Perspective
Apr. 9, 2013
US investors could see a tax bill from China
A U.S. investor with no residence in China that sells shares of a Cayman Islands company, which in turn holds shares in a Chinese subsidiary. Chinese law allows the Cayman company to be disregarded in certain circumstances. By Allan Marson
A U.S. investor with no residence in China that sells shares of a Cayman Islands company (which in turn holds shares in a Chinese subsidiary) may be subject to Chinese Enterprise Income Tax of 10 percent on its gain. Under Notice 698 (Guo Shui Han [2009] No. 698), the Cayman Islands company can be disregarded or looked through if its organizational form is considered abusive and without a reasonable commercial purpose. If it is disregarded,...
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