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China Tax Planning Guide

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This guide includes explanations, applications, and/or summaries of the laws, regulations, rules, circulars in the following areas: tax, accounting, auditing, company formation, investment, banking & finance, foreign exchange, employment, trade union, social securities, intellectual property, IT, telecommunication, merger & acquisition, trade & commerce, dispute resolution, etc. A list of the various publications pertaining to each topic can be found on the Reference page that ends at each Topic.

The contents consist of a series of modules, each dealing with a separate business transaction or situation, so as to provide coverage of the whole business life cycle — from the “birth” of a business to its “death”.

Each module follows a similar format:

• A brief overview and a series of detailed checklists which enable you to quickly identify the key planning issues or areas of interest, and

• A detailed analysis featuring practical examples and pointing out tax tips and pitfalls.

With quarterly updates every year, China Tax Planning Guide is a great tool which provides you with concise information covering a range of everyday issues that will ensure both you and your clients receive practical taxation guidance. As a practical tax planning guide for doing business in China, it helps you deal with tax-related problems as they arise and ensures you to plan for a wide variety of business scenarios through the whole business life cycle with complete and high compliance.

The explanations and analysis offered in the first publication are current at 30 June 2009, and the updated versions from then on are current at the date of publication as specified on Filing Instruction page.

RSM Nelson Wheeler

RSM Nelson Wheeler was established in 1975 and is today one of the leading accounting and consulting firms in Hong Kong, offering a wide range of services to local and international clients. Services include audit and assurance, taxation, risk management, transaction services, and corporate advisory.

RSM Nelson Wheeler is the Hong Kong member firm of RSM International (“RSMi”). Formed in 1964, RSMi is currently the seventh largest professional service accounting and consulting organisation in the world. RSMi is represented by over 37,000 professionals in 732 offices in over 110 countries around the world.

The PRC member firm, RSM China CPAs, derives its pedigree from the Ministry of Finance, State Administration of Taxation, the Ministry of Aerospace Industry and the Ministry of State Electric Power. Its client base covers a broad range of industries and includes State-owned enterprises, listed companies and foreign investment enterprises. RSM China is one of the largest professional accounting firms in China.

RSM Nelson Wheeler has approximately 400 staff in Hong Kong and enjoys a client list comprising successful individuals and companies of all sizes, with differing needs and from all parts of the world, all with the common aim of participating in the economic growth of the Asia–Pacific Region.

Author

Dicky To

Managing Director

RSM Nelson Wheeler & RSM Nelson Wheeler Tax Advisory Limited

Dicky is a Partner of RSM Nelson Wheeler and the Managing Director of RSM Nelson Wheeler Tax Advisory Limited, a company specialises in structuring, transaction and tax services for inbound and outboard investments to and from Hong Kong/China, and throughout Asia.

Dicky graduated from the University of Hong Kong and obtained a master’s degree from the University of Technology, Sydney. He is a GLG Scholar of the Accounting and Financial Analysis Council, Gerson Lehram Group, a fellow Member of The Association of Chartered Certified Accountants (“ACCA”), a member of the American Institute of Certified Public Accountants (“AICPA”), and a member of the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and an associate of The Taxation Institute of Hong Kong.

Dicky qualified with Arthur Andersen & Co in Hong Kong and worked with the Tax & Business Advisory Division of Arthur Andersen’s Hong Kong and Shanghai Offices for ten years. He then worked as Chief Operating Officer for two Hong Kong listed companies with business operations in China from 2000 to 2002. Dicky joined RSM Nelson Wheeler in April 2003.

Dicky specialises in foreign investment structuring in China (including Hong Kong and Macau), WTO/CEPA implications, corporate holding and operating structure advice, Hong Kong and PRC taxation systems, PRC Customs duty and import/export procedures, PRC foreign exchange, individual income tax planning, repatriation of earnings/funding from the PRC.

Dicky is an active speaker on PRC tax and related areas with the AICPA, ACCA, HKICPA, Hong Kong Baptist University, Shenzhen University, South China Technology University, etc and has also acted as expert witness on Hong Kong/China cross border Customs, taxation and foreign exchange issues.

Contributors

Samuel Chan, Partner of RSM Nelson Wheeler and Tax Director of RSM Nelson Wheeler Tax Advisory Limited, graduated from the Australian National University. Samuel is a fellow member of HKICPA and a member of CPA Australia. Samuel has strong Hong Kong and China tax knowledge and specialises in international tax structuring, profit repatriation planning, transfer pricing, mergers & acquisitions, transaction support services as well as individual income tax planning.

