China Practice — Tax

Orrick's China lawyers have extensive experience in the field of Chinese tax law. The group's involvement in the PRC's development of tax policy and legislation dates back to 1979 when, as part of the Coudert Brother law firm, the group began hosting a series of biannual seminars on foreign tax systems for PRC government officials. Tax aspects of investments and operations in China, and of cross-border holding structures and transactions, are areas in which Orrick's China Practice Group has broad expertise and experience.

Recent tax-related publications by group members include:

• editing the Bureau of National Affairs' Tax Portfolio on Business Operations in China
• serving as the general editor of Commerce Clearing House's Guide to PRC Tax and Customs Law
• authoring the recent book Shareholder Agreements and Joint Ventures in the People's Republic of China
• publishing the first comparative analysis of how the China Hong Kong tax treaty-type "arrangement" impacts on the structure of foreign investments in China, in the October 2006 issue of Asian Counsel magazine
• continuing a multi-year series of articles on royalty duty-risks and precautions in "China Customs Valuation: Software Exempted; E-Content and IP Royalties Still at Risk," in the September 2006 issue of China Law & Practice

Orrick's tax experience focuses on assisting clients with taxation of a wide range of corporate transactions and other tax matters, such as:

• Foreign Direct Investment: Assist foreign investors design, establish and operate tax-efficient holding and operating structures for their China investments, including offshore and (wholly and partially foreign-owned) domestic 'China Holding Companies.'
• Mergers and Acquisitions: Assist foreign strategic buyers and venture capitalists on China tax aspects of mergers and acquisitions, from due diligence, through acquisition deal structures and post-acquisition tax integrations, to exit strategies.
• Financial Services: Advise on tax aspects of innovative financial products and transactions. Our practitioners have participated in two landmark transactions in China's financial industry: the first foreign investment project in China's Non-performing Loan (NPL) market and one of the first pilot asset securitization projects in China.
• Outward Investment and IPOs: Assist Chinese domestic companies' tax aspects of their restructuring relating to securities offerings and outward investment.
• Indirect Tax Planning: Advise on indirect tax planning for international and domestic trading activities, including value-added tax, business tax and customs duty.
• Supply Chains: Advise transfer pricing and other aspects of tax-efficient supply chain management.
• Employees: Advise on employee taxation including employee share options plans.

Recent Representative Matters

• Quaker Chemical Corporation, a worldwide developer and marketer of chemical specialty products, in connection with its tax efficient purchase of the interest of its joint venture partner in China. Quaker used dividends to pay a portion of the purchase price, allowing the Chinese seller, who had already paid tax on such profits, to obtain a rebate of a portion of the tax paid. Quaker was able to reinvest the dividends declared in a new, high-tech entity in China, enabling Quaker to receive a 100% rebate of the tax paid on the dividends reinvested.
• One of the world's largest electronics manufacturers on its purchase of equity interest from the Chinese joint venture partner and provided extensive advice on all aspects of the transfer including approval procedures, foreign exchange issues, tax implications, state assets evaluation and guarantee for the joint venture's debts.
• Master Replicas, an industry leader in the manufacture and marketing of movie and television prop replicas, on the tax aspects of its combination with Hong Kong and U.K. companies.
• Numerous multinational companies, private equity and venture capitalist on tax due diligence and tax structuring of their acquisitions and joint ventures in China.

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