Convertible Yuan
June 29, 2009 by Chinatex
Old Chinatex had a convertible once. It was a Jeep CJ-7 and I used to ride around without a top and I thought i was cool. So I’m not sure about this article about the Yuan (Chinese money) being a convertible, but, I remember telling y’all that this was coming soon and it would make it much easier to do business in China, while avoiding high foreign corporate tax rates – if your business is structured properly. Now that’s the important part. We’ve been advising our clients on proper corporate structure in Asia-Pac and the Pearl River Delta for years. If you’d like to know more about convertibles or proper corporate structure and tax avoidance and cool stuff like that, give Old Chinatex a call. Check out this article for more. Yeeha!! Chinatex
Deal signed on yuan settlement |
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Chinese currency may be used for cross-border trade from next month |
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Maria Chan, Neil Gough and Enoch Yiu |
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Trade between Hong Kong and the mainland could be settled in yuan from as early as next month after the two sides yesterday signed an agreement expected to help further internationalise the Chinese currency. The memorandum of understanding between People’s Bank of China governor Zhou Xiaochuan and Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong will allow companies on both sides of the border to settle trade in yuan as well as other currencies. That move will boost Hong Kong’s ambitions to become a yuan offshore centre and reflects Beijing’s ultimate desire to make the currency freely convertible. Bilateral trade between Hong Kong and the mainland totalled an estimated US$203 billion last year. Chief Executive Donald Tsang Yam-kuen said the agreement was a milestone in the city’s role as an international financial centre. Financial Secretary John Tsang Chun-wah said the scheme would provide Hong Kong enterprises with more flexibility in their operations. Mr Zhou said it was more important for countries in the Asia region to have closer co-operation since the global financial turmoil began. “Enhancing co-operation in trade and finance between the mainland and Hong Kong is a way to cope with the global financial crisis,” he said, adding that it could also help firms reduce exchange risks and lower costs. Mr Yam said he hoped yuan settlement could begin in July. Banks in Hong Kong could also provide trade finance, a form of lending, to customers under the scheme. Hong Kong yuan deposits stood at 53 billion (HK$60.2 billion) at the end of May. Hong Kong banks have been allowed to offer yuan deposit, remittance, exchange and credit card services since 2004 but have not been allowed to provide yuan lending. The PBOC and HKMA in January agreed on a 200 billion yuan currency swap agreement to bolster short-term local liquidity of the yuan. The State Council said early in April that it would allow traders in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan to settle their cross-border business in yuan. In December, the council said Hong Kong and Macau would be permitted to use yuan for the settlement of trade with designated partners in Guangdong and the Yangtze River Delta under a pilot scheme. Mr Zhou said how many mainland enterprises participated in the scheme would depend on the governments of the two delta regions but “there will be at least a few hundred”. Mr Yam said all Hong Kong exporters and importers could settle trade with their designated mainland counterparts, but the scheme could only be implemented after the PBOC issued administrative guidelines. He said companies from other countries could also use Hong Kong as a platform to settle their trade with their mainland trading partners. Goldman Sachs said the move reflected the mainland’s efforts to further internationalise the yuan. “Our long-standing view has been that the increase in yuan circulation would pave the way towards the ultimate endgame of” the Hong Kong dollar being linked with the yuan, the brokerage said in a report. Mr Zhou stopped in Hong Kong on his way to Beijing after a forum in Switzerland where he also held talks with his Brazilian counterpart that could pave the way for the two sides to recognise each other’s currency. |
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Intellectual Property
June 17, 2009 by Chinatex
You would think that the term “Intellectual Property” would be significant enough to cause businesses to really try and protect it. I mean it is a fairly significant word just by itself. But maybe it is just an oxymoron like military intelligence or maybe it just causes moronic behavior or inaction – which is worse. Consider that for many companies, IP is one of their main assets. While Old Chinatex doesn’t know a whole lot about GAAP and FASB and other complicated bean counter stuff, I do know that if you want to sell your company, raise money, get loans, or go public you can count IP in your valuation and it is even better if it is real and protected and enforceable IP. So, Chinatex wonders why companies that operate outside of the seemingly safe confines of U.S. IP law and legal system don’t do more to protect their IP? Anyway, this issue has come up as I receive more enquiries from foreign companies asking for help protecting and enforcing IP rights. Here is the bottom line:
- IP in China is governed by the State Intellectual Property Office (SIPO)
- China is a first to file jurisdiction. This means the first one to file and have the application approved is the IP holder.
- China does not recognize IP rights from other jurisdictions such as the U.S., the EU and those filed under the Madrid Protocol.
- Patents and Trademarks are valid for 10 year periods and are renewable.
- Intellectual Property rights must be registered with the SIPO and other government organizations each year in order to remain effective and to increase the chance of enforcement.
- Damages in litigation are not based upon precedent but on judges discretion.
Well, there’s a little more to it than that, but hopefully you get the point. If you don’t file you don’t have any rights and you don’t have any intellect or intellectual property! If you are thinking about protecting and/or enforcing your IP, we can help you. If you are thinking about bringing your products to the China market, you better darn sure protect your IP before you start showing your products and ideas to factories and partners and distributors.
