Offshore SPV And Tax Optimization Structures Under Fire

The Chinese State Administration of Taxation recently released the circular Guoshuihan [2009] No. 601 ("Circular"). The Circular defines the notion of "Beneficial owner" that may enjoy preferential tax rates for certain passive incomes under the relevant double taxation treaty ("DTT") and "Conduit company" that cannot enjoy such DTT tax rates.

Beneficial owner:

Beneficial owner is an individual, a corporation or other organization that has the ownership and control over the income or the rights or assets that generates such income. A beneficial owner shall generally engage in substantive business activities such as manufacturing, trading and management activities, etc.

Conduit company: