|China Eases Taxes for Foreign Companies|
China will cut taxes on the profits that foreign companies take out of the country by up to 50 per cent after rules on withholding taxes were relaxed to encourage more overseas investment. The move will also apply to dividends paid by Chinese listed companies to foreign shareholders through the Qualified Foreign Institutional Investor scheme. In both cases, the lower tax rates will apply only to companies and shareholders based in countries, such as the UK, that have double taxation agreements with China.
The changes could save companies billions of dollars worth of tax payments, which might initially lead them to repatriate more profits, but ultimately should provide incentives for more investments, according to experts at KPMG. US companies, however, cannot benefit as they are taxed on a global basis by US authorities.
The relaxation of the rules comes after almost a year of consultation between Chinese tax authorities, tax experts and companies. The effect will be to make it much simpler and quicker to cut withholding taxes paid on dividends from 10 per cent to as little as 5 per cent, depending on the owner’s country of residence. Any company listed and resident in a country with a tax treaty with China will now automatically qualify for the relief on dividends from Chinese operations or wholly owned subsidiaries, according to two regional governments.
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Published on our website on August 13, 2012