By Paul Dwyer, Director, Head of International Tax and Transfer Pricing
On December 29, 2017, the Inland Revenue (Amendment) (No. 6) Bill 2017 (BEPS bill) was gazetted in Hong Kong. The BEPS bill introduces a transfer pricing regulatory regime and mandatory transfer pricing documentation requirement in Hong Kong as well as a variety of other anti-BEPS changes.
The BEPS bill marks a significant step up in Hong Kong’s transfer pricing enforcement regime and was formally introduced into the Legislative Council on January 10, 2018. The BEPS bill is a lengthy document and as such it is expected to take a few months before it can be enacted.
On the basis of the arm’s length principle, the BEPS bill proposes fundamental transfer pricing rules that further empower the Inland Revenue Department (IRD). This includes the ability to adjust the profits or losses of an enterprise where the actual provision made or imposed between two associated persons departs from the provision that would have been made between independent persons and has created a tax advantage.
The BEPS bill further introduces mandatory documentation requirements based on the three-tiered approach of Country-by-Country (CbC) Reporting, Master File, and Local File. The BEPS bill also provides further details into the Advance Pricing Arrangement (APA) programme and other related provisions.
By Alexander Chipman Koty and Zhou Qian
Guangdong province, China’s manufacturing heartland, has announced new measures to attract foreign investment.
On December 1, the Guangdong provincial government issued a report delineating 10 policies to expand the province’s openness to foreign investors and foreign capital.
The measures are in support of the State Council’s Measures to Expand Opening-up and Actively Utilize Foreign Investment (Guo Fa  No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa  No. 39). They include policies to improve Guangdong’s business environment, promote fair competition between foreign and domestic companies, expand market access, and offer investment incentives.
By Jake Liddle
Shenzhen has been implementing a variety of preferential policies and subsidies to attract high-level foreign talent to the city in the last few years. This year, regulations have been amended and policies have been promulgated to incentivize living and working in the vibrant city.
Alberto Vettoretti, Managing Partner of Dezan Shira & Associates says: “The Shenzhen municipal government has been very active in formulating incentives to attract foreign and local talents to the city, which has recently become one of the most expensive in the Mainland in terms of real estate. Housing prices there have now reached levels comparable to those in Silicon Valley, but salaries are still a fraction of the US innovative hub if taken on an average basis.”
In this article, we detail three recent government initiatives that provide opportunities for foreign talent.
By Waiyan Varsha Tse
Rising minimum wages have led commentators to declare the end of affordable Chinese labor. However, these assertions ignore the vast expanse of the Chinese mainland, and the varying economies that exist within it. The sprawling city of Chongqing especially stands out as a major emerging manufacturing destination for foreign investors.
Over the past years, manufacturing in China has steadily crept inland as companies seek not only to lower their costs, but also to take advantage of government incentive programs aimed at developing western provinces. In particular, the State Council enacted the “China Western Development Plan” in 2000, which prioritized increasing foreign direct investment (FDI) into Central and Western China.
By Antonio De Michele
Foshan is the third largest city in China’s wealthy Guangdong Province, and part of the immense Pearl River Delta Economic Zone.
In 2015, Foshan’s GDP reached RMB 800 billion (about US$123 billion). That year, it attracted US$2.4 billion in foreign direct investment (FDI), with an average investment size of around US$10 million – also the third biggest in Guangdong.
The city’s economy revolves around manufacturing, including the production of various types of machinery and equipment. Particularly relevant is the consumer electronics industry, which manufactures half of the world’s air conditioning units and refrigerators.
However, in alignment with China’s broader efforts to overhaul the country’s manufacturing industry, Foshan’s economic structure will pivot on the so called ‘Made in China 2025’ program, leading to new opportunities for foreign investors in the city.
In what is fast becoming a rite of passage for Chinese leaders, President Xi Jinping has decreed that the Xiongan New District be created in Hebei, about 160 km south of Beijing. The area will be developed with similar incentives and infrastructure that were put in place with the creation of Shenzhen and the Pudong New Area by predecessors Deng Xiaoping and Jiang Zemin.
The Xiongan New District is set to include Anxin, Rongcheng, and Xiongxian counties around Hebei’s Baiyangdian Lake. It will initially be a 100 km2 area but will expand to more than 2,000 km2 over time, and will house facilities such as markets, schools, research institutions, and hospitals that will be relocated from Beijing. The area is expected to form a triad between Beijing, Tianjin, and Hebei.
By Harry Handley
Jiaxing, traditionally known as ‘the home of silk’, is a prefecture-level city of 4.59 million people located in East China’s Zhejiang province. With an area of 3,915 square kilometers, Jiaxing is surrounded by Suzhou to the north, Shanghai to the east, Hangzhou and Huzhou to the west and the Hangzhou Bay to the south. In terms of infrastructure, Jiaxing is well developed with a deep-water port, high speed rail links, and six expressways linking to the wider Yangtze River Delta region.
The Chinese Academy of Social Science ranked Jiaxing the 37th most competitive city in China in 2016, a standing that has significantly increased in recent years. A push by the local government to shift away from traditional resource-heavy manufacturing and towards a more high-tech and environmentally friendly economy has led to a range of diverse industries in the city. These industries, and several special development zones within the city, present significant opportunities for foreign firms who are looking to expand their operations in China.
By Harry Handley
As host of the 2016 G20 summit, Zhejiang province has been thrust into the global spotlight in recent months. The province of 55 million people is advantageously located on China’s east coast, south of Shanghai which is easily accessible via one of the world’s transoceanic bridges spanning the Hangzhou Bay. Zhejiang boasts advanced infrastructure, with 2,600 kilometers of railway, almost 120,000 kilometers of highway, and one of the top five busiest ports in the world. These factors, along with a rapidly developing business environment, have led Zhejiang to become one of the strongest and most diverse provincial economies in China.
A growing number of foreign firms are choosing Zhejiang as the location for their Chinese investments. The province offers great opportunities to potential China entrants, including a range of economic development zones. In order to take advantage of these opportunities, the economy of Zhejiang and recent foreign direct investment (FDI) trends must be understood.