According to Chinese Ministry of Commerce (MOFCOM) data, in the first 2 months of 2010, Chinese investors set up 693 overseas enterprises in 89 foreign countries and jurisdictions, with MOFCOM approval. |
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The outbound direct investment (ODI) in these enterprises amounts to US$4.66 billion, and demonstrates rapid growth, as it already exceeds the ODI for the first quarter of 2009.
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Jurisdictions for holding companies, such as Hong Kong, BVI, Singapore and Cayman, attract more than 80% of the total Chinese ODI, both annually in recent years and cumulatively.
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How to Set up a Holding Structure for ODI from China |
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International double tax treaties and the flexible regulation and economic environment of some jurisdictions provide holding structure opportunities for Chinese ODI that will serve one of the following purposes:
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- Reduce or exempt foreign withholding taxes on dividends, interest or royalties and capital gains taxes
- Defer Chinese corporate income taxes
- Keep incomes in foreign currencies in overseas accounts, and create flexibility for international capital movement
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| How Amicorp Can Assist You |
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The Amicorp Group is specialized in establishing and managing all types of corporate entities. Amicorp has over 500 specialists in 24 offices in 20 jurisdictions to provide all supporting services connected with company management and administration, including: |
- the appointment of company secretaries, managers and directors,
- bookkeeping, accounting and financial transactions,
- a registered address,
- preparation and maintenance of corporate records, and
- the administration and management of bank accounts.
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International tax treaties or other mutual tax agreements can be used to structure Chinese ODI in a tax effective way, provided certain conditions are met. Amicorp does not provide legal or tax advice. Amicorp works on the basis of structuring advice from lawyers or tax advisors. |
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| For more information about how Amicorp can assist you in business, contact your nearest Amicorp office or contact one of the undersigned directly. |
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Derk Scheltema
Amicorp Shanghai |
| d.scheltema@amicorp.com |
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Deqi Chen
Amicorp Shanghai |
| d.chen@amicorp.com |
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Xiaoliang Li
Amicorp Shanghai |
| x.li@amicorp.com |
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Kit-wah Poon
Amicorp Hong Kong |
| c.poon@amicorp.com |
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Example 1: To Reduce Withholding Tax |
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When investing into Kazakhstan, if Chinese investors use a Chinese company as the holding company, then the dividends paid from Kazakhstan will be subject to a Kazakhstan withholding tax rate of 10%. (See Example 1-1 below.) |
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On the other hand, if a Chinese investor uses a Singapore SPV as a holding company for the Kazakhstan operating company, the total withholding tax rate will be reduced to 5%. (See Example 1-2 below.) |
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| Example 2: To Exempt Capital Gain Tax in Operating Company |
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For investing into South Africa, if Chinese investors use a Chinese company as the holding company, then the capital gains derived from alienation of shares in the South African operating company will be charged a 28% capital gain tax in South Africa. (See Example 2-1 below.) |
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If, however, a Chinese investor uses a Singapore SPV as a holding company for the South African operating company, then the alienation will be free of capital gain tax in both South Africa and Singapore. (See Example 2-2 below.) |
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| You will find more potential holding structures for Chinese ODI in the Appendix. |
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