As always yeeha!!! Chinatex
Tax man cometh part II
June 3, 2009 by Chinatex
This just in from the U.S. Internal Revenue Service. Now would be a good time to follow Halliburton and move your company completely out of the U.S. to a place like Hong Kong or Macau. With a 14 trillion dollar national debt, doesn’t look like the taxman is going to let this issue slide and with unemployment at about 12% looks like a lot of people lining up to be tax henchmen. As always, Yeeha!!! Chinatax
IRS Commish Details Global Tax Enforcement Plans
WASHINGTON, D.C. (JUNE 2, 2009)
IRS Commissioner Douglas Shulman laid out the Obama administration’s plans for cracking down on offshore tax evasion, including extending the statute of limitations.
In a speech before the Organization for Economic Cooperation and Development, Shulman noted that the Obama administration has asked Congress to extend the statute of limitations on international tax enforcement from three to six years “after the taxpayer submits required information.”
“These cases are often highly complex and require additional time to resolve beyond the current three-year statute,” said Shulman.
He pointed out that the IRS has been faced with a growing number of foreign tax credits claimed on both individual and business tax returns. Between 2000 and 2007, the volume of foreign tax credits claimed by individuals rose “an eye-popping 133 percent,” Shulman noted, while the volume claimed by U.S. businesses increased 71 percent.
The problem has become a major concern for the IRS. “In the U.S., international tax issues have moved to center stage,” said Shulman. “It is a major priority for President Obama, and last month he outlined a bold suite of international legislative proposals. At the same time, the IRS has been stepping up enforcement measures in this area. We are aggressively tracking down tax evaders hiding their wealth overseas and the promoters who aid and abet these schemes. We are steadily increasing the pressure on offshore financial institutions that facilitate concealment of taxable income by U.S. citizens.”
To deal with the problem, he is hiring more enforcement personnel at the IRS. “For too many years, the IRS was in the position of not having the resources to go toe to toe with taxpayers operating in the international markets,” said Shulman. “They had deep pockets and could hire a cadre of legal and tax experts. Some observers said we were outmanned and outgunned. To meet this challenge, we must keep existing personnel current on emerging techniques and hire top examiners, lawyers, economists, special agents and financial specialists who can unravel the sophisticated and complex world of international tax issues.”
Shulman noted that the stepped-up enforcement efforts had led to a victory in last week’s Appeals Court ruling against chip maker Xilinx, which had sought to shift research and development costs to its Irish subsidiary in a transfer-pricing arrangement (see IRS Wins Transfer Pricing Tax Dispute Against Chip Maker).
Shulman plans to require more enforcement of information-reporting requirements to catch tax evaders.
“We know that those taxpayers who have their taxes withheld and reported to the IRS through third parties are the most compliant,” he said. “On the other end of the scale, those operating without withholding and reporting are the least compliant. What’s the lesson here? Simple: Better information reporting can boost compliance, and we need more of it from foreign countries and foreign financial institutions.”
Shulman also said he wants to boost the Qualified Intermediary program, which gives the IRS “an important line of sight into the activities of U.S. taxpayers at foreign banks and financial institutions.”
President Obama’s fiscal 2010 budget includes proposed changes to the QI program to provide increased oversight of taxpayers’ activities at foreign banks, as well as additional information reporting on cross-border wire transfers. The proposals would increase tax withholding in certain situations, strengthen penalties, and shift the burden of proof to make it harder for offshore account-holders to evade U.S. taxes, Shulman added. The proposals would also create disincentives for U.S. taxpayers who chose to do business with a financial institution that has chosen not to be a QI.
On the business tax enforcement side, Shulman acknowledged that many companies adhere to the international tax laws and try hard to comply, but he warned against those that try to take advantage of loopholes.
“Let me be clear,” he said. “There are plenty of international tax strategies that are perfectly legal. And many corporations and their legal and tax advisors are genuinely trying to comply with the myriad of international tax laws. While we won’t always agree about what the law is, or how it applies in particular cases, we recognize that many businesses are trying to get it right. However, we also know that some businesses use the complexity of the Tax Code and the international capital markets to push the envelope too far. That is where we have issues, and where we will continue to focus.”
Particular areas of concern include transfer pricing, financial instruments, hybrid structures and withholding taxes. The administration is also cracking down on reforming the tax deferral rules in which U.S. multinational corporations that invest overseas can take immediate deductions on their U.S. tax returns for certain expenses but defer paying U.S. taxes on the income, Shulman noted.
Another area of corporate tax reform proposed by the administration is to change the so-called “check-the-box” rules that can make foreign subsidiaries “disappear” for U.S. tax purposes, according to Shulman.
60 years in photographs
June 1, 2009 by Chinatex
Howdy y’all. Not a lot of news except for the bad stuff coming out of the U.S. economy. I came across this interesting collection of photo’s put out by the China Daily. It’s pretty cool to see the history of China in photographs. Check it out: http://www.chinadaily.com.cn/china/2009-06/02/content_7961398.htm
As always, yeeha! Chinatex
