China: Private securities fund management, opportunities for foreign investors

China: Private securities fund management

A list of “questions and answers” (Q&As) concerning private securities fund registration was issued in late June 2016 by the Asset Management Association of China. Of the Q&As on this list, Q&A 10 describes the rules for allowing qualified wholly foreign-owned enterprises and Sino-foreign joint venture enterprises to establish private securities fund management institutions to conduct private securities fund management business—including investments in securities on the secondary market.

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Q&A 10 also provides specific rules for the entry conditions and procedure. Q&A 10 is based on China’s commitment to open up the fund industry to foreign participation which, previously, has limited foreign shareholding of the securities investment fund management company to 49%.

Tax implications

There are tax considerations for foreign investors to keep in mind in planning an asset management business in China. For example, there are tax implications on asset managers and on different types of investment fund structures. Also, foreign invested managers would need to consider the indirect tax implications of the investments funds, keeping in mind the value added tax (VAT) reform for the financial services sector was launched in May 2016. Transfer pricing rules for cross-border transactions also can apply.

 

Read a July 2016 report [PDF 395 KB] prepared by the KPMG member firm in China: Private securities fund management businesses are now open for foreign investors: Access and opportunity 

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