As the global economy remains weak and uncertain, China is also going through hard times, and is no longer experiencing a high GDP growth rate. Therefore, the Chinese government has started to scrutinise some industries, in particular oversupplied industries like raw materials, natural resources and real estate, in an attempt to rationalise the supply side.
The government is putting less emphasis on increasing the tax revenue to give more breathing room for the corporates, but at the same time emphasising that businesses must pay their fair share of tax. The tax authorities have started to tighten up the tax collection on cross-border transactions using legislation such as tax residence rules and the M&A tax regime. The authorities' expertise is also increasing due to government-sponsored compliance training. This may also reduce compliance costs for taxpayers in China.
"We've seen a number of mergers and reforms in the domestic market," said Kevin Ng of Deloitte. "We also see the 'one belt one road' which I think it is very important initiative apart from political motive. I think it's also a good channel for Chinese business to expand globally. There are mega-size M&A's outside the border, in particular in natural resources. Given the global market pricing, the Chinese government is securing natural resources," he added.
One of the most significant tax reforms in China is the full expansion of the VAT pilot programme, replacing the existing business tax. The new VAT rule covers the construction, real estate, and life science industries on a nationwide basis.
"Companies in the affected industries are keen to study the impact of the new VAT pilot programme and prepare for necessary changes," said Julie Cheng, head of tax at JunHe. "Overall, the majority will benefit from the VAT system since the VAT system is aimed at eliminating the double taxation issue [which exists] under the business tax system," she added.
More of the OECD's BEPS recommendations will be further localised in China, on top of the already implemented Action 13-inspired regulations. It is also expected that the Chinese tax collection and administration law and the individual income tax law will be revised in the future. However, it is unclear when new laws will be published. Tax advisers said that multinational companies and other Chinese companies may have further requirements for compliance purposes in light of the increasingly strengthened tax compliance environment in China.
Many of these new regulations and the clear path being taken by the tax authorities are seen as positive developments in the tax market in China. However, taxpayers will need more help from the professionals and experts to deal with more sophisticated rules and changing legislation. Khoon Ming Ho of KPMG predicted that there will be more inbound and outbound M&A transactions, leading to an increased demand for related tax works such as investment holding structures and assistance in conducting due diligence in the coming years.
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KPMG China has around 10,000 professionals working in 17 offices: Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
Our tax professionals are equipped with strong technical knowledge and industry specific business understanding to help organisations and individuals realise tax efficiencies while meeting the highest standards of compliance.
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|Corporate Income Tax||25%|
|Capital Gains Tax||25%||A|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||10%|
|Branch Remittance Tax||0%|
A Capital gains derived by foreign enterprises from disposals of interests in foreign investment enterprises are subject to a final withholding tax of 10% instead of income tax. This rate may be reduced by applicable tax treaties.
Withholding tax note: The statutory rate is 20%, which is reduced to 10% by the Enterprise Income Tax Law Implementation Regulations.
Dennis Xu is a founding partner of Hendersen Taxand, Taxand China who has more than 11 years of experience in the areas of corporate tax, M&A, international tax and investment structuring. The firm's tax team consists of seven partners and 73 tax practitioners.
Henderson works with numerous international and domestic companies many of which are listed in Fortune Global 500. The firm provides services in a wide range of markets such as manufacturing, financial services, new media, logistics, retail, and food and beverage.
One client said: "We are very comfortable with the performance provided by this firm for years. We cooperated for a long time and it really was a big help for our business strategy and development in China."
The tax team offers services like corporate tax, M&A, investment advisory, human capital, customs and outsourcing technology.
Jon Eichelberger and Brendan Kelly lead Baker & McKenzie's China tax practice, which comprises four partners and seven other professionals.
The tax team has extensive experience in broad aspects of tax practice in China, particularly advising multinationals on tax planning for M&A, the establishment of new businesses, supply chain structuring and management, tax-efficient financing, tax compliance and tax controversy, direct tax, VAT and other indirect taxes, customs, personal tax and transfer pricing. The team provides clients with technical analysis, dispute resolution skills and the ability to implement and defend tax structures.
Manufacturing, financial services and banking, technology, retail, and pharmaceuticals and healthcare are the main industries the practice advises on.
