The document provides an overview of common options for structuring local presence and investments in China, including contractual alliances, representative offices, wholly foreign owned entities (WFOEs), and joint ventures. It then discusses in more detail considerations for structuring local operations using a WFOE or joint venture. Key points include that a WFOE allows full control over business operations but requires higher registered capital, while a joint venture requires sharing profits with a local partner.

1. Structuring Investments and Operations – Practical Tips: China and Hong Kong www.rhklegal.cn RHK Legal Corporate Advisors

9. Tax Treaties/Arrangements of selected jurisdictions for receipt of payments from China Subsidiary Payment Type Dividends Interest Royalty Share sale gain Standard China Income Tax Withholding Rate Zero (post-reform: possibly 20% ) 10% (post-reform: possibly 20%) 10% (post-reform: possibly 20%) 10% (post-reform: possibly 20%) Hong Kong Arrangement Rate 5% 7% 7% No Protection Germany Treaty Rate 10% 10% 10% No Protection UK Treaty Rate 10% 10% 10% No Protection Netherlands Treaty Rate 10% 10% 10% No Protection Mauritius Treaty Rate 5% 10% 10% 0% Barbados Treaty Rate 5% 10% 10% 0%

10. ABC Holding Company (Offshore/Hong Kong) Parent Company ABC Trading Co. (ABC China) Outside China Inside China T R A D E M A R K L I C E N S E T e c n n o l o g y T r a n s f e r A g r e e m e n t Agreement Loan

13. Royalty Structure PRC Subsidiary Hong Kong (License Company) Client (Offshore Company & Owner of the IP) IP Use IP Use Royalties Royalties 7% WHT (PRC) 0% Corporate Tax 0% WHT 0% Corporate Tax

28. RHK LEGAL Richard Kimber Managing Partner Add: Suite 507, Jingan China Tower, No. 1701, Beijing West road, Jingan District, Shanghai T: (8621)62888821 F: (8621) 62888823 ! www.rhklegal.cn RHK Legal Corporate Advisors