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Clifford Chance

Clifford Chance


China issues new guidelines on the taxation of the indirect offshore transfer of PRC assets

27 February 2015

The State Administration of Taxation of the PRC (SAT) has issued new guidelines on 3 February 2015 that will significantly impact offshore transactions involving substantive Chinese assets.
Compared to the old rules under Circular 698, the new guidelines, generally referred to as Announcement 7, trigger the imposition of capital gains tax on a wider range of offshore indirect transfers. More importantly, it imposes clear withholding obligations on the buyer and introduces an associated penalty mechanism affecting both the seller and the buyer.
This briefing studies these changes and further discusses the potential retroactive effect Announcement 7 has on historic transactions. Parties to past, pending and future offshore transactions that involve substantive Chinese assets should be aware of these important developments and any subsequent clarifications from SAT.

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