China Provides Further Guidance for Chinese Outbound Investment

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On 10 June 2010, the China State Administration of Taxation (SAT) issued a tax circular, Opinion Regarding Improvement of the Tax Service and Administration for Chinese Enterprises “Going Outbound”, Guo Shui Fa [2010] No. 59 (Circular No. 59). The circular addresses tax developments pertaining to outbound investment by Chinese enterprises as well as suggestions for local tax authorities to improve tax administration and service. The circular also provides guidance with respect to anticipated legislation and administrative developments relating to outbound investments, including potential reporting compliance requirements and anti-abuse provisions.

Background

One of the most significant strategic decisions made by China’s central government, the State Council, has been to encourage Chinese enterprises to invest outward (or “go outbound”) and make use of overseas resources, markets and advanced technologies to facilitate development of China's domestic economy.

According to a report from the Seventeenth National Congress of the Communist Party, China is committed to the opening-up policy and will continue to encourage outbound investment in combination with its policy of attracting foreign investment.

A national tax meeting was convened by the SAT to develop ideas to support Chinese outbound investment strategy. In order to better support Chinese enterprises going outbound (outbound enterprises), the SAT issued Circular No. 59 to improve tax administration and governmental services for outbound enterprises.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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