China company tax planning services
Hotline: 86-755-82147392, Email:info@citilinkia.com
When setting up a company in China, one inevitably incurs costs prior to the company being formally incorporated. The question then arises what part of these costs may be deducted from the company’s tax bill. This becomes especially relevant if the investment is a large project, such as setting up a factory and purchasing machinery, where the costs incurred prior to incorporation can be substantial.
At this point, it is important to note that Representative Offices (ROs) are taxed on their expenditure. It is therefore in the investor’s interest to, within reason, keep expenses allocated to the RO to a minimum. For this reason, it is advisable to allocate the RO’s pre-incorporation expenses to the foreign headquarters.
Why PRC tax planning and structuring are essential in pre-deal stage?
Advisory on a tax efficient acquisition structure: asset deal versus share deal. Under both the asset or share deal, tax planning is essential in maximizing the tax saving opportunities as well as to manage the downside tax risks and exposures associated with M&A transactions.
Designation of a flexible and tax efficient holding structure which has built-in flexibility for future restructuring and for exit purposes as well as facilitating the tax efficient repatriation of profits out of China.
Advisory on a tax efficient financing structure: Debt versus equity financing. Foreign investors looking to leveraging their invested capital would need to give careful consideration to the thin-capitalization rule in China. Tax planning is required in order to minimize the PRC withholding tax and host country tax on the interest income. Foreign investors should also consider maximizing the leveraging to obtain tax deductions on the interest incurred on the borrowing as well as obtaining additional tax benefits.
Transaction supports, including deal negotiation supports; review of the draft contracts and agreements from the tax and commercial perspectives especially the walk-away clauses, warranty and tax indemnity clauses as well as back-up arrangement (e.g. escrow arrangement); translate documents; confirm unclear tax issues with the authorities; structuring a technology transfer, feasibility studies, and general tax and business technical supports.
Contact Us
For further queries, please do not hesitate to contact ATAHK at anytime, anywhere by simply calling China hotline at 86-755-82148419, 86-755-82143512, or emailing to info@citilinkia.com.