Hong Kong s Role Your China Market Entry & Strategies

Transcription

1 Intertrust Katherine Chiu October Hong Kong s Role Your China Market Entry & Strategies Katherine Chiu

2 Intertrust Katherine Chiu October Welcome to China!!!

3 Intertrust Katherine Chiu October China Market characteristics Moving towards more transparent / open market Highly fragmented market Fast changing, dynamic market Guanxi with local authorities Growing consumption power the emerging middle class Change of multi-national firms strategic approach from exploration to penetration

4 Intertrust Katherine Chiu October CHINA Beijing Central Bohai Economic Zone Western Guangzhou Shanghai PRD Hong Kong Shanghai &YRD

5 Intertrust Katherine Chiu October Issues to consider entering China 1st question - why China? Perform industry analysis Identify entry mode Understand regulation regime Understand regional characteristics Identify competitive advantages Focus on positional advantage (e.g. to achieve lower cost & superior customer value)

6 Intertrust Katherine Chiu October China/HK DTA* covers in China individual income tax and foreign China/HK DTA* investment enterprise income tax in Hong Kong profits tax, salaries tax and property tax * Double Tax Arrangement

7 Intertrust Katherine Chiu October China Hong Kong DTA favourable withholding tax rates taxable item non-treaty rate normal treaty rate favourable treaty rate Hong Kong dividends (1) - 10% for companies - 20% for individuals 10% 5% interest - 10% for companies - 20% for individuals 10% 7% royalties - 10% for companies - 20% for individuals 10% 7% capital gains tax (on transfer of shares) - 10% for companies - 20% for individuals 10% - 0% (if < 25%) - 10% (for all other cases) 1) Currently after-tax dividends from an FIE are exempt from withholding tax. However, this exemption is likely to be repealed under tax unification.

8 Intertrust Katherine Chiu October extraction of profits from China Benefits of not investing directly into China EU co 0% under EU Directive shareholding Belgium / HK DTA China / HK DTA withholding tax 0% Belgian co HK co > 25% unification 5% tax of if income exemption dividends tax 1 abolished? exempted Jan 2008 shareholding China co

9 Intertrust Katherine Chiu October Benefits of not investing directly into China EU co 0% under EU Directive shareholding if profits in the foreign invested enterprises are repatriated in form of dividends it is possible that only China primary tax is payable withholding tax 0% 5% if exemption abolished? Belgian co HK co > 25% shareholding China co

10 Intertrust Katherine Chiu October Benefits of not investing directly into China EU co 0% under EU Directive shareholding gains on disposal of shares in the FIE would be taxed in China but at Hong Kong level there would be no capital gains tax withholding tax 0% 5% if exemption abolished? Belgian co HK co > 25% shareholding China co

11 Intertrust Katherine Chiu October Benefits of not investing directly into China EU co 0% under EU Directive shareholding flexibility of shareholding structure withholding tax 0% Belgian co HK co > 25% 5% if exemption abolished? shareholding China co

12 Intertrust Katherine Chiu October Benefits of not investing directly into China EU co 0% under EU Directive shareholding Hong Kong company may tap into benefits offered under CEPA withholding tax 0% Belgian co HK co > 25% 5% if exemption abolished? shareholding China co

13 Intertrust Katherine Chiu October Benefits of not investing directly into China Belgium / HK DTA China / HK DTA if profits in the foreign invested enterprises are repatriated in form of dividends it is possible that only China primary tax is payable gains on disposal of shares in the FIE would be taxed in China but at Hong Kong level there would be no capital gains tax flexibility of shareholding structure Hong Kong may tap into benefits offered under CEPA made between Hong Kong and China 0% under EU Directive withholding tax 0% 5% if exemption abolished? EU co Belgian co HK co China co shareholding > 25% shareholding

14 Intertrust Katherine Chiu October China tax regime Foreign Enterprise Income Tax Unification of Income Tax 1 Jan 08 Rate : 25% 33% Rate SEZ manufacturing: 0% - 2 years 7.5% - 3 Years 15%- 24% - 27% Rate SEZ other: Shenzen, Zhuhai, Shantou, Xiamen, Hainan & Pudong 15% (maybe) monthly/quarterly filing

15 Intertrust Katherine Chiu October China tax regime Individual Income Tax 5% - 45% top rate 45% after Euro 10,000 per month monthly filing

