Impuestos en china (inglés)

Fudan University – Fall Semester, 2008

“Legal and Tax Framework in China”

Alberto Fabio Gonzalez
C2008080251

Doing Business in China
Shanghai, China, 1st of December, 2008
It is of utmost importance for effective management to plan ahead of time. In the corporate world where business changes day by day, it is a must to know the best ways to operate and to market our products. Thegovernment in its intent to provide stability and legality brings forward a limitation for the uninformed and an opportunity for those who possess the knowledge: the consultant. If the legal frameworks were easy to understand and simple to comply, this limitation wouldn’t exist, therefore businessmen would have to dedicate less effort and resources looking for the best path for optimizing operationslegally and tax-wise, so more time could be dedicated to the core-business and business fundamentals such as marketing, finance, management and product research and development.
It is the scope of this essay to analyze the possible structures for foreigners to participate in the Chinese market and the implications of tax laws in order to assess the best possible option to achieve optimization ofresources, thus effective corporate performance.
Corporate-Legal Framework: Natural Persons and Legal Entities
In China as in many other countries (if not all), business can be conducted by legally empowered persons such as Natural Persons and Legal Entities. A Natural Person is every person that has a name, rights, and individuality. You and me are Natural Persons according to law. LegalEntities are those entities conformed by a group of other persons either natural or legal that act as if they were one composite individual. Examples of Legal Entities are companies, states, political parties, etc. For doing business the ones that are allowed would be the companies, which have many different sub-variations listed as following:
Company: The general name for a Legal Entity thatconducts business.
Cooperative: An entity in which natural persons work for a common goal. In this entity the profits and the ownership are shared proportionally to the degree of participation. Participation can be physical, intellectual or capital. It is fundamentally owned by the persons that work in it. There are other sub classifications of co-ops such as consumer co-op and producer co-op, whichrange in different procedural and taxation rules.
Limited Liability Company: Legal entity in which the owners are liable to the extent of the company’s equity.
Partnerships: Legal entity in which the owners can be liable further than the company’s equity.
Trusts: Arrangements in which either natural or legal persons can conduct business. A trust is a contract in which the parts incur obligationsfor a certain amount of time but it is not a type of legal entity.
Every one of the different types of entities is taxed differently from one another and is also required to comply with different legal rules. Selecting which one better satisfies your needs is very important for efficient corporate performance. Usually LLC is selected and thus the most common entity within business conductingentities.
The FIE: the Ways to Enter China
The Foreign Investment is a very important factor in the economic growth equation. The potential of foreign investment is vast. It ranges from being able to stimulate internal economy by allowing local businesses to have further client reach, to lifting people out of poverty. Other effects such as employment (by creation of new jobs), efficiency (by cuttingcosts), increase of standards of living (forcing the development of city infrastructure) are within the range of the before mentioned. This way, countries have always looked for and fought for this external “economic healthy vaccine”. It has been so sought for that policies and incentives created to attract FDI are really beneficial for those who provide it. This is why it is really attractive...