China’s Anti-tax Avoidance Rules

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By Dezan Shira & Associates

The general anti-avoidance rule was first introduced in China under the 2008 CIT Law. It empowers Chinese tax authorities to make reasonable adjustments where an enterprise implements an arrangement without reasonable business purposes in order to reduce its taxable income or profit. According to the CIT Law’s Implementation Guidelines, “an arrangement without reasonable business purpose” refers to an arrangement which has the main purpose of obtaining tax benefits such as the reduction, elimination, or deferral of tax payments.

Prior to 2008, a special purpose vehicle (SPV) was the most common structure used by foreign companies to hold investments in China. A SPV refers to a holding company set up outside of China – usually in Hong Kong or other locations that boast notable tax advantages and favorable tax treaties with China – for the special purpose of holding equity interest in an onshore FIE.

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China’s Healthcare Reforms Underscore Market Growth

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By Dezan Shira & Associates
Editor: Qian Zhou

Due to its size and growth potential, China’s healthcare market is one of the most attractive in the world for foreign investors. China surpassed Japan to become the world’s second-largest healthcare market in 2013 and continues to develop at double-digit rates. Indeed, it’s the fastest-growing healthcare market of all large emerging economies.

Recently in 2016, China’s healthcare market reached RMB 5,670.3 billion (US$853.7 billion), an increase of 12 percent in local currency when compared with that of 2015. Among others, the medical device market grew 20.1 percent to RMB 370 billion (US$56 billion) in 2016, while pharmaceutical and health products sales reached RMB 1,839 billion (US$277 billion), up 10.4 percent year-on-year.

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Registering for Social Insurance and the Housing Fund in China

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By Dezan Shira & Associates

Although both employee and employer make contributions towards the social insurance funds in China, it is generally the case that the employer is responsible each month for withholding the contribution of the employee from gross salary, and making the employee’s contribution together with that of the employer.

When hiring a new staff member, employers need to register him or her with the local Social Insurance Bureau and the Housing Fund Bureau. As each city or region regulates its own social insurance scheme, the procedures vary per city and change rapidly. Below, we describe how this procedure generally works.

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Pre-investment Capital Planning for China’s Foreign Exchange Control

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By Dezan Shira & Associates
Editor: Zolzaya Erdenebileg

In China, companies, banks, and individuals must comply with a “closed” capital account policy. This means that money cannot be freely moved into or out of the country unless it abides by strict foreign exchange rules.

China made promises to liberalize its foreign exchange market when acceding to the World Trade Organization (WTO), but changes are being introduced gradually. Currently, the government is using the China (Shanghai) Pilot Free Trade Zone to test full currency convertibility and further liberalizations for foreign investors. If successful, regulators will likely expand liberalizations nationally.

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The Senior Care Sector in China: Is it Time to Think Differently?

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By Nayoung Mathiesen

Foreign investors that would like to understand the senior care sector in China may find a comparison to the hospitality sector helpful.

The hospitality sector boomed over the past 30 years as the Chinese economy grew and visitors poured in. Chinese real estate players rushed into the sector, and they absolutely wanted to work with well-known global luxury brands to develop the sector. Domestic investors were totally dependent on their Western partners’ management and operational know-how – there were no local culture or competence in the sector.

As a result, global hotel brands had been given relative autonomy in how they operate their branded hotels in China. Global rating systems and training programs obligated Chinese owners to stick to their agreements.

How does this compare to the senior care sector?

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China May Legalize Gambling in Hainan

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China may legalize gambling in Hainan, the country’s southernmost province, according to a report from Bloomberg.

Online gaming, lotteries, and sports betting could be introduced to Hainan, which would pave the way for casinos to enter in the future, per the report. Legalizing gambling would come in conjunction with a new airport in Dongfang and relaxed visa rules for foreigners.

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French FDI in ASEAN, India’s 2018 Budget, and e-Invoices in Vietnam – Asia Investment Brief

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Our weekly round up of other news affecting foreign investors throughout Asia:

ASEAN BRIEFING

French FDI in ASEAN Part I: Singapore, Malaysia, and Vietnam

ASEAN continues to be an important FDI destination for European investors. Read more about France’s investments in Singapore, Malaysia and Vietnam in the first part of our two-part article on French FDI in ASEAN.

INDIA BRIEFING

India’s 2018 Union Budget: Elections Focus behind Broad-brush Vision

Prime Minister Modi’s government presented its Union Budget for the financial year (FY) 2018-19 on February 1. While some foreign observers have overlooked this year’s budget, it takes on increased importance ahead of the election fight in eight states this year, and the general elections next year.

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China Eases Foreign Investment Restrictions in Free Trade Zones

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By Alexander Chipman Koty

China has relaxed restrictions on foreign investment in the country’s 11 free trade zones (FTZs), per a decision released by the State Council, China’s cabinet, on January 9.

The Decision on Temporarily Adjusting Relevant Administrative Regulations, State Council Documents and Departmental Rules Approved by the State Council within FTZs (the Decision) updates various administrative regulations to extend to China’s new FTZs, and relaxes investment restrictions in 16 industries.

Several of the relaxed rules introduced by the Decision are technically only temporary. The Decision directs the departments in charge of the relevant industries to issue or amend regulations to formalize the changes.

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