Presentation for China Offshore Summit Shanghai Nov 2015 - China High Net Worth Individuals Going Global

International Tax & Business Advisory Services Firm
China High Net Worth Individuals Going Global
China Offshore Summit
Shanghai, China
4th - 5th Nov, 2015

AGENDA
 Latest development of Chinese HNWIs going global
 Illustrative examples
 Australia
 Portugal
 Germany
 Hong Kong
 Our services and strength
2015 Masson de Morfontaine Limited. All rights reserved. For the purpose of China Offshore Summit Shanghai 2015
Chinese HNWIs’ preferences point to new avenues of opportunity

Latest development
1
 Opportunities
 According to the latest World Wealth Report from Capgemini and RBC Wealth Management, Hong
Kong is the gateway to 4.69 million HNWIs in Asia Pacific, the region with almost 1/3 of HNWIs in
the world
 Mainland China recorded a significant increase in the number of HNWIs with a growth of 17.8% in
2014, which notably outpaced the growth in Asia Pacific and globally, wealth also grew strongly by
20.5% to USD 3.8 trillion
 Mainland China has a large population of HNWIs worldwide around 758,000
 According to a recent joint study of Deloitte and Oxford Economics, wealth of HNWIs in Mainland
China and Hong Kong combined is forecast to be USD 13.9 trillion by 2020
 The global outreach of Chinese HNWIs creates unprecedented opportunities for wealth
management and associated professional services The comprehensive professional services in Hong Kong are well-
catered for the growing Chinese HNWIs’ foreign investments
2015 Masson de Morfontaine Limited. All rights reserved.

Latest development
2
 Corresponding measures (e.g. Hong Kong)
 Tax exemptions on private equity funds
o Extend the profits tax exemption for offshore funds to include transactions in private companies
which are incorporated or registered outside Hong Kong and do not hold any Hong Kong
properties nor carry out any business in Hong Kong, which provides a clear and competitive tax
environment for private equity funds
 Developing an Islamic finance platform
o Several landmark Sukuk have been listed on HKEX, various Islamic financial products and services
have also been launched in Hong Kong, including Islamic funds, loan syndication, indices and
banking windows, while the HKSAR government has amended and clarified the tax laws in Hong
Kong with the aim of providing a comparable taxation framework for common types of Sukuk vis-
à-vis their conventional counterparts
 Modernised trust law
o The modernised law, among others, provides for flexibility for the establishment of perpetual
trusts, and enhances the certainty of transfer of movable assets to Hong Kong trusts against
foreign forced heirship rules
Hong Kong is the ideal gateway for Chinese
HNWIs’ foreign investments

Illustrative examples
3
Example 1: The legal and tax considerations for Chinese HNWIs investing in Australia property market
 Legal Considerations
 If Chinese want to buy a property in Australia, they must obtain prior approval from
the FIRB of Australian Government. The reason why they need to have a prior
approval is that, the Australian Government believes foreign investment in the
property sector should increase the supply of housing, and should not be
speculative in nature. Hence, the policy is designed to channel foreign investment
into Australia for increasing the supply of new housing.
 Chinese can normally obtain approval to purchase (i) vacant land, as long as they
start continuous construction within twelve months; or (ii) existing residences for
redevelopment, provided that this will increase the supply of housing as well as the
house must remain unoccupied during redevelopment; or (iii) units, townhouses
and house/land packages in a new development.
 Chinese can buy the aforesaid properties before construction, during construction,
or when the dwelling is newly constructed, given that the dwelling has never been
occupied or sold; and no more than fifty percent of the dwellings in any one
development are sold to foreign investors.
 Since Australia’s foreign investment policy is designed to increase the supply of new
housing, Chinese cannot normally obtain approval to purchase houses, flats or units
which have been occupied. However, there are two exceptions to this rule: (i) if
Chinese temporarily resident in Australia for more than twelve months, who are
purchasing a home there; or (ii) if Chinese companies buying a house for their senior
executives who will be living in Australia for more than twelve months.
The depreciating Australia dollar is the main catalyst for
Chinese HNWIs’ investment in Australia property market

4
 Tax Considerations
 Since China adopts a worldwide tax basis concept for both of her individual residents
and corporates, when Chinese investors purchase property in Australia and
eventually dispose it with capital gains, they are not only required to pay the
Australia capital gains tax, but they also need to pay China income tax at 25% for the
capital gains as their ordinary income, and the elimination or reduction of the
potential double taxation on the same capital gains, are subject to the foreign tax
credit available in the China-Australia Double Tax Treaty, which in turn is subject to
the China tax authority's approval.
 Tax considerations which should be addressed prior to the purchase of a property
include (i) income tax; (ii) capital gains tax; and (iii) land tax.
 Australian taxation is among one of the most complicated tax systems in the world.
Coupled with the strong compliance enforced by Australian Taxation Office (ATO) and
FIRB in recent years to combat illegal purchase of property in Australia property
market, foreign investors and immigrants including Chinese should be very cautious
to the latest development of the Australian legislations and seek professional advice
and solution from a trusted advisor, in order to avoid any unnecessary loss arising
from potential non-compliance acts.
Example 1: The legal and tax considerations for Chinese HNWIs investing in Australia property market
Gold Coast is one of the favourite options for Chinese HNWIs

