Our Latest Round-Up of Business News Affecting China-Based Businesses Investing in Asia
In this edition of China Outbound, we delve into the ongoing trend of China-based companies moving to lower-wage destinations in Southeast Asia and India. Fueling this are both the rising costs of manufacturing in China, as well as the maturing Chinese middle class. In the coming years, goods produced more cheaply in emerging Asian nations will find their way to China’s consumer markets, fueled by FDI from both China and abroad. The future will increasingly see executives moving across emerging Asia, bringing along a new set of HR and legal challenges.
China & Asian Human Resources – Sharing Talent Across Borders
With China’s population aging, labor pool dynamics across Asia are changing. Chinese executives will increasingly move abroad to lead projects outside of the country, introducing new HR challenges. Singapore at the same time is developing into a regional center for handling payroll.
Registering your Indian Employment Visa
After obtaining an Indian visa, registering the visa at a FRRO is often an afterthought for expatriates. Unfortunately, however, registering a visa is a cumbersome process. In this article, we outline the process involved.
China Moves to Curb Transfer Pricing – Effective Immediately
China is moving to curb transfer pricing with new corporate income tax deduction rules on cross-border related party transactions. It is predicted that transfer pricing will be another tough area for foreigners operating business in China in 2015 and beyond.
How to Establish a Trading Company in Vietnam
In this article, we take you through the processes involved with setting up your trading company in Vietnam, so that you can engage in import and export activities as well as domestic distribution.
Vietnam Adds New Forms of Public-Private Partnership
Starting April 10, 2015, the forms of build, own, and operate (BOO); build, transfer, and lease (BTL); build, lease, and transfer (BLT); and, operate and manage (O&M) will be added to the list of acceptable types of Public-Private Partnership (PPP) allowed in Vietnam.
Quality and Cost of Living Reports Point Towards Emerging Trends in Asia-Pacific
Mercer’s 2015 Quality of Living Rankings confirms some well-established insights into Asian cities. However, rankings alone can be notoriously superficial. In this article, we explore the trends which stand up to scrutiny.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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HR Administration: Labor Contracts, Visas and Termination Procedures
In this issue of Asia Briefing, we set out to provide readers with a basic understanding of how to navigate the HR procedures of China, India and Vietnam. We begin by introducing the most common employment contract structures in each of these countries, as well as their laws for employment probation. We then take a look at the three’s increasingly complex procedures for obtaining work/business visas, and conclude with a special feature on how to legally terminate an employee across Asia.
Developing Your Sourcing Strategy for Vietnam
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.
Establishing Your Sourcing Platform in India
In this issue of India Briefing, we highlight the advantages India possesses as a sourcing option and explore the choices available to foreign companies seeking to create a sourcing presence here. In addition, we examine the relevant procurement, procedural and tax duty concerns involved in sourcing from India, and conclude by investigating the importance of supplier due diligence – a process that, if not conducted correctly, can often prove the undoing of a sourcing venture.
In this final part of this China-Asia comparison series, we take a look at the differences in business costs between China and its Asian competitors. Operational costs in China can vary significantly within the country, yet savings in lower wages can be offset by increases in logistics overheads. Even within China there is plenty of scope for shopping around and comparing overheads. When adding the entire region of Asia into the mix, there is a huge amount of research and digging around to do to get to any meaningful comparisons – let alone the actual cost of getting that data in the first place. Asia is a big area, and finding out the real costs of business is a daunting task. Its something very few, if any, China based consultants are able to manage. Continue reading…
By Stephen O’Regan
International Business Advisory
Dezan Shira & Associates
There are many reasons why setting up a Representative Office (RO) in China is beneficial for a company, with the simplicity and low cost of the registration process being among the most attractive. If a company is beginning its venture into China or only wants a research/support post then an RO is a great way to get started.
There certainly are uses to an RO but at some point in a company’s development, either if it wishes to expand or the expenses are too high, it will mature beyond the scope of the RO and from that point on the RO no longer becomes cost efficient. One must keep in mind how tax on an RO works. ROs are taxed on their expenses which can be quite considerable if companies consider rent, salaries and other variable costs. Continue reading…
By Dezan Shira & Associates
Legal Editor: Steven Elsinga
China tax authority, the State Administration of Taxation (SAT) issued an announcement on March 18, in which it outlines a number of transfer pricing transactions which would no longer be eligible for tax deductions. The decision is effective immediately.
The move follows an investigation into transfer pricing that first started in July 2014. The SAT requested local bureaus to gather information on the practice of transfer pricing for the purpose of launching a new policy. With the release of these new guidelines, tighter scrutiny of multinational companies is expected.
One of the component parts that make up a business decision whether to either trade with, or establish operations in a country is the tax aspect. These are a moving target – not only can they vary from province to province, be subject to different interpretations by different tax bureau or customs officials, or be changed during the regular annual budget reviews that China has. This is one reason why China tax consultants are never unemployed.
However, when it comes to China, there is a lot to absorb. Yet in both trading with China and developing a fully fledged business in China, tax is one of the areas that often gets ignored. This is problematic in a number of areas, from the punishments that can arise for not being tax compliant, to not realizing certain tax provisions can actually save you money. This lack of knowledge can be described as a “tax hole” through which many foreign investors can become stuck. In this article I take the reader through a number of developing scenarios in which tax holes can appear – and what to do about them. Continue reading…
Enterprises to Enjoy CIT Incentives in Western China
The State Administration of Taxation (SAT) released an interpretation of the “Circular on Corporate Income Tax Issues for the Implementation of Catalogue of Encouraged Industries in Western China” on March 10. The SAT clarified that eligible companies engaged in industries newly added to the encouraged list of the “Catalogue of Encouraged Industries in Western China” may pay the corporate income tax (CIT) at a reduced rate of 15 percent. Such companies need to meet the following two requirements:
- The companies’ main business is included in the encouraged industries; and
- The companies’ main business income covers more than 70 percent of their total income.
A number of high-profile foreign investors have announced office and factory closures in China, while at the same time “unfriendly” barriers to certain Western hi-tech industries, and most notably software and IT have been announced. While the media often portrays this as symptomatic of problems in China, due to a “slowing economy” and “unfriendly business practices”, my view is that these are normal occurrences in the typical life of a multinational company. I do not believe, with one or two obvious exceptions, that they represent a trend of a “bad China” or a country where foreign investors are generally and increasingly having a tough time, one or two specific sectors excluded.
In actual fact, China realized the second highest volume of Foreign Direct Investment in the world last year, according to the World Investment Report 2014, produced by the Geneva-based UN Conference on Trade and Development (UNCTAD), which stated that FDI was a rising trend that would continue. So the bigger picture doesn’t support China as being FDI unfriendly. This means that the reasons for high-profile China retractions and closures must instead be related to very specific cases or strategic decisions due to changing commercial circumstances. Let us review this by taking a look at some of these cases: Continue reading…
By Rainy Yao
SHANGHAI—On March 10, the much anticipated “Catalogue for the Guidance of Foreign Investment Industries (2015)” was jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM). The Catalogue will enter into force on April 10, 2015.
The Guidance Catalogue is comprised of encouraged, restricted and prohibited lists. Foreign companies that are engaged in the encouraged industries may enjoy preferential policies such as tariff exemptions for imported equipment, or tax incentives. For industries that are listed as restricted, investors often need to get pre-approval from the government. Some of these sectors may also have a limit on the number of shares of a foreign entity may own. For industries not included in the catalogue, foreign investors only need to complete filing procedures with the local government.