Inreased options for foreign investors – Limited Partnerships

Posted by Shi Zhiqun on December 15, 2009 under China Tax, Corporate Tax Planning | Be the First to Comment

The Chinese government will permit foreign investor’s to establish limited partnerships in China as of 1 March 2010. On 25 November 2009 the State Council issued Regulations on Foreign Enterprises and Individuals Establishing Partnership in China (the “Regulations”). The Regulations provide that both foreign enterprises and individuals can establish a limited partnership and that such enterprises can directly registered at the local Administration for Industry and Commerce without the need for approval from the Ministry of Commerce. Previously, local persons and organizations could establish a limited liability partnership in accordance with the Partnership Enterprise Law. Now the Regulations extend the benefits of using a partnership form to foreign investors. Limited liability partnerships can provide tax benefits to investors as no tax is applied at the partnership level, rather the partners are taxed directly on their portion of the partnership’s income. Traditionally, the forms of business organizations available to foreign invested business set up within the Chinese territory included joint ventures, WFOEs and representative offices. However, the introduction of this regulation provides an alternative for foreigners wishing to penetrate the Chinese market.

At Hwuason we are looking forward to the extra planning options that limited partnerships will provide for our clients.