Example 2: Chinese HNWIs making property investment in Portugal under the Golden Visa Regime
 Under the Golden Visa Regime, generally where a property is valued at
under €1million it is seen as advisable to keep the property as a privately
owned property. There will be costs involved in a corporation owning a
property and it may not be as financially viable. However when buying
property valued over €1million you may find there are benefits of
corporate ownership of property in Portugal.
 Below is a table, which shows some of the costs involved for a non-
resident of Portugal (e.g. Chinese HWNIs), in the buying, selling and
owning of a property in Portugal valued at €1million.
Costs involved in buying a property valued at over €1million & as a non-resident of Portugal
Cost Privately Owned Company
White Listed Corporate Ownership of
Property
(e.g. Malta, Delaware)
Black Listed Corporate Ownership of
Property
(e.g. BVI, Isle of Man)
Property purchase costs, (IMT) 6% Purchase Tax (IMT) No IMT 8% Purchase Tax (IMT)
Stamp duty 0.8% Stamp Duty No Stamp Duty No Stamp Duty
Legal fees on purchase & sale 1 to 2% 1 to 2% 1 to 2%
Capital Gains tax on sale of property 25% on the profit (in Portugal) None to be paid in Portugal None to be paid in Portugal
Annual running costs of company None Between €1500 and €3750 Between €1500 and €3750
Annual property Tax (IMI). This is calculated
on the property rateable value
Revalued since 2004 (0.2 to 0.4%) | Not
valued (0.4 to 0.7%)
Revalued since 2004 (0.2 to 0.4%) | Not
valued (0.4 to 0.7%)
1.00%. Or 2.00% if the property is not
inhabited for more than a year.
Annual Fiscal representation €250 €425 €425
 Corporate Ownership Benefits
 When property is owned by a white listed corporation there is no IMT
to be paid, thus saving 6% if it was a private property purchase.
 Capital gains tax is not paid in Portugal on the profit of a sold
property through corporate ownership. The capital gains made will
then be subject to where the corporation is domiciled.
 Owners through a Corporation enjoy privacy/anonymity. Property
sales via a corporate structure are very simple and tax efficient. The
transfer of shares can be conducted in English through a share
purchase agreement.
 Benefit of corporate ownership for property valued at over €1million

6
Example 3: Chinese HNWIs making real estate investment in Germany via corporate vehicles of efficient tax structure
 Background
1. Mr. Li is a Chinese HNWIs who invests in German market by forming a
German company (G Ltd);
2. G Ltd performs well and remits different types of payment to Mr. Li every
year, including dividend, interest and royalty, etc.
 New arrangement
1. Mr. Li forms a Hong Kong company (H Ltd) as 100% shareholder;
2. H Ltd is 100% shareholder of a Luxembourg company (L Ltd);
3. L Ltd is 100% shareholder of a German company (G Ltd);
4. Payment from G Ltd reaches Mr. Li via L Ltd and H Ltd.
 Benefits
1. H Ltd and L Ltd are regarded as “Twin-Company” – there are Double Tax
Agreements (DTAs) between Germany and Luxembourg; Luxembourg and
Hong Kong as well as Hong Kong and China;
2. Luxembourg company also enjoys local tax benefit in Europe;
3.
4. The income received by L Ltd and H Ltd is tax free – by virtue of their
respective local tax law.
Withholding tax payable
by German company
If no Twin-
Company structure
If used Twin-
Company structure
Dividend 10% 0%
Interest 25% 0%
Royalty 10% 0%

