China Outbound Investment Guide 2015

China Outbound
Investment Guide
A fully bilingual guide published in

conjunction with |
:
LEX
Arthur Cox
Bezen & Partners
Cadwalader Wickersham & Taft
Freshfields Bruckhaus Deringer
Homburger
Kobre & Kim
Macchi di Cellere Gangemi
Nagashima Ohno & Tsunematsu
2015
SIXTH edition |
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Introduction |
Introduction |
Welcome to China Law & Practices 2015 China Outbound Investment Guide.
Editor
Katherine Jo (katherine.jo@chinalawandpractice.com)
+852 2842 6964
Translator
Susan Mok (susan.mok@euromoneyasia.com)
+852 2842 6924
Production manager
Andy Alcock (andy.alcock@euromoneyasia.com)
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Publisher
Peter Ollier
Published by
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EUROMONEY INSTITUTIONAL INVESTOR (JERSEY) LTD 2015
ISBN 978-962-936-226-3
Disclaimer
The material in this periodical does not constitute advice
and no liability is assumed in relation to it. The materials
referred to in this publication are publicly available. All information
contained herein was believed to be correct at the time of
publication in April 2015
The timing is impeccable, with officials flagging increased investment overseas, tweaking rules to
make the process easier and predicting that outbound flows will soon surpass that headed into
China. It also follows a Ministry of Commerce announcement that China outbound investment (COI)
rose 14.1% to US$102.9 billion (Rmb643.2 billion) in 2014.
The National Development and Reform Commission (NDRC) last year released the Measures for
the Administration of the Check and Approval, and Record Filing of Overseas Investment Projects
(), which came into effect on May 8 2014. These substantially
smoothened the regulatory and approval processes for COI, replacing approval requirement for most
projects under US$1 billion and not involving sensitive regions or industries with a simpler filing
procedure. And, on December 27 2014, the NDRC revised the Measures and eliminated the US$1
billion threshold, meaning all outbound projects, regardless of type, size or scope, are subject to filing
only (unless considered sensitive). This will further level the playing field between Chinese and global
bidders.
This years guide features jurisdictions worldwide with plenty of investment potential. Large
destinations such as the US and UK continue to attract, as seen by Lenovos US$2.9 billion
acquisition in early 2014 of Motorola Mobility from Google, which was the largest acquisition ever by
a Chinese company in the US tech sector. Also key was Greenland Groups residential development
project investment in London worth US$2 billion. Pages 64 and 71 provide insight into investing in
these two countries, respectively.
This guide includes features written by leading firms in Ireland, Italy, Japan, Nigeria, Switzerland and
Turkey, giving expert insight into each jurisdiction. It also addresses the fact that cross-border deals
are rarely executed without an offshore structure. See page 33 for the key features and risks of
using offshore vehicles and holding companies through the Cayman Islands, BVI and Bermuda.
Each jurisdiction has unique regulatory facets that guide COI into specific sectors and industries. All
chapters thoroughly explain the regulatory approval, foreign exchange, tax, corporate governance,
labour and dispute resolution landscapes that Chinese investors need to be aware of in order to
better plan and structure their investments abroad.
Thank you to all the firms that participated. Im confident our readers will find this guide useful.
All rights reserved
20154
Divisional director, Legal Media Group

Greg Kilminster
Directors, Euromoney Institutional Investor
(Jersey) Ltd
Peter Richard Ensor, Tony Shale, Anita Rye
CEO, Euromoney Institutional Investor, Asia
Tony Shale
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China Law & Practice2015
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()201458
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20141227
10
201429
206471
33
Katherine Jo |
Editor |
www.chinalawandpractice.com
China Outbound Investment Guide 2015
>>
Contents |
Contents |
Ireland | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Arthur Cox
italy | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Japan | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Nagashima Ohno & Tsunematsu |
nigeria | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
LEX
offshore | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Kobre & Kim |
Switzerland | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Homburger
Turkey | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Bezen & Partners
UNITED KINGDOM | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Freshfields Bruckhaus Deringer LLP |
UNITED States | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Cadwalader, Wickersham & Taft LLP
<<

28
Alliuris
25 52
500
2014
Acquisition International
86-21-2310 3333

86-10-8523 6899

yongxie@jinmaopartners.com
qibin@jinmaopartnersbj.com
ireland
Ireland
Caroline Devlin and Diyu Wu
Arthur Cox
he draw of Ireland as a destination of choice for foreign

