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Seven Areas of Tax Savings for SMEs in China for 2022-2024

The Chinese government has released a series of incentives relating to corporate income tax (CIT), value-added tax (VAT), and other taxes for Small and Medium Enterprises (SMEs). Here are seven areas where SMEs can save taxes in China. 1. Lower CIT rate for small low-profit…

Case Studies

IIT and PE issues for a HK consulting firm

Puzzle pieces with word tax

Background A HK consulting firm (‘A’) sent its consultant staff to Mainland China to provide consultant services to the clients of an advisory company in Mainland China (‘B’). A charges B consultancy fee of RMB 5m. Under normal circumstances, the consultant staff would not spend more than 183 days in any calendar year on the whole firm basis. However, starting from Year 2020, A’s staff kept staying in Mainland China because of COVID-19 pandemic. A engaged CW to assess the…

A Fallacy about the Requirements for Keeping Hi-Tech Status

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Background A multinational group headquartered in Europe (“EU Co”) owns a Foreign-Invested Enterprises in Mainland China, FIE 1, which in turn holds 100% equity interest in FIE 2. FIE 2 mainly purchases raw material from local suppliers, manufactures machines, and sells to FIE 1 who then sells to corporate clients. FIE 2 is certified as a high-tech co based on the data from Year 5 to 7. Accordingly, it enjoys a 75% extra deduction on R&D expenses and a 15%…

Solutions for a Foreign-Invested Enterprise to Increase Capital

A man puts wooden blocks with the word Capital

Background A multinational group headquartered in the US (“US Co.”) owns a subsidiary in Hong Kong. The Hong Kong subsidiary (“HK Co.”) is the shareholding company of a Foreign-Invested Enterprise (“FIE”) in Mainland China. The FIE’s primary business involves sourcing telecommunication products from China and locally selling to their corporate clients.   Challenge Initially, when the FIE was established, the registered capital was set at USD 200,000, which would be contributed by the HK Co. with funds sourced from the…

China Updates

China Updates – March 2022

Administrative Regulation of the People’s Republic of China on the Registration of Market Entities  On 1 March 2022, China enacted the new Administrative Regulation of the People’s Republic of China on the Registration of Market Entities, which is the first unified administrative regulation to regulate all types of market entities in terms of registration and filing […]

China Updates – February 2022

Administrative Measures for Client Due Diligence and Preservation of Clients’ Identity Information and Transaction Records by Financial Institutions The “Administrative Measures for Client Due Diligence and Preservation of Clients’ Identity Information and Transaction Records by Financial Institutions” will enter into force on 1 March 2022. Here’s how it will affect the individuals engaging in funds […]

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