16 Intertrust Katherine Chiu October China tax regime Business Tax rate: 3-20% of turnover normal rate: 5%

17 Intertrust Katherine Chiu October China tax regime VAT normal taxpayer 17% small scale taxpayer 4 or 6%

18 Intertrust Katherine Chiu October China tax regime Capital Gains Tax foreign seller 10% withholding local seller 20% for individuals 33% for corporations

19 Intertrust Katherine Chiu October China tax regime Consumption Tax 0~45% product specific

20 Intertrust Katherine Chiu October China tax regime Deed Tax 3~5%

21 Intertrust Katherine Chiu October China tax regime Land Appreciation Tax

22 Intertrust Katherine Chiu October China tax regime Customs Duties

23 Intertrust Katherine Chiu October China tax regime Foreign Enterprise Income Tax : 33% 25% Individual Income Tax : 5%~45% Business Tax : 3-20% of turnover : normal rate : 5% VAT : 17% normal taxpayer : 4 or 6% small scale taxpayer Capital Gains Tax : 10% withholding for foreign sellers : 20% for individuals : 33% for corporations Consumption Tax : 0~45% Deed Tax : 3~5% Land Appreciation Tax Customs Duties

24 Intertrust Katherine Chiu October China structures representative office of foreign company China structures

25 Intertrust Katherine Chiu October China structures joint ventures cooperative JV equity JV

26 Intertrust Katherine Chiu October China structures WFOE - wholly foreign owned enterprise manufacturing servicing FICE

27 Intertrust Katherine Chiu October China structures rep office JV WFOE - wholly foreign owned enterprise manufacturing servicing Foreign Invested Commercial Enterprise (FICE)

28 Intertrust Katherine Chiu October China structures setting up a WFOE minimum capital requirement WFOE FICE wholesale FICE retail RMB30,000 (EUR3,000) RMB500,000 (EUR50,000) RMB300,000 (EUR30,000)

29 Intertrust Katherine Chiu October China structures setting up a WFOE the form of contribution in kind to total registered capital widened after 1 Jan 06 cash contribution: >30% non-cash assets: up to 70% tangible / intangible assets

30 Intertrust Katherine Chiu October China structures setting up a WFOE debt-to-equity rules USD 3 million or less 70:30 USD 3-10 million 50:50 USD million 60:40 over USD 30 million 33:67

31 Intertrust Katherine Chiu October China structures setting up a WFOE Board of Directors 1-13 natural persons no local director requirement

32 Intertrust Katherine Chiu October China structures setting up a WFOE legal representative not necessarily a director not necessarily a resident

33 Intertrust Katherine Chiu October China structures setting up a WFOE minimum capital requirement WFOE FICE wholesale FICE - retail RMB30,000 (EUR3,000) RMB500,000 (EUR50,000) RMB300,000 (EUR30,000) contribution cash 30% - non-cash 70% debt-to-equity rules 70:30 60:40 50:50 33:67 Board of Directors 1-13 natural persons no resident director requirement legal representative not necessarily a director not necessarily a resident

34 Intertrust Katherine Chiu October China structures EU company Belgium company -95% exemption on dividends from Hong Kong subsidiary -100% exemption on capital gains on disposal of equity interest of the Hong Kong company if such company s assets do not comprise > 50% of immovable property situated in Hong Kong Belgian/HK tax treaty HK/PRC tax arrangement HK company Dividends from China -currently exempt Capital gain on disposal of equity interest -exempt if < 25% -10% rate will apply for all other cases Representative office Service WFOE FICE Manufacturing WFOE

35 Intertrust Katherine Chiu October Structure: Representative Office Belgium company Goods Goods Goods European buyers Forex HK company Forex Chinese suppliers Representative Office Limited Business Scope Perform market surveys & quality control Provide business information Carry out business liasion PRC taxes Tax on cost-plus basis 5% & FEIT 25% Tax cost approx 8.63% of the operating expenses

36 Intertrust Katherine Chiu October Structure: Service WFOE Belgium company Goods Goods Goods European buyers Forex HK company Forex Chinese suppliers Forex Provision of services Provision of services Service WFOE RMB Business Scope Take up back office support functions Perform quality control and inspection Provide sales and marketing support PRC taxes 5% on service income 25% on profits

37 Intertrust Katherine Chiu October Structure: FICE Goods / Invoices Forex/RMB Belgium company European suppliers HK company Goods Chinese customers FICE Business Scope Engage in full-fledged trading function Provide after-sales and technical support Perform sales and marketing, quality control functions PRC taxes VAT@ 17% on local sales BT@ 5% on service income 25% on profits

