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Tax Insights

2018-06-30
1201 | 42 | 5

China Investment Guide


As the world’s second largest economy, China is one of the most attractive countries to invest in. If you are interested to invest in the Chinese market, please have a look at the guide below, where, we try to clarify all your questions and concerns.


 

* Market Research


Before investing in China, you need to know in which category does your business belong to, that is, Encouraged, Restricted or Prohibited.  RTF can assist to understand your business by analyzing the market itself and its competitors and come up with a feasible conclusion.  The administration of foreign investment are regulated by the Ministry of Commerce (MOC) and National Development and Reform Commission (NDRC) and their relevant subordinate bodies. For more details, you might refer to the “Catalogue for the Guidance of Foreign Invested Enterprises”, which is a policy document governing foreign investment into China and it can be accessed   (@link)


Catalogue for the Guidance of Foreign Investment Industries


For instance, if your business is not prohibited, RTF will collect your competitor’s information like registered capital, business scope, licenses, and so on,  through the National Enterprise Credit Information Publicity System (http://www.gsxt.gov.cn/index.html+) to better understand your business and advise you accordingly.


Information of KFC shanghai extracted from the National Enterprise Credit Information Publicity System

In addition, we also analyse your competitors corporate structure, to further advise you on the right and most tax effective structure.

 


Example of KFC’s business structure in China

* China Tax System


The most common taxes to businesses are Value Added Tax (VAT) and Corporate Income Tax (CIT). VAT rate ranges from 0% to 16%, depending on the type of goods and services supplied while standard CIT rate is set at 25%.  In some cases, lower tax rates might be granted by the Chinese Tax Bureau, such as VAT exemption and reduced CIT rate, only if the necessary conditions are met. More information about the China tax system and the relevant tax rules and regualtions can be accessed (@link)


For more professional advice regarding tax matters, you can contact our global tax advisers.  They can provide tailored tax advisory services based on your business strategy and requirement, for instance:
•  Whether you need to set up a holding company in Hong Kong, Singapore or other jurisdictions?
  How to meet the requirements of different VAT/CIT incentive policies?
  Is your profit rate within the reasonable range for related parties transactions?
•  What are the different tax risks to be aware of?
•  Is your business eligible for any local government subsidies?


* Foreign Exchange Policy and Bank Account in China


Chinese government has implemented strict regulatory control over the exchange of foreign currencies. All foreign-invested enterprises are required to open at least two type of bank accounts, one is the capital contribution account and the other one is the RMB basic account.  The capital contribution account is meant for only the receipt of foreign currency as capital. For use of the funds in the capital account for daily operations, the funds will have to be transferred to the RMB basic account. For business dealing with overseas, a foreign currency bank account may also be opened, depending on your needs and requirements. For information regarding funds repatriation, including dividend distribution, in terms of regualtions, procedures and so on, please visit our website (@link) or feel free to contact us.

* Business Registration


Once you have decided to invest and conduct your business in China, RTF will assist in getting the business registered at different government departments, for instance, Administation for Industry and Commerce (AIC), Commission of Commerce (COC), State Adminstration for Foreign Exchange, (SAFE), State Administration for Taxation (SAT) and so on. Normally, it will take about 1-3 months to get the company established, but again it will depend on the nature and complexity of the business.  For more information about business registration in China, please visit our website (@link)

* Financial Outsourcing


Due to the annual audit requirement imposed by the Ministry of Commerce (MOC), all the foreign-invested enterprises are advised to prepare accounts (Profit or Loss statement and balance sheet) once the business has been registered and the tax registration has been completed. Due to the differences between the International Financial Reporting Standards (IFRS) and the Chinese Financial Reporting Standards (Chinese FRS), it is advisable to either employ our own local professional accountant or outsource the accounting work to a professional firm like RTF.  For more information, please check our website (@link)


* Business Consultancy


Being new to the Chinese market, you may have lack of knowledge regarding the laws and regulations of conducting and operating the business. For example, if you are planning to provide beauty services and sell imported cosmetic products in shopping malls, you may come up with the following concerns:
  Is it necessary to register a subsidiary for each outlet?
  How to acquire cosmetic products, by centralized procurement or decentralized procurement?
  How to improve the efficiency and effectiveness of inventory management?
  Is there any additional special license/permit needed for conducting the business?
  What are the annual compliance work required?

All these concerns can be clarified by RTF through a one-time consultancy meeting or report.   Throughout all these years, RTF has accumulated plentiful experience over different industries, covering e-commerce, technology, pharmaceuticals, trading, finance and etc and we are very familiar with all the likely implications.  Please check our website (@link) for more information about our business consulting services.


* Tax planning


To encourage the development of some specific industries in China, the Chinese government has brought forward tax exemption and tax relief policies.  For example, Chinese tax bureau offers VAT exemption or VAT tax refund on cross-border taxable services and reduced CIT tax rate for Advanced Technology Service Enterprises (ATSE). Only if all requirements are met, these tax incentives applied for on an application or filing basis.

For companies having business overseas or repatriating earnings overseas, there is a possibility both foreign tax and China tax might be applicable, more specifically,  the enterprise will accounted for withholding tax in China and corporate/personal income in the overseas country. Is there a possibility to avoid or reduce this tax burden? Yes it will depend on whether or not China has a tax treaty with with the overseas country and also on the nature of the transactions.   Being a global tax expert, RTF is familiar with the tax law  in different jurisdictions such as Singapore, Hong Kong, UK,USA and so on and we can provide you with the best tax planning solutions.  For more details about our tax planning service, please refer to our website:(@link)

 


If you would like to have a even more broader knowledge and insight before investing into China, you may consider our hourly consulting service, charged at rate of 500 USD.

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