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ARTICLE · 10 JUNE 2005

The World Tax Advisor (June Edition)

Deloitte LLP
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This article discusses international tax developments and has been prepared by professionals in the member firms of Deloitte Touche Tohmatsu.

GlobalAccounting and Audit

This article discusses international tax developments and has been prepared by professionals in the member firms of Deloitte Touche Tohmatsu.

Originally published June 2005

Circular Introduces Restrictions on Offshore Investment by PRC Individuals

The State Administration of Foreign Exchange (SAFE) recently issued a Circular (Circular 11) that could have a severe impact on PRC individuals who make investments in offshore companies or acquire Chinese companies indirectly through an offshore company.

Before Circular 11, PRC individuals frequently used one of two structures to convert Chinese assets or companies into offshore assets. Under one structure, a PRC individual founder who wanted his Chinese companies or assets to be listed on an overseas stock exchange (e.g. the Hong Kong Stock Exchange) would adopt an "inversion" acquisition structure. The PRC founder would invest in an offshore company that would acquire the Chinese assets or companies from the individual. When the

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