Issue 177 • November 2017
From Dezan Shira & Associates
Managing China’s Financial System P.04
Why do Foreign Investors Think China’s Financial System is Complex?
P.09
Pre-investment Capital Planning for China’s Foreign Exchange Control
P.06
How to Manage Complexities within China’s Tax Regime
P.12
Transfer Pricing Regulations in China
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Introduction SABRINA ZHANG
Years 1992-2017
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Partner Dezan Shira & Associates Beijing Office
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Foreign investors often find China’s financial system to be one of the most difficult areas to navigate when establishing or growing their presence in the country. Navigating China’s tax system, and its complexities, requires time and commitment. That should not come as a surprise. The World Bank recently ranked China 130 out of 190
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jurisdictions for ease of paying taxes, for example. Overseas-based financial administration teams too often find that mastering the financial system in China is more complicated than in
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other jurisdictions. A complex bureaucracy and licensing regime, idiosyncratic features, strict capital controls, and frequent audits – as well as pronounced regional variance – all contribute to this complexity. These issues are borne of seemingly mundane day-to-day tasks, such as issuing invoices known as fapiao, as well as for more complex and strategically important issues, like profit repatriation and intercompany payments. In this issue of China Briefing Magazine, we look at the factors that make China’s financial system unique and complex, and identify steps foreign investors can take to overcome the resulting challenges. First, we look at the issues that most commonly disorient foreign investors. We then take a closer look at some of these complexities, and what businesses can do to manage them. Next, we discuss the importance of pre-investment capital planning in the context of tough foreign exchange controls, before examining the ever-maturing regulations for the transfer pricing system. This magazine is based on Dezan Shira & Associates’ 25 years of experience navigating the various iterations of China’s financial system, from the pre-1994 system to the current VATdriven system that was finalized in 2016. We hope this magazine helps you structure and optimize your business for growth in China and Asia.
Reference China Briefing and related titles are produced by Asia Briefing Ltd., a wholly owned subsidiary of Dezan Shira Group. Content is provided by Dezan Shira & Associates. No liability may be accepted for any of the contents of this publication. Readers are strongly advised to seek professional advice when actively looking to implement suggestions made within this publication. For queries regarding the content of this magazine, please contact: editor@asiabriefing.com All materials and contents © 2017 Asia Briefing Ltd. Asia Briefing Ltd., Unit 507, 5/F, Chinachem Golden Plaza 77 Mody Road, Tsim Sha Tsui East Kowloon, Hong Kong
With kind regards,
Sabrina Zhang
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Credits Publisher / Sabrina Zhang Managing Editor / Adam Pitman Editors / Qian Zhou, Zolzaya Erdenebileg, Alexander Chipman Koty Design / Kking Lu and Belén Rodríguez
Table of Contents
P.04
Why do Foreign Investors Think China’s Financial System is Complex?
P.06 ¥
How to Manage Complexities within China’s Tax Regime
P.09
Pre-investment Capital Planning for China’s Foreign Exchange Control
P.12
This Issue’s Topic
Managing China’s Financial System Online Resources from China Briefing China Deepens VAT Reform to Combat Financial Complexity Navigating China’s Foreign Exchange Currency Controls Transfer Pricing Investigation in China: Understanding the Latest Adjustments Tax, Accounting and Audit in China 2017 (9th Edition)
Transfer Pricing Regulations in China
P.15 Singapore Business and Dezan Shira & Associates
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Strategic Advisory & Commentary
Online Resources on Emerging Asia Regional Exposure to Foreign Exchange Risk An Overview of IFRS Adoption in ASEAN
Professional Services
Regulatory Framework & Updates
Tax, Accounting and Audit in India 2017-18 (3rd Edition) Tax, Accounting and Audit in Vietnam 2017-18 (3rd Edition)
Legal, Tax, Accounting News Cross Region Comparisons
Industry Studies
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China Briefing · Issue 177 · November 2017
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