China Tax/Business News Flash

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Feb 2012, Issue 4

What to learn from the Vodafone case for China tax

The Indian Supreme Court ("SC") pronounced its long awaited decision in the landmark Vodafone case on 20 January 2012.  It has concluded that the Indian tax authorities should not tax the capital gain from the sale of a foreign company's shares outside India, even though the transaction involved an indirect transfer of an underlying Indian company.

This News Flash highlights the SC's key judgments / observations on the Vodafone case, compares the similarities and disparities with China’s tax rules on overseas indirect equity transfer ("indirect transfer") stipulated in tax circular No.698 ("Circular 698") issued by the State Administration of Taxation ("SAT") in December 2009, and more importantly, analyses the potential influence of the Vodafone case on the SAT's position on indirect transfers.

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