PRC Non-Resident Enterprise Tax Series - Issue 03, June 2013
Following on from the previous two articles in this series, ‘Beneficial Ownership and Indirect Disposals’ published in March 2010, and ‘Indirect offshore, direct offshore and onshore disposals in an M&A context’ issued in April 2012, which charted the steadily increasing rigor of the Chinese tax regime for taxing non-residents on a withholding tax basis, this issue examines the impact of a new tax circular which appears, following clarifications given by senior officials at China’s State Administration of Taxation, to significantly relax the approach to applying the beneficial ownership criterion where Hong Kong tax residents are claiming dividend withholding tax reductions under the Hong Kong – Mainland double taxation arrangement.
While much depends on how the clarifications are ultimately implemented by local tax authorities in practice, this new development potentially makes Hong Kong the jurisdiction of choice when establishing holding structures for investment into China and may prompt foreign enterprises to consider restructuring their China holding arrangements. The details of this promising new development and what it means for foreign enterprises with business and investment operations in China is the focus of this edition of KPMG’s PRC Non-Resident Enterprise Tax Series.
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