Shenyang case a good guide for avoiding double taxation in transfers

0
1772
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

An interesting indirect transfer case was recently reported in Tax Planning, one of the official journals of the SAT. In the Shenyang case, a Cayman seller (company F) transferred a Mauritius subsidiary (company C) to a BVI buyer (company P) on 30 June 2008. Company C held 26.3% of the listed shares of a Shenyang retail company, Listco, listed on the Shenzhen Stock Exchange. Company C, after being acquired by Company P, sold some of the shares of Listco in 2010.

During an investigation against Listco on dividend withholding tax, the Shenyang State Tax Bureau (SSTB) discovered the 2008 indirect transfer and started a Notice 698 investigation.

Non-resident enterprises with no establishment in China must pay tax on China-sourced income.
Non-resident enterprises with no establishment in China must pay tax on China-sourced income.

Company F argued that Notice 698 should not apply because the indirect transfer had reasonable commercial purpose and company C did not abuse the corporate form. Specifically, company F argued that: (1) company C was established in a jurisdiction with a well established legal system that protects group investments; (2) company C had functions that included collecting information and analysing investment projects; and (3) company C assumed the risks in holding Listco’s restricted shares for 30 months before the indirect transfer.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link