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China represents, at the moment, one of the most attractive investment markets. The country is a top world economy and those who are considering to register an investment fund in this country are advised to find out as many information as possible referring to the regulatory framework applicable to this type of vehicles. Our Chinese law firm can provide an in-depth presentation on the legislation regulating investment funds, including those referring to taxation, which is performed in a different manner than in the case of commercial companies.
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The term qualified investor, also referred to as accredited investor, is used to designate a businessman with a high level of sophistication and knowledge in the field of financial markets. Recently, the Chinese authorities have enacted new regulations referring to the taxation of qualified investment funds, performed following the rules stipulated under the Cai Shui 2015 No. 125 notice, issued by the Ministry of Finance, the State Administration of Taxation and the China Security Supervision Committee, applicable starting with 18th of December 2015.
The notice, on which our team of lawyers in China can provide legal advice, stipulates that Chinese residents involved in an investment fund are exempted from paying the individual income tax (the regulation is available until 17th of December 2018).
On the other hand, investors receiving income from an investment fund in Hong Kong are taxed at a rate of 20%. Still, such investment funds are exempted from paying the capital gains tax applicable to trading participation.
In China, foreign investors are allowed to directly invest in several retail funds, in the following conditions:
• the foreign investors have received a license from the China Securities Regulatory Commission to act as qualified foreign institutional investors;
• investment funds registered in Hong Kong, which invest on the Chinese market under the qualified foreign institutional investors programme.
Such investors are required to pay a withholding income tax applicable at the rate of 10% for their income deriving from an investment vehicle in China.
Businessmen interested in receiving further details on the taxation system applicable to Chinese investment funds are invited to contact our law firm in China.