China Clarifies and Expands the Taxation of Indirect Property Transfers Outside China


On February 3, 2015, the State Administration of Taxation of China (“SAT”) promulgated, effective immediately, the Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises (“Circular No. 7”). Circular No. 7 supersedes all previous SAT regulations regarding indirect property transfers by foreign investors (e.g., transfers of equity interests in Chinese companies through the transfer of a foreign holding company), including the well-known and controversial Notice on Strengthening the Administration of Enterprise Income Tax on Income from Transfers of Equity Interest by Non-Resident Enterprises (i.e., Circular No. 698).

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