The years ahead will see China increasingly overtake the US as the world's dominant economic power. But US tax reform under President Trump, with ambitions of lowering the corporate tax rate from 35% to 15%, could see the US poaching multinational investment from China. This could have a knock-on effect on infrastructure funding and economic growth.
In 2016, China's economy experienced the slowest growth since 1990 and its state-owned enterprises are carrying mounting debts. A potential tax war with the US is the last thing that China needs.
However, China is looking to make its economy more attractive to business. The key tax measure it has employed to achieve this has been replacing business tax with the speedy rollout of a new VAT system nationwide.
While fellow BRICS member India's national indirect tax reforms have been beset by years of delays before finally seeing the light of day this year, China has proved a model example in how to implement a new, streamlined tax system that reduces complexity and compliance costs for business. The inclusion of services into the new VAT regime should aid in China's efforts to transition from a labour-intensive economy to a service-orientated one.
The State Council is now accelerating plans to optimise and integrate the various VAT rules into a single piece of legislation.
At a State Council executive meeting in August 2017, Premier Li Keqiang said: "The tax reform is a fundamental and significant reform that will benefit economic development. We need to keep adjusting and improving the tax regime and solve problems that come along in a timely manner. Excessive taxation is off limits."
The meeting decided to continue to improve VAT policies in manufacturing, finance and construction industries. It also made the decision to speed up the process of enacting, amending or repealing laws and regulations in accordance with the progress of VAT reform, and putting achievements of the VAT pilot programme into legal norms for the benefit of more enterprises.
The introduction of the VAT law could lend further certainty to business. "The idea of China implementing a VAT law is welcomed because it should provide greater legislative certainty and force to the current VAT rules, and put them on an equal footing with other tax laws, such as corporate income tax," said Lachlan Wolfers, head of indirect tax at KPMG China.
As such, while the US wrangles over tax reform, China is ploughing ahead.
Ernst & Young (China) Advisory Limited
50/F, Shanghai World Financial Center
100 Century Avenue, Pudong New Area
Tel: +86 21 2228 8888
Greater China Tax Leader
Tel: +86 10 5815 3397
China North Tax Leader
Tel: +86 10 5815 3231
China Central Tax Leader
Tel: +86 21 2228 2648
China South Tax Leader
Tel: +86 755 2502 8280
Hong Kong Tax Leader
Tel: +852 2629 3228
Taiwan Tax Leader
Tel: +886 2 2757 8888
Law Leader, Chen & Co.
Tel: + 86 21 2228 8318
Business Tax Services
Greater China Business Tax Services Leader
Chee Weng Lee
Tel: +852 2629 3803
Global Compliance and Reporting
Greater China Global Compliance & Reporting Leader
Tel: +86 10 5815 3226
Greater China Indirect Tax Leader
Tel: +86 10 5815 3808
International Tax Services
Greater China International Tax Services Leader
Tel: +86 10 5815 3230
Greater China Transaction Tax Leader
Jesse Lv Tel: +86 21 22282798
People Advisory Service Tax
Greater China People Advisory Services Leader
Tel: +852 2629 3876
Greater China Tax Policy Leader
Tel: +852 2629 3188
Greater China Tax Controversy Leader
Tel: +86 755 2502 8383
Great China Transfer Pricing Leader
Tel: +86 21 2228 2941
Greater China Financial Services Tax Leader
Tel: +86 10 5815 3890
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.
KPMG is at the forefront of public debate on tax policy and other related matters that affect the wider business community. We are dedicated to partnering with our clients to deliver long-lasting value through our team of people who think beyond the present and beyond borders.
8th Floor, KPMG Tower, Oriental Plaza
1 East Chang An Avenue
Beijing 100738, China
Tel: +86 10 8508 5000
Fax: +86 10 8518 5111
Eastern & Western China
50th Floor, Plaza 66
1266 Nanjing West Road
Shanghai 200040, China
Tel +86 21 2212 2888
Fax +86 21 6288 1889
38th Floor, Teem Tower
208 Tianhe Road
Guangzhou 510620, China
Tel +86 20 3813 8000
Fax +86 20 3813 7000
Head of Tax, KPMG China
Khoon Ming Ho
Tel: +86 10 8508 7082
Regional Tax Leader:
Tel: +86 10 8508 7083
Eastern & Western China
Tel: +86 21 2212 3421
Tel: +86 20 3813 8999
National Tax Leader for:
Tel: +86 21 2212 3433
Deal Advisory & M&A Tax
Tel: +86 10 8508 7095
Global Mobility Services
Tel: +86 21 2212 3406
Tel: +852 2685 7791
Research & Development Tax
Tel: +86 20 3813 8605
Tel: +86 10 8508 7509
Tel: +86 10 8508 7072
Trade & Customs
Tel: +86 10 8508 5000
Tax Dispute Resolution & Controversy
Tel: +86 10 8508 7083
Tel: +86 755 2547 1138
Financial Services Tax
Tel: +86 21 2212 3421
Energy and Natural Resources Tax
Tel: +86 10 8508 7540
Life Science Tax
Tel: +86 21 2212 3422
Tel: +86 21 2212 3415
Technology, Media & Telecommunication Tax
Khoon Ming Ho
Tel: +86 10 8508 7082
Infrastructure, Government & Healthcare Tax
Tel: +86 21 2212 3431
WTS China Co., Ltd
Unit 031, 29F, Hang Seng Bank Tower,
No.1000 Lujiazui Ring Road, Pudong New Area,
Shanghai, 200120 PRC
Phone: +86 21 5047 8665 ext. 202
Main areas of focus:
Corporate Tax, Mergers & Acquisitions, Transfer Pricing, Fund Repatriation, International Tax & Permanent Establishments, Indirect Tax, Customs, Private Clients, Global Mobility, Tax Controversy, Tax Technology
|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%||N/A|
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.