Eric Chen, Partner of RSM Nelson Wheeler and Tax Director of RSM Nelson Wheeler Tax Advisory Limited, graduated from Santa Clara University, California, USA. Eric has substantial experience in providing tax and business consulting services to clients, including consultation on investment structures, the establishment of foreign investment enterprises in the PRC, special tax preferential treatment applications, tax ruling requests, corporate and individual income tax planning, etc.

Catherine Tsang, Tax Director of RSM Nelson Wheeler Tax Advisory Limited, graduated from the University of New South Wales, Australia. Catherine is a member of CPA Australia and HKICPA. Catherine has extensive experience in providing international tax consulting and advisory services, including advice on investment structures in China and Hong Kong, group restructuring and implementation, and cross-border tax services and tax planning.

Ka Ho Chan, Tax Director of RSM Nelson Wheeler Tax Advisory Limited, graduated from the Chinese University of Hong Kong. Ka Ho is a member of ACCA and HKICPA. Ho has substantial experience in corporate and individual tax planning as well as tax investigation cases.

Patrick Ho, Tax Director of RSM Nelson Wheeler Tax Advisory Limited, graduated from University College London. Patrick is experienced in providing tax and business consulting services, including corporate holding and operating structure advice, foreign investment corporate formation in China (including Hong Kong and Macau), individual income tax planning, tax due diligence, repatriation of earnings/funding from the PRC, etc.

Shirley Lo, Senior Tax Manager of RSM Nelson Wheeler Tax Advisory Limited, graduated from the Hong Kong University of Science and Technology. Shirley is a member of ACCA. She has an extensive background in Hong Kong and PRC tax and business advisory services, including investment structures, restructuring, transfer pricing reviews, due diligence exercises and tax investigations.

Section I: Starting a business

  •     Introduction to Section I
  •     Choosing a Business Structure
  •     Obtaining Finance
  •     Setting up an Office
  •     Approval, Business Licence & Registrations
  •     Bank Account Opening
  •     Capital Injection and Verification
  •     Buying and Selling a Business


Section II: Running a business

  •     Introduction to Section II
  •     Salary Packaging
  •     Contractors Vs Employees
  •     Labor Union
  •     Social Security System
  •     Business Migrants and Visitors
  •     Termination Payments
  •     Outbound Investment
  •     Intellectual Property Management
  •     Intercompany Charges
  •     Company Distributions
  •     Change of Business Premises
  •     Group Restructuring
  •     Doing Business on the Internet
  •     High and New Technology Enterprises
  •     Foreign Exchange System
  •     Tax Compliance
  •     Processing Trade Arrangement
  •     VAT Export Refund
  •     Transfer Pricing Documentation
  •     Double Tax Agreement & CEPA
  •     Accounting and Audit Requirements

Section III: Disputes, trading difficulties and cessation of business

  •     Introduction to Section III
  •     Deregistration of a Representative Office
  •     Winding Up a Solvent Company
  •     Liquidation of an Insolvent Company
  •     Disputes Resolution
  •     Litigation Expenses and Compensation Payments
  •     Fire, Flood, Drought and Other Disasters
  •    Asset Valuation

Based on the complex regulation system in China inall relevant areas, including all business regulations and government controls in China, not just tax compliance;

Structured by the business life cycle, designed for practical workflow in real enterprises, containingclear commentary on a series of day-to-day business activities and situations, alerting you to the relevant tax considerations;

Comprises 35 business/taxation modules, ensuring you able to plan for a wide variety of business scenarios;

Easy access to required information by taking you step by step through each scenario;

Each module follows asimilar format: a brief overview and a series of detailed checklists, and then a detailed analysis, and finally regulation reference list and templates;

Structured around a checklistof all the key issues for each module, and cross-referencefor each item in the checklist;

Extensive and systematic explanation for each business or tax issues in plain,straightforward and precise English,for easy understanding,friendly use and practical reference;

Provide tax planning ideas, approaches to assess and evaluate tax consequences in advance, tax considerations and suggestions, common malpracticewith illustrationsfor each transactionbased on thorough analysis of all regulations in relevant areas for each scenario;

Extra finding tools: full index, legislation finding list, bilingual regulation reference, abbreviation, samples & templates;

Comprehensive commentary with practical worked examples, scenarios, and cases;

Flowchart, diagram, tablefor complex procedures and processes – simple & clear presentation;

Written by experienced and top professionals: 1 managing director, 3 tax directors, 3 senior tax mgrs, 1 tax mgrs. Time cost: 1.12M HK Dollar; RSM Nelson Wheeler: 300 staff in HK,member firm of RSM International ("RSMi")(seventh largest);

4 updates annually, to keep it effective all the time and to fulfill customers’ further needs emerging from practice

Suitable for both domestic & foreign enterprise. Especially for foreign investors , due to the different economic, tax and political system, social structure, culture and consumer behavior between China and the western countries, many o them may find that doing business in China is far more difficult than they expected.