In one of the most innovative tax transactions in the previous year, the team advised an online travel and tourism company listed in the US, with its principal business in China, on the sale of shares. The sale involved complex issues under China's indirect share transfer tax rules in Bulletin 7, as well as VIE structures. The deal was one of the first exits by a majority shareholder from an offshore listed company with an underlying variable interest entity (VIE) structure in China.
Deloitte China's tax practice is led by Vivian Jiang, who is also the firm's business advisory leader and service line leader for global business tax.
Deloitte China works across the Greater China region in 23 cities, including in mainland China, Hong Kong, Macau and Taiwan, supported by nearly 2,500 tax professionals advising clients on tax and business matters.
The firm's tax practice offers the full scope of services such as indirect tax, cross-border tax including M&A, transfer pricing, business model optimisation and global employer services.
The top industries that the firm advises on are consumer and industrial products, energy and resources, financial services, life sciences and health care, real estate and technology, media and telecommunications (TMT).
Deloitte China has developed advanced technology-based tax solutions to manage clients' tax efficiently in every aspect. For example, tax health check can be done with big data analysis tools rather than manually and tax management platform can be used to evaluate its management system.
During the last year the tax team, including partners Andrew Zhu and Charles Gong, provided tax due diligence, structuring and other transaction-related advisory services to a Chinese state-owned enterprise for its potential acquisition of a very large group in the agribusiness industry. This project was a landmark transaction in the Chinese M&A market due to the deal size and complexity. The deal was completed in January 2016 for a value of more than $44 billion.
Daniel Chan is head of the tax service at DLA Piper for both China and Hong Kong. His team consists of five partners and 16 other fee earners skilled in tax advisory, particularly for the financial services, manufacturing, automotive, TMT, online and digital markets.
The tax team is able to provide fully-integrated services offering a one-stop approach, providing clients with seamless coordination and knowledge of both local and global considerations. Beyond initial tax advice, the team assists clients in structuring, planning and implementing tax strategies in the most efficient manner for their global operations.
The firm offers a variety of services including advising on M&A transactions, post-acquisition integration, supply chain management, business process reviews, distribution, retail and after sales services. In addition, the team assists on structuring inbound and outbound investment, procurement centres and contract manufacturing relationships. The firm's private client practice also advises on multinational family matters and international business growth and management.
Henry Chan leads EY's tax practice and has years of tax experience across various industries in domestic and international tax. The firm provides the full range of tax services including country and global tax advisory, cross-border tax advisory, trade, compliance and reporting, private client services, tax accounting, tax controversy and more.
Jiang Han Xiong leads Grant Thornton China's tax team which consists of 18 partners and 250 other tax experts.
The firm offers the full spectrum of services focusing on advisory, compliance, dispute resolution, outsourcing and company secretarial services and global mobility solutions. The firm serves multinational companies involving complex cross-border holding structures and transactions.
The team offers tax advice mainly to the manufacturing, computers and digital, media and technology, healthcare, hospitality and fast-moving consumer goods (FMCG) industries.
Hwuason Lawyers is a law firm that focuses on tax services, providing comprehensive and innovative tax advice to clients. The firm's services range from tax planning, tax advisory, and international tax service to tax risk management, tax dispute resolution and assistance during audits and M&A, and tax audit. Tianyong Liu is the director and a senior partner of the firm in charge of all tax services provided by the practice.
The firm's major service sectors include high-tech enterprises, real estate, cultural business, financial institutions, government agencies and public institutions.
Julie Cheng is the head of the tax department at JunHe where she works alongside with three other professionals in the team. Cheng focuses on M&A, foreign direct investment and corporate tax. She joined the firm nine years ago and she has assisted many multinational companies in investment projects, M&A, project structuring, due diligence and drafting and reviewing documentation.
The firm provides various tax services including tax efficient structures for new investments, restructuring, inbound and outbound M&A, customs duty, VAT, business tax and income tax as well as representing clients before courts.
During the past year the tax team advised a client on the tax deductibility of the fees paid by Chinese subsidiaries in the same group to its overseas affiliates, including management fees, service fees, and other kinds of income and other related tax exposures. The team conducted a comprehensive review of the documents according to which the outbound payments were made, provided detailed analysis regarding the deductibility of such outbound payments and calculated the estimated tax exposure where the payments were non-deductible.
