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THE STRENGTHENING OF CHINA's FOREIGN INVESTMENT TAX SYSTEM

November 2010 - Tax & Private Client. Legal Developments by Lefèvre Pelletier & associés .

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In the early 80s, the Chinese government, eager to attract foreign investors, offered them tax incentives, took measures to facilitate their expansion and encouraged trade relations.

A first step in the establishment of the head office, the representative office benefitted from highly favourable measures: legal measures on the one hand, because no capital is required, registration is quick and unrestrictive, and operating costs are relatively low; and tax measures on the other hand, because they were tax-exempt if the parent companies were producing companies in their home country, or taxed on their expenditure in the other cases. 

In 2008, China organised the Olympic Games, in 2009, it became a leading G20 player, in 2010 it hosts the World Expo: these symbols are a sign that the levelling of the playing field for Chinese and foreign companies in China has begun. Although it remains the most attractive country by far, Greater China is one of Asia's highest taxers of foreign investment. The environment for foreign companies has become tougher (i) and sophisticated, approaching the complexity found in Europe or in the United States (ii). 


I - THE BEGINNING OF THE END OF THE REPRESENTATIVE OFFICE'S ROLE AS A FOREIGN INVESTMENT VEHICLE 

II - A TAX REFORM THAT REFLECTS THE GROWING SOPHISTICATION OF CHINESE LAW

 


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