The Taxman Cometh

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Everyone loves to “manage” their tax liability (some would say evade!), and many foreign companies in China have traditionally minimized their tax exposure by booking profits in tax-friendly places like Hong Kong. However, as the eye of the tax man focuses on foreign investors (as noted here), KPMG have recently issued an alert that is well worth a read.

The notice focuses on State Administration of Taxation plans to investigate foreign-invested enterprises “with a single manufacturing function” on behalf of a parent company, and which may be engaged in transfer pricing:

    Tax authorities set to audit non-profit-making production foreign-invested enterprises
    A new notice by the tax authorities forewarns of new scrutiny into foreign production enterprises that do not make profit or are making only marginal profit. This issue of China alert introduces the notice and its implications for foreign companies in China. [Click here for full article].

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