PE investors: recent off-shore tax developments
China Business Law Journal
China Business Law Journal
With the
recent focus on Irish tax treatments and investigation into the tax profile of
a well known high-tech corporation, reviewing tax structures has become a hot
topic. Nobody wants to pay more taxes than is legally
required. However, the line between tax avoidance and evasion remains
slim.
Private equity
investors frequently review tax planning when structuring a deal, and then move
on to the real business of ensuring/monitoring asset performance, trusting
external advisers to keep them updated on changes. However, this “build
and forget” model may not be as sound as many private equity investors
assume. When changes in tax enforcement patterns occur, legal ambiguity
and conflict of interest may delay warnings.
For private
equity investors into China, this issue needs to be reviewed in light of the
State Administration of Taxation’s (SAT)
recent issuance of its Opinion on
Implementing the Dividends Provision Under the Tax Arrangement Between Mainland
China and Hong Kong in Cases Involving Beneficial Ownership (Circular 165) and other pronouncements
made in the past few years.
Treaty shopping in Hong Kong
Treaty
Shopping is widespread and can be a legal tax mitigation method whereby a
taxable investor reviews tax treaties/laws among jurisdictions to find
favourable rates on taxable items such as withheld income or capital
gains. For example, a parent corporation domiciled in a tax haven (TopCo) may own a corporation in a
second country (OpCo). Any
dividend from OpCo to HoldCo are subject to withholding tax in the operating
jurisdiction at the normal rate for that jurisdiction, unless a tax treaty
between the two jurisdictions provides otherwise. If a favourable tax
treaty is not present, professional advisers often assist companies to mitigate
their tax exposure by inserting a holding company from a favourable tax treaty jurisdiction
into the structure.
The PRC has a
variety of current tax treaties with various jurisdictions. One of the
most popular is with Hong Kong, where tax rates on dividends are reduced from
10% (the applicable rate in the PRC) to 5% (a rate withheld prior to
distribution to the Hong Kong shareholders). However, if the ultimate
“beneficial owner” is determined to be outside of Hong Kong—making the Hong Kong entity effectively a shell—the treaty tax benefits are
not available.
Determining
what constitutes a beneficial owner under PRC tax law becomes an important issue
when structuring an offshore investment. These issues were first outlined in
the SAT’s Notice Concerning the Meaning
and Determination of ‘Beneficial Owner’ in Tax Treaties (Circular 601) and Announcement Concerning the Determination of Beneficial Owner Under Tax
Treaties (Announcement 30). Circular
601 stipulates that only beneficial owners can receive the benefit of a tax
treaty, generally outlines the definition of beneficial owner, and proposes
seven factors that would negatively impact such a
determination. Announcement 30 builds on that by clarifying that listed
holding companies, are beneficial owners, that having a legitimate business
purpose by itself was not enough (i.e.
the structure cannot be designed just to avoid tax) and that the seven factors
should be considered collectively in making an assessment on tax status.
Circular 165 seeks to clarify the definition of beneficial owner with
specific reference to the terms of the Hong Kong tax treaty with the PRC, by detailing
how to interpret several of the negative factors listed in Circular 601.
Regarding these factors, Circular 165 provides that:
- when
determining the applicability of the tax treaty to a Hong Kong entity, the
local SAT bureau should review relevant materials regarding i) the
entity’s profit distribution situation (e.g. does it distribute profits and to what degree are
those prefixed) and (ii) degree of control by its non-Hong Kong parent
company, all as evidenced by its articles of association, relevant
agreements and other corporate documents;
- investment
companies with merely one project will not necessarily be disqualified
from receiving the benefit of the tax treaty, but must be carefully
reviewed in the context of the other factors;
- the
assets of the Hong Kong entity should be analysed in comparison to the
income of the entity, and assets should not be considered registered
capital;
- the
employees’ responsibilities and substance of work should be examined,
rather than the number of staff; and
- since
Hong Kong employs a territorial system of taxation, and the PRC government
has seen fit to enter into a tax treaty with Hong Kong, the fact that Hong
Kong’s tax rate is low should not be the key factor.
Circular 165
also reiterates the language of Announcement 30 regarding it being a collective
determination based on a review of all of the factors, with no one factor
disqualifying the applicant.
Anti-treaty shopping measures
Circular 165
should be considered a shot across the bow of Hong Kong entities claiming
beneficial ownership status of the PRC/Hong Kong tax treaty. Circular 165
was issued after consultation with the Hong Kong tax authorities and after some
SAT-conducted studies of the actual practices in Hong Kong. The PRC has issued
various other “anti-treaty shopping” measures through statements regarding the
enforcement of tax treaties and renegotiating existing tax treaties.
Furthermore,
private equity investors who avail themselves of the beneficial owner definition
under a tax treaty should not assume that external accounting firms will provide
the necessary oversight and warning. For auditors, there may be a conflict
of interest. After setting up or signing off on a structure, changes in
interpretation or enforcement might lead to difficult discussions regarding
restructuring or booking more withholding. Also, as an application for
treatment as a beneficial owner under a tax treaty must be filed each time a
dividend is issued, and the continued applicability of the treatment re-examined,
there is a chance that, after such a reinterpretation or change of enforcement,
the SAT will determine that the entity is disqualified. In such cases,
authorities have the ability to retroactively seek taxes not previously paid on
dividends that were previously allowed, and assess interest penalties on such
‘late’ payments.