B) The statutory rate is 20%, which is reduced to 10% by the Enterprise Income Tax Law Implementation Regulations.
C) Special rates apply to small-scale enterprises 10-20% and businesses with high-tech status 15%.
Baker Mckenzie has maintained an experienced and well-established tax practice in China for nearly 30 years. Brendan Kelly and Jon Eichelberger lead the tax department, which comprises eight partners and 13 associates. Members of the department have previously worked at major accounting firms, banks, and in-house at multinational corporations. Abe Zhao joined the department on May 1 2017.
The tax department advises multinational corporations on tax planning for M&A, the establishment of new business presences, supply chain structuring and management, tax-efficient financing, tax compliance and tax controversy, covering direct tax, VAT and other indirect taxes, customs and personal tax.
The firm established the Baker McKenzie Fen Xun (FTZ) Joint Operation Office in China (Shanghai) Free Trade Zone in 2015. This was the first joint operation to be approved by the Shangai Bureau of Justice.
Baker McKenzie advised a client on the tax implications arising from its spin-off from its parent company. The tax department worked closely with the client's tax team to identify and formulate responses to potential issues. The firm is representing another client on tax issues related to a major acquisition followed by a global business restructuring and post-acquisition integration.
Vivian Jiang is the head of tax at Deloitte. The firm's comprehensive tax solution package includes corporate income tax; international tax; tax controversy solutions; tax management consulting including IT advisory, implementation, and data analytics; tax consideration for M&A; R&D and government incentives; dedicated tax services for private clients, known as Deloitte Private; indirect tax and customs; global employer mobility services; business process solutions; and business model optimisation. It offers multi-disciplinary yet one-stop-shop services.
In the last year, Deloitte advised a US-based leading consumer brand's China division separation project. The firm's tax team worked closely with their colleagues in the US in this matter, which had an approximate value of $10 billion. The firm is also representing a client in the negotiation with the local tax authority on the price of an equity transfer.
Daniel Chan is a partner and the head of the tax department at DLA Piper. The firm comprises six partners and 20 other fee earners. In 2017, George Li and Henry Ji joined the firm.
In the last year, the firm has continued providing services to Fortune 500 clients. DLA Piper's size and expertise allows it to take on complex matters. This strengthens its relationships with key strategic clients, and enables it to attract new clients. The firm uses its quarterly tax newsletter to review and comment on laws and practices across the PRC, and Hong Kong.
DLA Piper takes on pro bono matters and has helped charities in establishing a tax exempt presence in Hong Kong. In the past year, the tax team advised a Hong Kong listed company in a matter concerning a high-value acquisition of Hong Kong shares. The team worked closely with its colleagues in the UK on the negotiation of the share purchase price agreement and settlement mechanisms. The team is representing another client in a negotiation with the local Chinese tax authority on remitting outstanding services fees to a related Ireland company, free from PRC withholding income tax.
The tax practice at EY advises its clients on a range of tax matters including: global compliance and reporting; corporate services; tax accounting; VAT, GST and other sales taxes; transaction tax; and tax policy and controversy.
Andrew Choy is a partner and the international tax services leader for EY in Greater China. Henry Chan is a managing partner at the firm. Chan has experience advising MNEs on tax issues including strategy for tax controversy and tax efficient supply chain management. Clement Yuen is a tax partner at EY and he works in the tax and business advisory area. He has more than 20 years of experience in this area. Yuen has worked in different cities in China including Shanghai, Beijing and Shenzhen. EY's other tax partners include: Judy Hou, who advises on international tax; Samuel Yan, a leader for Greater China in global compliance and reporting; Henry Chan; Vickie Tan; Lan Alan; and William Zhang.
The tax services provided by Grant Thornton include tax compliance, planning and advisory, indirect tax, tax risk management and transaction support, and corporate business and tax solutions. The firm is supported by a global network that comprises 47,000 employees of Grant Thornton across more than 130 countries.