38 Intertrust Katherine Chiu October Structure: Manufacturing WFOE Goods / Invoices Forex/RMB Raw Materials Belgium company European suppliers HK company European buyers Chinese suppliers Manufacturing WFOE + FICE Chinese buyers Business scope Production Local or foreign customers Provide after-sales and technical support PRC taxes VAT@ 17% on value-added portion of local sales 25%

39 Intertrust Katherine Chiu October Structure: timeline for establishing the various investment vehicles type of establishment WFOE FICE FICE RO Services or Manufacturing Retail business or Wholesale business Retail + Wholesale business months

40 Intertrust Katherine Chiu October Hong Kong companies companies can be set up easily off the shelf incorporation 7 working days Hong Kong companies

41 Intertrust Katherine Chiu October Hong Kong companies minimum issued share capital HK$1

42 Intertrust Katherine Chiu October Hong Kong companies one man companies one shareholder one director

43 Intertrust Katherine Chiu October Hong Kong companies no requirement for a HK director

44 Intertrust Katherine Chiu October Hong Kong companies corporate directors corporate shareholders

45 Intertrust Katherine Chiu October Hong Kong companies HK secretary required

46 Intertrust Katherine Chiu October Hong Kong companies HK registered office required

47 Intertrust Katherine Chiu October Hong Kong companies audited annual accounts and tax filing required

48 Intertrust Katherine Chiu October Hong Kong companies companies can be set up easily off the shelf incorporation 7 working days one man companies one shareholder one director no HK director requirement corporate directors / corporate shareholders HK secretary required HK registered office required minimum issued share capital - HK$1 audited annual accounts and tax filing required

49 Intertrust Katherine Chiu October Advantages of a HK holding company gateway for investment in China CEPA China/HK double tax arrangement Advantages of a HK holding company Belgium/HK double tax agreement

50 Intertrust Katherine Chiu October Advantages of a HK holding company one more layer of protection on the interest of the parent holding company shareholders agreements IP registered in HK recognised centre for arbitration

51 Intertrust Katherine Chiu October Advantages of a HK holding company easier to change shareholding structure

52 Intertrust Katherine Chiu October Advantages of a HK holding company gateway for investment in China Closer Economic Partnership Agreement China/HK double tax arrangement Belgium/HK double tax agreement one more layer of protection on the interest of the parent holding company easier to change shareholding structure

53 Intertrust Katherine Chiu October Hong Kong facts first class professional services first class all top 10 international accounting firms professional services

54 Intertrust Katherine Chiu October Hong Kong facts first class professional services all magic circle law firms

55 Intertrust Katherine Chiu October Hong Kong facts first class professional services investment bankers

56 Intertrust Katherine Chiu October Hong Kong facts first class professional services private equity houses

57 Intertrust Katherine Chiu October Hong Kong facts first class professional services real estate agents and property consultants

58 Intertrust Katherine Chiu October Hong Kong facts first class professional services all top 10 international accounting firms all magic circle law firms investment bankers private equity real estate agents and property consultants corporate services companies

59 Intertrust Katherine Chiu October Hong Kong facts first class professional services in fact, everything you would expect in a major financial centre the world s leading corporate services company Intertrust

60 Intertrust Katherine Chiu October Our Asian offices Western Central PRD Bohai Economic Zone Shanghai &YRD Beijing Shanghai Hangzhou Guangzhou Our Asian offices Hong DalianKong Singapore Wuhan Chengdu

61 Intertrust Katherine Chiu October to recap

62 Intertrust Katherine Chiu October Conclusion Asia still dynamic growth Hong Kong preferred jurisdiction for MNC to hold the investment and finance in China Our Asian offices Hong Kong Singapore China (Beijing, Shanghai, Hangzhou, Guangzhou) Our services: Business services China services Corporate services Securitisation and fund administration services Tax services Trust services

63 Intertrust Katherine Chiu October Conclusion HK / China DTA Benefits for not investing directly into China China tax regime China structures Advantages of using a Hong Kong holding company Hong Kong first class professional services Intertrust

64 Intertrust Katherine Chiu October See you at the Mall!!!

65 Intertrust Katherine Chiu October providing creating crossing Fortis professional Intertrust business, borders, services! Thank you Katherine Chiu