South China

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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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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The Nansha New Area Explained – Guangdong Free Trade Zone

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Nansha new areaBy Omar Khan
International Business Advisory
Dezan Shira & Associates

Found at the central divergence of the Pearl River Delta, the Nansha New Area is one of three pre-existing development zones that came together to form the current Guangdong Free Trade Zone. With various export shipping routes and financial hub Hong Kong within the vicinity, it is worthwhile exploring the various facets of the Nansha New Area.

In this article, we look at some of the features outlining this development zone including a basic overview, major services, and finally, the objectives and mandates that the Nansha New Area intends to accomplish. Not only does this area have great potential to serve businesses within its proximity, but also has future potential to render itself a focal point of the 21st Century Maritime Silk Road.

Basics

Only 38 and 41 nautical miles away from Hong Kong and Macau, respectively, the Nansha New Area is positioned to be Guangzhou’s (and Guangdong’s) main gateway to sea-based trade. A vital transportation hub linking the above locations enables it to connect the PRD region as a whole. The actual Nansha area has a resident population of 720,000 within its 803 square kilometer space, with 60 square kilometers a part of the Guangdong Free Trade Zone. Nansha developed well in 2014 – area-wide GDP exceeded RMB 100 billion; industrial output value above designated scale reached RMB 270.6 billion, and the industrial output value of 50 key industrial enterprises grew by 14.53 percent.

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Zhongshan: China’s Upgrading Manufacturing Base

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Zhongshan city mapBy Rainy Yao

China’s Zhongshan city, named after the nation’s famous revolutionary and political leader Dr. Sun Yat-sen (Sun Zhongshan), is located in the southern part of Guangdong Province and a stone’s throw away from Macau and Hong Kong. Given its geographic advantage, the city serves as an international trading hub and one of the biggest manufacturing bases in China. Though being a small prefecture-level city in Guangdong, Zhongshan’s economy ranks fifth in the province and its industrial production growth has ranked first in the Pearl River Delta for three years in a row.

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