China Business News

S.J.Grand offers quality research, case studies and essential updates on the latest China tax and business issues through our news feed, periodic newsletters and our online resource library.

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New tax agreement between Mainland China and Taiwan to boost trade and investment

Following long negotiations, the agreement was signed on the 25th April, 2015 with a multitude of provisions differing from the previous treaties and based on the Organization for Economic Cooperation and Development (OECD) and United Nations (UN) models. Provided that Mainland China is the most important trade partner of Taiwan and given the number of Taiwanese that work, study and live in Mainland China, the agreement will significantly impact investment and trading behaviors of Taiwanese firms.

A Comprehensive EU-China Agreement on Investment for SMEs

European companies are reconsidering their strategies in response to the Chinese slowdown. Despite of all the challenges and difficulties that private entities are facing, the Chinese market remains a priority for most European entities.

Major concerns

Ongoing reforms in China aim to make the market more attractive for foreign invested firms by loosening administrative barriers for a clearer business environment and deepening healthcare and budgetary reforms.

Chinese Yuan devaluation: global threat or adjustment?

Shanghai’s stock exchange is now at a lower level than it was on the 31st December 2014, meaning all of 2014’s gains collapsed since the Yuan lost more than 7% against the US$ in the last 2 weeks. Since many other stock exchanges followed the trend throughout the world, the estimated worth global loss arises 5,000 billion US$.

Experts are wondering whether this is a wakeup call for the Chinese economic system or if it is natural outcome from a system based on artificial growth being readjusted.

Attracting foreign talents by loosening visa requirements

Chinese authorities under the Ministry of Public Security have decided to loosen visa procedure for foreigners in July 2015 in order to attract talents and encourage residents of Hong Kong, Macao and Taiwan to settle businesses in China. This is the outcome of a long term trend since 2013 aimed at boosting employment in China. Shanghai will first implement those measures on a trial basis and other parts of China will follow gradually. Potential costs and organizational changes may arise for firms settled in China.

Key measures:

Focus on China – Australia Free Trade Agreement (ChAFTA)

The deal was signed on the 17th June 2015 between Australia and China. It is a huge opportunity for Australia as it promotes liberalization more than ever. Not only does it grants market access for Australian wine and beef exporters but also does it encourages Chinese carmakers and electronic producers willing to enter the Australian market.

As of 2014:

Circular 146- A new Corporate Income Tax (CIT) treatment for some overseas related payments

On the 18th March 2015, Circular 146 provided new CIT regulation for overseas parties. It gives further leeway and insight to local tax authorities on both royalties and oversea fees for foreign actors involved. Indeed, the latter charges need to be relevantly justified and foreign firms must perceive them only if their activity in China has some legitimate economic substance and fulfill what the intercompany agreement stipulated. This a step further in the Chinese anti-tax avoidance policy.

Long-awaited china international payment system (CIPS) turns out to be for trade deals only

Today, one third of Chinese trade is denominated in RMB, which is  ranked 7th global currency worldwide. The outstanding growth of trade settled in RMB is embodied by 14 RMB hubs settled worldwide. Therefore, with the CIPS not covering transactions anymore, very little value is added to the existing system. The CIPS was supposed to ease China’s RMB transactions by enabling them to be done faster and at a cheaper rate. It is now downgraded to trade deals which questions Shanghai’s role as an international RMB hub.

Indirect asset transfers – New taxation rules under Bulletin 7

Bulletin 7 was released on the 6 February 2015 following Circular 698 and Bulletin 24. It is the more recent regulatory instrument on indirect transfer and embodies the intensification of Chinese efforts against anti-tax avoidance. It is a specific application of the General Anti Avoidance Rule (GAAR) in the area of indirect transfer of Chinese Taxable assets (CTA). From now, indirect transfer of CTA with no relevant commercial purposes will be taxable in China.

This will significantly affect:

Fujian Pilot Free Trade Zone

Fujian PFTZ has a strategic position of being on the coast across Taiwan and the starting point of 21st century Maritime Silk Road. Fujian PFTZ has a total area of 118.04 sq. km and covers the following three areas:

Tianjin Pilot Free Trade Zone

Tianjin Pilot Free Trade Zone (PFTZ) has been officially launched on April 21, 2015. Tianjin PFTZ has a total area of 119.9 sq. km and covers the following three parts:

Guangdong Pilot Free Trade Zone

On 21 April 2015, China officially launched China (Guangdong) Pilot Free-Trade Zone (“Guangdong PFTZ”) which is located in Guangdong province, near Hong Kong and Macau. The zone covers an area of 116.2 sq. km which is about 1/10th the size of Hong Kong, and comprises of three areas: Nansha New Area (Guangzhou), Qianhai-Shekou (Shenzhen), and Hengqin (Zhuhai).

Local preferential policies are not yet completed

In November 2014, the Chinese Government issued a Notice to call local authorities to clean-up local preferential policies. It raised concerns for foreign companies that enjoyed preferential tax treatment. Indeed, they often made investment based on the incentives.

China eases restrictions on the currency control system

On March 30, 2015, the Chinese State Administration of Foreign Exchange (SAFE) issued Circular 19 related to the currency controls system. The measures will come into effect on June 1, 2015. The new regulation facilitates restrictions on the currency control system which is likely to boost foreign investments.

Major updates:

Companies will be able to inject capital with a qualified bank in the area where the business is incorporated without registering with the local SAFE bureau before.

Corporate Income Tax Matters on Payments to Overseas Related Parties and how it will impact multinationals

The State Administration of Taxation released Announcement No. 16 on 18 March 2015. The new regulation sets out different criteria on non-deductibility of outbound payments, service fees and royalties to overseas related parties by Chinese companies.

2015 SME Conference: Fraud risk in China

SJ Grand Financial and Tax Advisory and The European Union Chamber of Commerce are delighted to invite you to the SME Conference on Thursday 14th May 2015 in Shenzhen.
Beijing - Shanghai - Shenzhen - Hong Kong - Paris

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