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Beijing is taking a harder line on offshore structures and the tax advantages they offer

By George W Russell

In the 1920s, the British writer W Somerset Maugham reputedly described Monte Carlo, in the emerging tax haven of Monaco, as a “sunny place for shady people”. Some 90 years later, the phrase still encapsulates common attitudes towards offshore legal jurisdictions. Nowhere have such attitudes emerged more dramatically than among regulators in China in the recent past.

Massive investment into and out of China has been accompanied by a proliferation of structures involving special purpose vehicles (SPVs) and intermediate holding companies located beyond China’s borders, especially in Singapore, the British Virgin Islands (BVI), the Cayman Islands and Mauritius.

Chinese investors, and investors into China, have used offshore structures for a variety of purposes. “Broadly speaking, the benefits and reasons why investors use offshore jurisdictions are tax incentives, fast licensing, maximum flexibility, confidentiality and minimal regulatory oversight,” says Arti Sangar, a partner at Miami-based Diaz Reus & Targ in Dubai.

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