China's tax laws are complex and numerous, and the implementation of policies may vary in detail from region to region. In addition to fiscal laws and regulations, new tax policy patches are regularly issued by Chinese government agencies at all levels.
Common challenges foreign investors face when setting up subsidiaries and branch plants in China are a lack of understanding or a poor understanding of Chinese tax laws. Insufficient attention to Chinese tax compliance and lack of experience in dealing with international tax issues will pose tax risks for subsidiaries and branch plants in China.
Our tax teams in China and Germany, combined with the bdp's immanent decades of expertise in the field of taxation, can provide comprehensive "tax advisory services" and "tax planning solutions." This enables us to support our clients in compliance with Chinese tax laws and regulations and avoid and reduce tax risks. We offer customized tax services for clients from different countries and industries and respond to individual expectations accordingly.
The tax teams at bdp China and bdp Germany are very familiar with Chinese and German tax laws and practices and are able to provide comprehensive, multi-level, and professional tax consulting services according to the expectations of our clients.
Before deciding to set up a subsidiary in China, you may have a series of questions, such as what is the amount of the corporate income tax (CIT/EIT) and the value-added tax (VAT)? Are there any tax incentives in the city of investment? Is there a Double Taxation Agreement (DTA) between Germany and China to avoid double taxation? What is the withholding income tax (WIT) in cross-border transactions? What “tax planning” is available to reduce the Chinese tax burden in general and in particular the withholding income tax? What is the tax cost for a company using shareholder loan (foreign loan) financing? How can we control the permanent establishment (PE) risk? How to transfer profits from China and the related procedures? How to exit from China, if necessary? Should we sell assets, liquidate, or transfer equity?
The tax teams at bdp China and bdp Germany are very familiar with Chinese and German tax laws and practices and are able to provide comprehensive, multi-level, and professional tax consulting services according to the expectations of our clients. We speak three languages, Chinese, German and English, to ensure fluent communication and understanding at all levels. We currently serve more than 100 German, Austrian and Swiss companies from the automotive, manufacturing, chemical, energy, automation, machinery, medical, banking, and financial sectors.
Day-to-day Tax Consulting:
- Assisting clients in resolving tax issues encountered in their daily operations, including corporate income tax (CIT/EIT), value-added tax (VAT) and individual income tax (IIT), etc.
- Assisting clients in responding to and handling disputes and disagreements with tax authorities on specific tax matters
- Providing professional advice on tax-related matters
- Consulting on tax policies such as tax incentives, etc.
- Consulting on tax refunds such as individual income tax (IIT) refund and VAT export tax refund, etc.
- Assistance in drafting, reviewing, and revising tax-related provisions in relevant legal documents
International Tax Consulting:
- Advice on withholding income tax (WIT): providing professional advice on WIT on service fees, royalties, interest, and rentals received from China by non-resident enterprises under the new Double Taxation Agreement (DTA) between Germany and China
- Advice on permanent establishment (PE) tax risks
- Tax advice on financing, e.g., shareholder loan application (foreign loan)
- Support in the determination of tax liabilities of resident enterprises and non-resident enterprises
- Handling of relevant formalities related to foreign payments transactions under trade in services and other items such as taxation recordation and foreign bank payments
Other Tax Consulting:
- Cross-regional relocation-related tax matters
- Preparation for tax inspection
- Tax due diligence for buyers and sellers
Tax planning should occur before the production and operation of enterprises and investment and financial management activities. Enterprises often encounter the following problems when facing tax planning:
- Failure to distinguish the three concepts of tax evasion, tax avoidance, and tax saving
- Lack of experience in considering beforehand, during, and afterward
- Improper application of accounting policies and incomplete understanding of tax laws and regulations
The individual members of our bdp tax teams have a solid background in tax law and extensive practical experience in first-class law firms. Thanks to our many years of experience in supporting various German, Austrian, and Swiss companies, we have a deep understanding of our international clients' needs and often act as a bridge between the Chinese and the foreign side. Prior advice is an essential part of our tax planning services. It is also called “creative advice”, i.e., advice in advance, which differs from direct advice in that many errors can be avoided in advance. Especially during global crisis-exception situations (such as under COVID-19), forward-looking planning is complex, but it is all the more critical.
- Corporate income tax (CIT/EIT) and value-added tax (VAT) planning
- Individual income tax (IIT) planning
- Withholding income tax (WIT) planning in cross-border transactions between Germany and China
- Individual income tax (IIT) planning for foreign executives
- Tax planning for equity transfer
- Internal group tax planning
- Tax planning for financing arrangements
- Tax issues and planning related to M&A transactions
As your tax advisor, we manage your tax risks and interpret the latest tax policies.
We ensure that your subsidiaries and manufacturing companies in China meet the Chinese tax laws and local regulations requirements and submit tax returns and payments on time to avoid fines. At the same time, we can check compliance with tax laws to identify tax risks and offer solutions based on your specific expectations.
- Compliance review of tax returns and tax payments such as corporate income tax (CIT), value-added tax (VIT), individual income tax (IIT), customs duty, stamp duty, etc.
- Compliance review of tax-related matters such as withholding income tax for non-resident enterprises
- Compliance review of permanent establishment (PE) related tax
- Compliance review of shareholder loan contracts (foreign loan)
- Compliance review of service contracts between affiliated companies
- Tax, financial, and legal compliance review
- Tax health check service
German companies opening subsidiaries and branch plants in China also have to face tax compliance issues between China and Germany. The cross-border services and trading activities between the German parent company and its Chinese subsidiaries make them have to directly face the international taxation between China and Germany, especially the transfer pricing issues. Our transfer pricing teams at bdp China and Germany offer practical, easy-to-use transfer pricing solutions for clients in a wide range of industries and business situations.
- Filing of Related Party Transactions: Help you review and/or prepare “People’s Republic of China Enterprise Annual Reporting Forms for Related-Party Transactions" ("Reporting Forms for Related-Party Transactions“)
- Advance Pricing Arrangements (APA): Help you prepare and apply for APA and draft APA agreements
- Transfer Pricing Documents (TPD): Assist you in reviewing and/or preparing contemporaneous TPD
- Transfer pricing compliance and planning
- Transfer pricing risk assessment