Conference on Cross-Strait Finance and Tax

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Date of Release: 2013/03/07

On March 7th 2013, the Conference on Cross-Strait Finance and Tax organized by PwC Taiwan took place in the Taiwan Academy of Banking and Finance, where over 150 people from banking and financial sectors gathered together to learn about topics including investment and tax regulations in Mainland China, the current status of RMB funds, and the development of Hong Kong’s RQFII.

PwC HK tax partner Jeremy Ngai indicated that foreign investors used to make investments through offshore special purpose vehicles and exit investments when reaping gains through indirect disposal methods. However, in accordance with current PRC tax regulations, foreign investors may be subject to corporate income tax on all their indirect disposal gains. Taiwanese investors are advised to develop an appropriate investment structure before investing in Mainland China to reduce tax risks.

PwC China tax partner Dan Yao stated that investors need to consider if they have permanent establishments in Mainland China no matter which types of investment are made. Financial institutions in Taiwan need to pay special attention to the fact that all investors with permanent establishments in China are subject to China’s corporate income tax at a standard rate of 25%, which will result in lower expected return on investment.

PwC Taiwan tax partner Richard Watanabe said that it is a subject which requires immediate consideration that financial institutions in Taiwan need to pay heed to financial regulations in China as well as to evaluate China’s increasingly complex tax system in all cases, including financial institutions on both sides setting up establishments in the other side of the Strait, Taiwan’s financial institutions purchasing real estate in China, and China lowering the RQFII threshold.

Richard also pointed out that Taiwan’s financial institutions should, from a vantage-point perspective, comprehensively examine the impact of different tax systems on two sides of the Taiwan Strait and the effective tax burdens incurred, and properly develop their business and operations framework in the Greater China area, to avoid operational and tax risks.