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Hong Kong Account Holders: Prepare for AEOI Reporting

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By Jennifer Lu

Those who hold an account (or are a controlling person) with Hong Kong Financial Institutions – both individuals and entities – must prepare to report their tax residency information to the Inland Revenue Department (IRD) by May 2018 for exchange with 75 reportable jurisdictions under the AEOI standard.

In September 2014, Hong Kong indicated its support for implementing automatic exchange of financial account information (AEOI) on a reciprocal basis with appropriate partners, with a view to commencing the first exchanges from 2018.

Under the AEOI standard, financial institutions in Hong Kong are required to identify financial accounts held by “tax residents of reportable jurisdictions” or held by passive non-financial entities whose controlling persons are tax residents of reportable jurisdictions, in accordance with due diligence procedures.

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Hong Kong’s New Transfer Pricing Regime

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By Paul Dwyer, Director, Head of International Tax and Transfer Pricing

On December 29, 2017, Hong Kong gazetted the Inland Revenue (Amendment) (No. 6) Bill 2017 (the Amendment Bill). The Amendment Bill, which was formally introduced into the Legislative Council on January 10, represents a crucial step in the development of Hong Kong’s transfer pricing regulatory and enforcement regime.

The objectives of the Amendment Bill are to codify transfer pricing rules into Hong Kong’s Inland Revenue Ordinance (IRO), introduce transfer pricing documentation requirements, and implement other measures set out in the Organisation for Economic Co-operation and Developments (OECD’s) Base Erosion and Profit Shifting (BEPS) program.

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Hong Kong BEPS Bill: New Transfer Pricing Regime to Regulate Documentation

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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.

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Foreign Investment in Guangdong: New Incentives Announced

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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 [2017] No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa [2017] 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.

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Incentives in Shenzhen for Attracting Foreign Talent

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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.

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Investing in Inland China: Assessing Chongqing’s Industrial Zones

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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.

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Foshan’s Changing Economy: Opportunities for Foreign Investors

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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.
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China to Develop Hebei’s Xiongan as Rival to Shenzhen and Pudong

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CDE Op-Ed Commentary

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.

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