Finance

Capitalizing Structures And Profit Repatriation

A China Foreign Investment Enterprise may be capitalized in cash or in kind such as equipment, technology, license rights, loans or any combination of these. The capital may be injected upfront or in installments as per the Chinese company laws within 2 years.

Within the set dept/equity rules an FIE may borrow from its foreign investors or it may also borrow from banks inside or outside China. These capital contributions may be made in cash, including plant, machinery, technology, land use rights and intangible assets.

China has introduced a Unified Tax Law on 1.1.2008 with 25 percent profit tax rate and effective taxation planning and profit repatriation strategies are now needed in order to minimize the taxation burden in China.

Various capitalization, business formats and profit repatriation strategies have different tax, royalty and payment implications, and certain issues should be considered

• Sharing various costs and expenses of overseas group companies, including headquarters expenses, R&D fees and IPR registrations

• Paying royalties to overseas Group companies on China business

• Paying service fees to overseas Group companies

• Paying loan interest to overseas Group companies

• Distributing of dividends to the overseas holding company

How we can help:

To meet your business requirements, we provide these services:

•Recommend Effective Capitalizing, Funding Structures and Exit

• Technology-to-Equity Transactions to Minimize the China Risks

• Optimize Taxation Planning and related Taxation Treaties

• Advise on the Debt/equity Ratios and New Thin Capitalization Rules

• Withholding Tax Implications of Dividends and Loan Interests

• Build-in Appropriate Business Procedures to meet Approval and Registration Requirements

• Capital Verification and Valuation Conformation

• Advise on the Forex Remittance and usage of Local RMB Loans