STEP BeNeLux Investigates Investment Structures for China and Asia

Categories: STEP News

STEP Benelux held a business luncheon today at the Cercle Munster with Kristina Koehler-Coluccia as special guest, talking on the topic of Holding Jurisdictions for Investments in China.

She explained that she has grown up in China and lives in Shanghai, active in helping organisations set up in China, specifically international companies and inward investment into Asia, not just China.

Her clients are corporate, individuals and private equity firms. They look for staff to manage their operations in Asia; many of these could be expatriate, yet different tax regulations apply to different nationalities. Many companies in Asia now have multi-cultural boards, half local and half international. The issue of the business plan is important as tax structures can be examined after this is clear.

While many companies look for profits from day 1, it is not that simple; many companies now operational in China make their profits overseas, not in China itself. Entry plans are crucial too, as related regulations change almost on a daily basis.

She said that last December she came to Luxembourg where she heard Singapore being mentioned more than Hong Kong, with China not mentioned much at all. As a result, she compared Hong Kong, Singapore and China in her presentation.

Hong Kong’s status for offshore companies is about to dry up as a result of 25 new bye-laws coming into effect which will mean than many (large) companies will need to change their structures. She also discussed the requirements for having local directors and shareholders in the three jurisdictions. Winding down a company in China takes 24 months. VAT in China is complicated, with the type and size of company factors in determining the rate to be applied.

Shanghai is about to open a new free-trade zone which is tipped to become the new and largest financial centre in Asia, with lower taxes (15%) than Singapore (17%) and Hong Kong (16.5%) as well as China (25%); this is a pilot project for three years which could result in it being applied to the whole country afterwards. However, there is nothing to stop the Chinese authorities changing tax rates, etc., which is not what inward investment companies want to hear.

Investment structuring is very important, with China becoming very transparent; they now frown on entities from certain juridsictions including the Seychelles and others who have traditional offshore models.

On the issue of outbound investment from China, she explained that Chinese companies do not traditionally engage tax experts in China and she encouraged companies advising Chinese companies exploring outbound investments, to negotiate up-front payment and implement regular invoicing.

Photo by Geoff Thomposn (L-R): Fabio Gasperoni (STEP BeNeLux); Kristina Koehler-Coluccia (Klako Group); Louise Benjamin (STEP BeNeLux).

Author: STEP BeNeLux