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CMS Tax Implications in China of restructuring a group of companies

28/01/2010

Restructuring a group of companies may be effected through the transfer of the shares (or participations) in a Chinese subsidiary to a parent or sister company (“direct transfer”) or the transfer of the shares of a company located outside China that holds the shares (or participations) of a Chinese subsidiary (“indirect transfer”). These alternatives are regulated differently under Chinese law. The most recent notable change is that the rule which, prior to 2008, permitted the transfer of shares within a group of foreign invested companies at nominal value (and therefore without incurring capital gain tax) is no longer valid. To date, there are no regulations permitting financial and tax consolidation in China.

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Portrait ofNicolas Zhu
Nicolas Zhu
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Shanghai