Dennis Xu is the head of the tax department at Hendersen Taxand. The practice consists of seven partners and 60 other fee earners. The firm was created by senior management who had worked with the major accountancy firms and from multinational companies including GE.
The practice's major services include M&A, investment advisory, corporate tax, outsourcing and customs and trade.
In 2017, the firm represented a Spanish client in the retail industry in a dispute with the local tax bureau on land tax use. In the same year, the tax department advised its clients in matter concerning the issue of the personal service platform.
Hwuason Lawyers is a specialist tax practice that provides its domestic and international clients with a range of services including tax preferential planning, tax risk management, tax dispute resolution, international tax; and M&A.
Liu Tianyong is a senior at the firm. He assists domestic and international clients with all aspects of Chinese tax law. He also gives interviews to media organisations on Chinese taxation and business issues. He is supported by two other partners at the firm: Lin Wang and Xun Zi Cong.
Julie Cheng is the head of JunHe's tax department, which was launched in 2007. It has become one of the firm's major practice areas.
Its work includes formulating tax efficient structures for new investments in China; restructuring existing operations in China to achieve better tax efficiency; advising on PRC tax implications of inbound and outbound M&A; advising on PRC customs duty, VAT, business tax, enterprise income tax and other tax issues; advising clients on Circular698/Bulletin 7 filings and other tax issues affecting non-residents in China; and representing clients before the PRC State Administration of taxation.
The firm has grown in 2017 with major new clients including ExxonMobil, NXP, Aramco, Everbight Investment, MFOP, Bosch and Savera. Last year, it was involved in the tax restructuring for the sale of property valued at $150 million.
King & Wood Mallesons's clients include MNEs, state-owned enterprises, private companies, banks and financial institutions. The firm's tax services include tax disputes, tax planning, corporate tax, and indirect tax.
Tony Dong is the head of the firm's tax practice. His experience includes tax planning on investment and business structure, tax compliance and risk management, M&A, restructuring, and dispute resolution. Dong advises clients from a variety of industries including pharmaceutical, energy, finance, telecoms and IT. Before joining the firm in 2009, he worked at Big 4 firms for more than nine years.
Duan Tao (Daisy) is a partner at the firm and she has more than 13 years of tax experience.
Lewis Lu is the head of the tax department at KPMG. In the past year, Cynthia Xie, Zhang Shu Feng, and Sisi Li joined the department. Xie joined the department as a partner. Feng joined as a special adviser on corporate income tax, particularly in relation to incentive policies including R&D incentives. Before he joined KPMG, Feng served as the divisional chief of the income tax department of the SAT. Prior to joining the tax department, Li worked with the Guangdong Provincial State Tax Bureau.
Lu advises clients on Chinese tax and regulatory business implications on major structuring, restructuring and reorganisation projects. He leads the China financial services tax practice in Shanghai, assisting clients in the banking and financial services sectors on new and complex products and transactions. Khoon Ming Ho is the head of KPMG in the Asia Pacific. Ho advises Chinese finance and tax authorities on tax reforms different industries.
In the last year, the team worked on one of the largest tax deals in China, worth $1.9 billion. This involved the disposition of commercial property by a large private equity real estate fund to a Chinese investor by a US group.
PwC offers a range of tax services including international tax, tax reporting and strategy, corporate tax, indirect tax, and tax controversy.
Peter Ng is the China and Hong Kong tax leader at the firm. He has more than 28 years of experience in tax matters including international tax structuring, M&A, and corporate reorganisations. He advises MNEs and private equity firms concerning their inbound investments into China. Ng also advises Chinese companies on their outbound investments. His clients come from a range of industries including the retail and consumer, and the automotive sectors.
Charles Lee is the China South and Hong Kong tax leader. Prior to joining the firm, he worked with the Inland Revenue Department.
Alan Yam is a partner who works in China tax and business advisory services at PwC. He is also the practice leader for automotive industry and consumer and industrial products for the firm. Jeremy Ngai is PwC's China South tax leader. Edwin Wong is the firm's China outbound investment services leader and its China international tax services leader.
WTS China advises its clients on a range of tax issues including business compliance and out-sourcing, corporate tax, international tax, M&A, and VAT. Martin Ng is a managing partner and the head of WTS China. He works in tax matters concerning China-related inbound and outbound tax planning and group restructuring, and business model and supply chain consultancy. He has 25 years of experience in the management and China tax consultancy business. Ng has previously worked for a Big 4 firm.
Zhong Lun Law Firm provides comprehensive tax and private client services including dispute resolution, tax planning, and investment structuring.
In 2016, the firm assisted an international pharmaceutical company that operated in China with a tax risk analysis. In the same year, the practice advised an American Fortune 500 company on Chinese tax law regarding the sale of $1 billion worth of assets. The firm also advised an American US consumer goods company on tax planning in relation to the optimisation of supply chains. The firm's partners that handle tax matters include Borong Liu, Wei Xu and Xiaoli Liu.