AmCham-China

China Wants to Impose Tax on the Sale of Foreign Company Owning Investment in China - A Trend or an Exception?

The Chinese State Administration of Taxation released a circular (Guoshuihan No. 698 – Circular 698) on December 15, 2009 that addresses the transfer of shares by foreign nonresident companies.  This is the first guidance since the government issued the M&A tax rules, "Enterprise Income Tax Treatment of Enterprise Restructuring Transactions" (Caishui [2009] No. 59) in May 2009.  Circular 698, which is effective retroactively to 1 January 2008, will have a significant impact on many companies that use offshore holding companies to invest in China. 

Deloitte China Tax Analysis - December 19, 2009 ( English, Chinese)