Over the past few years, Chinese tax authorities have been
focusing increasingly on secondment (also referred to as
dispatchment) arrangements of foreign companies in China. Under a
secondment arrangement a foreign company assigns a foreign manager
to its Chinese subsidiary, while the employee remains an employee
of the foreign company. This structure is often used when there are
some specific benefits to keeping the manager on the other payroll,
or for example when the manager is only staying in China for a
short period of time. Secondment arrangements usually involve a
secondment fee, transferred from the subsidiary to the
multinational company.
The big question is whether a secondment arrangement must be
regarded as a services arrangement, under which a multinational
company which is not a Chinese tax resident seconds a manager to
work at a Chinese subsidiary. If this is the case – and
according to Chinese tax authorities this usually is the case
– the