Simon Luk is a partner and chairman of Asia
practice at Winston & Strawn in Hong Kong. He can be contacted on +852 2292
2000 or by email at sluk@winston.com
Mark Jacobsen is a registered foreign lawyer (California, USA) at Winston & Strawn in Hong Kong. He can be contacted on +852 2292 2000 or by email at mjacobsen@winston.com
私募股权投资人：离岸税务最新动态
私募股权（PE）投资人在设计交易结构时会经常审核评估税务筹划方案，之后再开始真正的商业事务——确保/监控资产运营状况，并依赖外部顾问随时报告资产变化情况。然而，这种“确立后即放在一边不闻不问”的模式，可能并不像很多PE投资人设想的那样可靠。当税务执法模式发生改变时，人们可能会因法律自身规定的模糊性和利益冲突得不到及时地警示。
对于来中国投资的PE投资人来说，考虑这个问题时要参考《国家税务总局关于湖北等省市国家税务局执行内地与香港税收安排股息条款涉及受益所有人案例的处理意见》（税总函〔2013年〕165号处理意见）及最近几年颁布的其他公告。
香港套用税收协定的情况
套用税收协定（Treaty Shopping）的做法广泛存在，其可以作为一种合法减轻税负的手段：投资人纳税人可以查阅相关法域之间签订的税收协定/法律，从中找出对自己有利的所得税或资本利得税等税目的税率，以合法降低税负。例如，住所地在一个“纳税天堂”的母公司（控股公司）可能拥有住所地在其他国家的一个公司（子公司）的所有权。子公司派发给控股公司的所有股息都必须按照子公司运营地所属法域规定的正常税率缴纳预提税，除非两法域间的税收协定另有规定。如果两法域间不存在有利的税收协定，为帮助公司降低税收风险，专业咨询顾问通常会在公司结构中加入一级控股公司结构，且该控股公司的所属法域与相关法域签订有有利的税收协定。
中国内地与多个法域签有有效的税收协定，其中最常见的是与香港特区签订的税收协定。根据该协定，股息的税率从中国内地当前适用的10%降至5%（派发给香港股东之前的代扣税率）。然而，如果最终受益所有人被认定不在香港的，即香港公司其实是壳公司的，则不得享受税收协定规定的优惠待遇。
在设计离岸投资交易结构时，确定怎样才构成中国内地税法定义的“受益所有人”成为一个重要问题。这一问题最先在《国家税务总局关于如何理解和认定税收协定中“受益所有人”的通知》（国税函〔2009〕601号通知）和《国家税务总局关于认定税收协定中“受益所有人”的公告》（国家税务总局公告2012年第30号公告）中有所阐述。国税函〔2009〕601号通知规定了只有“受益所有人”才能享受税收协定的待遇，并给出了“受益所有人”的大致定义，和提出了7项不利于申请人“受益所有人”身份认定的因素。国家税务总局公告2012年第30号公告在该通知的基础上进一步澄清：上市控股公司本身具有合法的商业目的还不足以被认定为“受益所有人”，即该结构的设计不得纯粹为了避税；以及在评估纳税身份时，应综合考虑国税函〔2009〕601号通知规定的7项因素。
税总函〔2013年〕165号处理意见详细解释了国税函〔2009〕601号通知列出的几项不利因素，进一步明确了“受益所有人”的定义，并具体提到了香港与内地的税收协定的规定。
税总函〔2013年〕165号处理意见对该等因素的规定如下：
·
在确定税收协定是否适用于香港实体时，地方国税局应审查以下相关材料：(i) 该实体的利润分配情形 （比如是否分配利润，以及预提比重等）以及(ii)其非香港居民母公司对其的控制程度，上述情况的证明文件包括企业章程、相关合同和其他公司文件；
·
为单个项目所设立的投资公司并不必然没有资格享受税收协定的优惠待遇，但必须结合其他因素谨慎审查；
·
应分析香港实体的资产与其所得数额是否匹配，不应将“资产”等同于注册资本；
·
应当着重分析和审查人员的职责与工作实质，而不得仅依靠人员数量做出判断；及
·
由于香港实行的是来源地征税原则，且内地政府认为与香港特区达成税收协定是适当的，因此香港税率低这一事实不应作为不利于受益所有人身份判定的关键因素。
税总函〔2013年〕165号处理意见还重申了国家税务总局公告2012年第30号公告关于对所有因素综合考量作出决定的规定，不得仅凭一项因素判定申请人无资格享受税收协定的优惠待遇。
反协定套用办法
对于申请内地/香港税收协定“受益所有人”身份的香港实体而言，税总函〔2013年〕165号处理意见应被看作一个示警。在税总函〔2013年〕165号处理意见颁布之前，国税局与香港税务机关进行过磋商，并对香港的实际操作情况也进行了一些调研。内地还通过发表税收协定执法情况声明，以及重启现有税收协定的谈判，颁布了多个其他反协定套用办法。
此外，根据税收协定获得“受益所有人”身份的PE投资人不应当假定外部会计师事务所能够为其提供必要的监督与警示。审计师与此可能会有利益冲突。在确立或完成公司结构设计后，司法解释或执法情况发生变化的，可能会引发结构重组或者扣税更多的艰难谈判。还有，因为在每一次派发股息时都必须重新根据税收协定提出“受益所有人”身份认定申请，是否继续享受优惠待遇也要重新进行审查，因此在法律被重新解释或执法活动发生变化之后，国税总局有可能会做出不认定“受益所有人”身份的决定。在这种情况下，税务机关可以补征税款，并加收滞纳金。
