Eclaircissements sur les déclarations des transferts indirects de participations chinoises par des entreprises étrangères

Paris, 10 mai 2011 - Visualiser l'eAlerte

L'Administration fiscale chinoise avait publié en 2009 une circulaire (« 698 ») relative à la déclaration des transferts indirects de participations chinoises par des entreprises étrangères (i.e. Non-TRE transferor). Elle a imposé aux entreprises étrangères qui réaliseraient des cessions indirectes d'entreprises chinoises de les déclarer sous certaines conditions. C'est le cas par exemple d'une entreprise qui céderait sa filiale de Hong Kong propriétaire d'une participation en Chine. De nombreuses questions restent ouvertes, en particulier comment l’Administration chinoise apprécie la notion de l'existence de holding intermédiaire.

Afin de répondre aux nombreuses questions restées sans réponse,  l'Administration fiscale chinoise a publié une notice fiscale n° 24 (PN 24).  Cette notice fiscale n°24 est entrée en vigueur le 1er avril 2011.  
La présente Newsalert expose les points clés de la notice ainsi que nos observations sur cette dernière.  Dès lors, les entreprises françaises doivent être plus attentives à leurs transferts indirects de participations dans des entreprises chinoises afin d'éviter tout frottement fiscal en Chine.

Indirect equity transfers under PN 24

Scope of the reporting party, i.e. the Non-TRE transferor (effective controlling party)

PN 24 clarifies that the term "Non-TRE transferor (effective controlling party)" refers to all Non-TRE transferors that indirectly transferred equity of a Chinese Company.

Reporting of equity transfers for low-, or no-tax jurisdiction resident enterprises

According to Article 5 of Circular 698, an equity transfer in an overseas company that owns a Chinese Company should be reported to the Chinese company's local-level tax bureau within 30 days if:

• the overseas company is located in a jurisdiction whose effective tax rate is less than 12.5%, or
• offshore income derived by the jurisdiction's tax resident enterprises is not taxed.

PN 24 clarifies that both profiles above refer to that jurisdiction's tax on equity transfer income. In other words, the jurisdiction:

• has an effective tax rate of less than 12.5% on equity transfer income; or
• does not tax foreign equity transfer income.

Procedural matters

• Where two or more Non-TRE transferors indirectly transfer the equity of a Chinese company simultaneously, only one of them is required to report it to the Chinese company’s local-level tax bureau.
• Where one Non-TRE transferor indirectly transfers the equity of many Chinese companies simultaneously,
  • The Non-TRE transferor may choose to report it to one of the Chinese companies’ local-level tax bureaus. That in-charge tax bureau will coordinate with other in-charge tax bureaus to determine whether to impose China Corporate Income Tax ("CIT") on the indirect equity transfer and report it to the SAT.
  • If China CIT is imposed, the Non-TRE transferor should file and pay CIT with each of the Chinese companies' respective tax bureaus.

Observations

• Since the release of Circular 698, some minority shareholder Non-TRE transferors have argued that they should not be subject to the reporting obligation because they were not the "effective controlling party". PN 24 clarifies that the "effective controlling party" includes all Non-TRE transferors indirectly transferring the Chinese company, regardless of the shareholding percentage.
• PN 24 also clarifies that the two reporting conditions above refer to the tax treatment of equity transfer income as opposed to income in general. This clarification however, raises questions such as:
  • Would a jurisdiction satisfy that profile if it taxes trading gains rather than the equity transfer gains of a capital nature?
  • Do jurisdictions with "participation exemption" regimes meet that profile?
• Allowing a Non-TRE transferor that has indirectly transferred many Chinese companies to choose one reporting location will reduce the administrative burden.
• China CIT cannot be imposed until the General Anti-avoidance Rules ("GAAR") are invoked to disregard the intermediate holding company. According to GAAR, the Chinese local-level tax bureau should obtain SAT approval before invoking GAAR and imposing China CIT.
• The SAT's efforts to address the uncertainty in Circular 698 are appreciated. However uncertainties remain:
  • How does a taxpayer ascertain "substance" and "reasonable commercial purpose"?
  • When the intermediate holding company is disregarded, how does one determine the tax basis of the Chinese company's equity?
  • If the intermediate holding company is disregarded, could the Non-TRE transferor claim treaty protection under the tax treaty between China and the Non-TRE transferor's jurisdiction?
• Non-TRE transferors should assess the technical and practical merits of each indirect equity transfer to reduce potential tax exposures in China.

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