Example 4: The investment structure and tax issues of Islamic bond (Sukuk) in Hong Kong
 The latest development of Sukuk in Hong Kong
 Hong Kong issued its first USD 1 billion inaugural five-year Sukuk in September last
year which used the Ijarah structure that has underlying tangible assets of 100
percent in the issued amount. The second government Sukuk to raise USD 1.1 billion
in May this year used a structure called the Wakalah, which has one-third of assets
invested in selected units in an office building in Hong Kong, and two-third of the
assets underpinned by Shariah-compliant commodities.
 Most of the Sukuk issued are the leasing type (known as “Ijarah Sukuk”). Under an
Ijarah structure, assets such as buildings, land, machinery and property are sold to a
SPV using funds raised from investors (e.g. Chinese HNWIs). Lease income are paid
by the issuer to the SPV, which are passed to investors until maturity when the issuer
repurchases the assets. Below is an illustrated diagram.
At inception Periodic payments At maturity
Co
SPV
Sukuk holders
Co Co
SPV SPV
Sukuk holders Sukuk holders
Assets Assets
Asset
payment
Securities
payments
Lease
payments
Securities
returns
Principal
repayment
Asset
payment
 To allow Sukuk to receive the same tax treatment, the Hong Kong
government introduced legislative amendments to the Inland
Revenue Ordinance and Stamp Duty Ordinance, thereby ensuring
that Sukuk can enjoy the same treatment as traditional debt
securities, which essentially involved an exemption from Profits Tax
and Property Tax and a remission of Stamp Duty, achieving a level
playing field for the development of Sukuk in Hong Kong.
 The investment structure of Sukuk
 The tax issues and prospect of Sukuk in Hong Kong
 As a mature financial centre, Hong Kong is well-positioned to
develop as a Sukuk market. Hong Kong government has proved its
commitment to provide the tax and regulatory framework to
promote the industry. Hong Kong is already well-placed to provide
a gateway for investors who are interested in Asia, particularly
Mainland China, by structuring Shariah-compliant financial
instruments with underlying Asian assets.

Our services and strength
 Our services
 International Tax Services
- Corporate tax planning and transactional work
- High net worth investors tax planning
- Resolution of tax disputes
- Transfer pricing
 International Business Advisory Services
- Business advisory / Strategic support / M&A
- Company formation / Company secretarial service
- Trademark registration
- HNWI services / Trust / Immigration / Real estates
- Global mobility / Labour law
8
Our official website: www.masson-de-morfontaine.com Our brochure
Our recent publications

Our services and strength
 Our strength
 Knowledge
- Our advisers have detailed and intimate knowledge of
domestic rules in Africa, Asia, Europe and Middle East,
international rules as well as Islamic finance
 Determination
- Our determination and drive to ensure complexities are
simplified and tax & commercial issues are clarified
 Track record
- We have a track record of pragmatic and integrated tax &
business advice to individual, corporates and governments
within the regions
 Solution
- We deliver creative and innovative solutions to what is
otherwise perceived as insurmountable tax & commercial
and regulatory issues
 Network
- Our uniquely strong local touch with professional firms,
enterprises and industrial bodies in various jurisdictions
across the regions
Our people: We are a team of experienced tax experts and
business advisers from multinational background
Our office: Lippo Centre in Admiralty, Hong Kong
Our Main Partner: Ms. Catherine LE BOURGEOIS,
Qualified Lawyer, M&A, legal and tax expert

10
 Let’s talk, your questions are most welcome

CONTACT LANGUAGES
Phone: +852.3953.4804 (Direct line) - English
Email: wilson@masson-de-morfontaine.com - Mandarin
Skype/WeChat: wyeu002 - Cantonese
PROFESSIONAL & ACADEMIC QUALIFICATIONS PROFESSIONAL MEMBERSHIPS
CTA(HK), CMA(Aust.), MIPA(Aust.), MCom(NZ), BCom(NZ) TIHK, ICMA(Aust.), IPA(Aust.), AITC, ISFIN
SPEAKER PROFILE: Wilson YEUNG - International Tax Director
A qualified accountant and certified tax adviser with over 18 years of practical experience gained from Big Four CPA firm and multinational listed corporations.
Possesses comprehensive knowledge and experience in telecom, manufacturing, real estates, financial institution and tourism industries, with broad exposure to China,
APAC, EU, CIS, MENA, Americas and Australasia markets, advising MNC, SME and HNWI clients in the area of M&A, corporate restructuring, transfer pricing, offshore
structure, global mobility, SOX compliance and FATCA. Expertise in group tax efficient structure, cross border transaction, indirect taxes, customs, particularly DTA, TP and
PE issues.
Wealth of successful cases in respect of tax incentive application, tax audit mitigation, contractual review and negotiation of infrastructure projects for China enterprises
going global. Keen on offshore tax structuring and implementation for HNWIs especially from China, Russia and Europe making investments in both developed and
developing countries. Leveraging on a strong international network, striving to offer technically robust, industry specific, pragmatic and seamless solutions to clients on
their international tax issues.

Unit 3401, Level 34, Tower One, Lippo Centre,
No. 89 Queensway, Admiralty, Hong Kong
Tel: +852.3953.4880 Fax: +852.3953.4818
Website: http://www.masson-de-morfontaine.com
Thank you

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