SAT clarifies notification and taxation requirements of indirect disposal of equity interests

SAT clarifies notification and taxation requireme...

China alert - Issue 12, April 2011  

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 SAT clarifies notification and taxation requirements of indirect disposal of equity interests

In Announcement 24, the State Administration of Taxation (SAT) clarifies certain aspects of the rules on the direct and indirect disposal of Chinese equity interests by non-resident enterprises. This announcement gives further guidance on the timing of the realisation of capital gains from direct disposals, the meaning of open market acquisition and disposition of listed securities and the meaning of the effective tax burden on disposal of shares in offshore holding companies. Announcement 24 also simplifies the procedure for complying with the offshore indirect disposal rules. However, the announcement does not touch on the important question of what will constitute an abuse of the organisational structure by a foreign investor and the tax treaty implications of the offshore indirect disposal rules.

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