Taxing Rmb funds with foreign-invested limited partnerships
With new measures allowing overseas private equity players to adopt a new structure for its Rmb funds, authorities have yet to concretely define certain terms of a partnership in order to set a conclusive tax rate
Issue: July/August 2010
Keywords (click to search):
Rmb funds
foreign invested limited partnership
tax
JunZeJun
The Measures for the Administration of the Establishment of Partnerships in China by Foreign Enterprises or Individuals (外国企业或者个人在中国境内设立合伙企业管理办法) (FIP measures) became effective on March 1 2010. The FIP measures pave the way for foreign private equity sponsors and investors who organise Rmb funds in China to adopt a foreign-invested limited partnership (FILP) structure. Rmb funds using the FILP structure have been recently set up in certain local regions in China and it is important to examine the income tax treatment of these funds’ overseas investors.
1. FILP as taxpayer
In 2008, the Ministry of Finance (Mof) and the State Administration of Taxation (Sat) jointly issued the Notice on the Income Tax of a Partner of a Partnership Enterprise (Cai Shui [2008] No.159) (Circular 159). Circular 159 provides that each partner (enterprise or natural person) of a domestic partnership enterprise shall be a taxpayer in China. If...
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