China tax - Corporate reorganisation and restructuring
Since China's opening of its marketplace to foreign investors, over 650,000 foreign entities have been approved to operate in China. More than 480 of the Global 500 have already set up their presence in China. However, because of various regulatory constraints, complex and sometimes tax-inefficient structures are used to occupy the regulatory space. We are seeing more and more foreign investors' corporate reorganisations and restructuring exercises arising at enhancing and streamlining their China structures. These include increasing equity participation, closing down obsolete structures and establishing more powerful new structures and gaining control over distribution and after-sales services, and many others.
Besides, the privatisation program of state-owned enterprises, the emergence of asset management companies for non-performing loans and the hot waves of domestic and overseas listings are all driving corporate reorganisations and restructurings of state-owned enterprises and domestic China enterprises, which also open up new investments opportunities for foreign investors.
What have been done by many of our MNC clients?
- Closing down representative offices and replacing them by foreign invested commercial enterprises
- Buying out Chinese partners to convert an equity joint venture into a Wholly Foreign Owned Enterprise (WFOE)
- Setting up special propose technical consulting or service WFOE
- Converting contract processing factories into manufacturing WFOEs to capture the opportunity for domestic sales
- Rectifying irregular investment holding structures or wholesaling / retailing operation
- Consolidating operations by merging two or more existing foreign investment enterprises (FIEs) to achieve synergy and save costs
- Division, spin-off, transfer of business or reorganisation of non-core business
- Liquidation of obsolete or dormant FIEs
- Creating investment holding structure to achieve integration of various business and treasury functions
- Pre-listing restructuring and planning.
You may want to know more about the key drivers for corporate negotiations and restructuring in the China and their relevance to your business operations. You may also want to know what are the regulatory approval requirements, documentation, assets valuation and the China tax perspectives. You may require professional opinions on defining an effective corporate reorganisation and restructuring programme and a tax-efficient approach, for example, corporate restructuring with special tax (tax deferral) treatment and the right strategies to preserve the tax attributes, such as the carry-forward of tax losses and un-utilised preferential tax treatments, etc.
