
KLR (Kahn, Litwin, Renza & Co., Ltd.
888-557-8557
poliveira@kahnlitwin.com
Editor's Notes
Rising manufacturing costs and consumer market shift► Previously China was primarily a manufacturing market. Since a number of yearsthis shifts towards a more consumer market, with rising labor prices.► Further focus on becoming a global player both manufacturing and (high value)services (Qianhai).
A growing middle class, 400 million by 2020Better quality and options demanded
AdvantagesDisadvantages√ Growth potential× Less developed logistics & supply chains√ Influx of new talent× Employee availability-“talent crunch”√ Improved infrastructure-transportation× Lack of soft infrastructure√ Rising purchasing power× Lack of market transparency√ Un-met demand× Policy stability-uneven & overlapping√ Special economic zones & incentives× Lower disposable incomes than first-tier cities√ Stable workforce× Less-sophisticated consumers√ Relaxed policy environment× Lack of good local partners(Joint-Venture)
Capital contribution: Minimum RC 30K, 100K15% in 3 month;Minimum cash contribution 30% New rules to amend to company law and RC registration;Anticipated rules: Fix inconsistencies between rule for FIEs and amended Company Law;SAIC, several draft amendments now open for public comments; local implementing rules.
Negative list:In effect, mostly same restrictions as Foreign Investment Catalogue (e.g., cultural, sports and entertainment industries)To be updated from time to time;Sectors not specifically prohibited by list permitteed, subject to simple filing procedureOutbound investments:Company in SH FTZ may conduct outbound investments without any prior approval; only filing procedure needed. Bank may process remittance of funds overseas directly.