Both the tax and transfer pricing team of King & Wood Mallesons are led by Tony Dong. The tax practice has two other partners Duan Tao and Zhao Yan and one senior consultant Ye Yongqing. Tao specialises in China tax and business advisory work, with 13 years of experience in the field advising multinationals and domestic corporates on outbound investment, M&A, and restructuring projects. Yan has 18 years of experience in all kinds of tax as well as tax audits and initial public offering (IPO) projects.
The practice offers integrated legal and tax services to obtain both regulatory compliance and tax optimisation. The tax practice offers a full range of services related to any kind of tax issues from corporate tax, fund structuring, indirect tax, wealth planning and real estate tax, to tax disputes, tax planning and transfer pricing.
Khoon Ming Ho is head of tax for KPMG in China and Hong Kong. Ho has extensive experience in advising clients on matters relating to investment and funding structures, repatriation and exit strategies, M&A and restructuring. This year the team experienced noteworthy growth with the addition of eight new directors and partners including Andy Chen, who joined in December 2015 as head of KPMG's Chinese domestic market tax practice from EY, and Chris Ge, who joined as a director from PwC Shanghai.
Ho has advised the Chinese finance and tax authorities on post-World Trade Organisation tax reform, VAT reform, tax policies for foreign mining projects, oil and gas tax policies, insurance tax policies, tax compliance agreements and advance ruling mechanism. He has also been actively involved in advising foreign and Chinese multinationals in respect of their investments and operations.
The main industries the firm advises on are financial services, healthcare, infrastructure, industrial markets, private equity and TMT.
In December 2015, the team worked on a complex take-private transaction of the NASDAQ-listed China based technology solutions group. The deal was one of the largest and most complicated transactions in China in the last year, with a value of approximately $10 billion based on the offer. KPMG's solution allowed for maximum flexibility for each investor to exit from the portfolio company without creating adverse impacts on other investors or the portfolio company.
Larry Sussman is the managing partner of O'Melveny & Myers's Beijing office, covering transactional projects, tax structuring and disputes and other regulatory matters based in China. His main clientele include companies from retail, telecommunications, trade, e-commerce, real estate, and private equity funds.
The practice offers four major service lines involving financial products tax, international tax, insolvency and restructuring tax, and M&A tax. The firm's clientele comprises numerous multinationals including Yahoo!, American Honda Finance Corporations, CoreLogic, and China Investment Corporation among others.
PwC is one of the leading tax services provider in China. The firm is led by Peter Ng and has more than 90 partners and 1,200 other professionals. More than 280 tax professionals have joined the firm from May 2015.
The firm has 19 offices in China including Hong Kong and Macau with around 1,700 tax people in total which demonstrate the practice's focus on providing and expanding its services to local companies and step up its growth in the south western, central and north eastern regions in China.
The tax practice offers in-depth expertise on a full range of tax services to global clients including international tax, value chain transformation, transfer pricing, tax controversy, corporate tax, indirect tax, accounting and payroll, international assignment and global mobility services, R&D, business and regulatory advisory.
The firm is well-recognised in several industries including TMT, industrial products, retail and consumer products, automobiles, financial services and private equities, pharmaceuticals, real estate and transportation and logistics.
PwC China will continue to be busy in the next year working on many significant outbound investments, advising high net worth individuals on asset protection, M&A, tax efficient corporate restructuring, private equity and customised services to domestic enterprises due to fast economic development.
WTS China focuses on tax, legal and advisory. Its tax and finance team is led by partner Martin Ng, who works with 19 specialists with years of experience in various industries and financial administration fields.
The team employs a practical approach, allowing it to provide high-quality service to clients and provide tailor-made solutions towards complex tax matters.
The firm offers different services to clients including corporate tax, global expatriate services, M&A and company structuring, tax training and seminars, tax outsourcing, and transfer pricing.
In March 2016, the tax team advised a well-known German transportation company on an assessment of the possibility of corporate income tax exemption under the international transportation treaty. The application of this treaty is not entirely clear in China and WTS helped the client to clarify the relevant practical issues applicable under the treaty, resulting in a positive conclusion for the client.
Zhong Lun Law Firm's tax practice consists of 11 partners and one counsel covering China including Hong Kong. Its practice covers all tax aspects focusing on tax strategies for inbound and outbound investments, investment structuring, tax advisory for daily business operations, tax planning for import and export, financing structuring, M&A and initial public offerings, transfer pricing, tax dispute resolution and tax efficient supply chain management.