direct investment has continued strongly throughout the last
decade. Indeed Ireland has succeeded in attracting some of the
worlds largest organisations, and includes some of the biggest
players in the worldwide technology, pharmaceutical, biosciences, manufacturing and financial services industries.
Since 1990, US corporations have invested over US$277
billion into Ireland (more than their total investment in the BRIC
countries). The very same reasons and benefits that US and other
multinationals investments enjoy make Ireland equally appealing
to Chinese companies seeking to expand their worldwide operations. A summary of the highlights of Ireland as an investment
destination is set out below.
Section 1: China outbound investment (COI)
Ireland is a member of the EU and OECD and is the only English
speaking member of the Eurozone. Ireland has a developed legal
system and tax structure. It also has an extensive list of double
taxation treaties, including a comprehensive double taxation
treaty with China. Like the US and UK, Ireland is a common
law jurisdiction and its legal concepts are recognised by most
investors. Ireland is an onshore jurisdiction with top class professional and administration services available locally. It is also a
flexible jurisdiction in terms of company law, regulation and tax.
Geographically Ireland is well placed as a bridge between China
and the US, and a first stop from the US into Europe.
The Irish Government is keen to support foreign direct
investment (FDI) into Ireland and has established government
departments specifically to facilitate FDI into Ireland including the
Industrial Development Authority (IDA) and Enterprise Ireland (EI)
which have representative offices in most locations. These departments work closely with businesses looking to invest in and out of
Ireland. They can introduce a business to Ireland and, in certain circumstances, provide incentive grants, particularly for certain types
of operations in parts of Ireland that can offer employment.
With the long established history of inbound investment into
Ireland from many jurisdictions (such as the US or UK), Ireland
has a well-developed system to facilitate investors. This ranges
from investor friendly laws, which respect and protect investment, to well experienced advisors to guide an investor safely and
with ease through the process.
Inbound investment into Ireland spans various different types
of industries and interests. From China, there has been a significant interest in the area of aircraft leasing, and many of the
major Chinese banks have established aircraft leasing platforms
4
<<
in Ireland. Ireland has also seen significant investment by pharmaceutical companies and other types of companies looking
for a base as a holding company. Many of the top international
software companies have located some or all of their intellectual
property (IP) in Ireland. Financial services are well developed
in Ireland and most of the major international financial services
entities have a presence in Ireland, such as in the area of regulated
funds, insurance or securitisation.
Some of the multinationals that have chosen Ireland in recent
years include:
FINANCE
PHARMACEUTICAL
Industrial and Commercial

Bank of China
Abbott Laboratories
Bank of Communications
Alkermes/Elan Corporation
Bank of America
Bristol-Myers Squibb
Citigroup
Merck/Schering-Plough
Goldman Sachs
Pfizer
JP Morgan
Warner-Chilcott
TECHNOLOGY
CORPORATE/OTHER
Huawei Technologies
Accenture
Google
Eaton/Cooper Industries
Microsoft
Equifax Inc.
Intel
Exxon Mobil
Dell
Ingersoll-Rand
Facebook
MetLife
eBay
Madison Dearborn
Twitter
Marriott
Section 2: Tax and allowances

Ireland has a very attractive tax system for business. Key highlights include:
Trading tax rate at 12.5%: Companies pay corporation tax
at 12.5% on their trading profits. Many international companies
use an Irish company to base their Irish, European or worldwide
| | | |
ARTHUR COX
-
ARTHUR COX
+353 1 618 0585

Caroline Devlin ()
www.arthurcox.com
Expect Excellence.
ireland
operations to make use of this low tax rate, while still being an
onshore company with tax treaty access. Activities such as leasing,
trading in licences/IP, banking and manufacturing would all be
covered by this attractive rate.
IP and R&D tax reliefs: Companies get various tax breaks on
IP in Ireland, such as capital allowances (similar to depreciation)
on the acquisition of certain IP. This includes the acquisition of or
the licence to use:
patents and registered designs;
trademarks, brands, brand names, domain names and services
marks;
copyright or related rights;
know-how, generally related to manufacturing or processing, industrial, commercial or scientific experience whether
protected or not;
goodwill to the extent that it is directly attributable to specified
intangible assets;
computer software or a right to deal in or use such software;
applications for grant or registration of patents, trademarks,
copyrights etc.; and
certain other rights.
The tax write off is granted as a capital allowance and is
available in line with the depreciation or amortisation charge for
accounting purposes. Alternatively, a company can elect to take
the write off against its taxable income over a 15-year period.
The capital allowances that are available must be used for offset
against profits generated from exploiting the IP itself (which
includes profits from the sale of goods or services that derive the
greater part of their value from the IP). If the allowance cannot be
used up in one year, it can be carried forward.
Where a company incurs research and development (R&D)
expenses, in addition to having this as a deduction against taxable
Author biographIES
Caroline Devlin
Caroline Devlin is the co-chair of the Arthur Cox tax
group, and the head of the firms China group. She
advises multinational companies on investing in Ireland,
including structuring their operations in the most legal
and tax-efficient manner possible. She has extensive
experience in mergers and acquisitions as well as structured finance
products and also has extensive expertise in securitisation, aircraft and
equipment leasing.
With her team and other specialists at Arthur Cox drawing on the
expertise and experience of all the industry-specific practice areas across
the firm, as well as its extensive network of contacts both in Ireland and
in the Asia-Pacific region, Carolines practice helps clients prepare for the
opportunities and the challenges they face in doing business overseas.
Diyu Wu
Diyu Wu is an associate within the Arthur Cox tax
group and a committee member of the China group.
He has experience working with structured finance and
securitisation products. As a Mandarin speaker, he has
written articles examining the state of Chinese legislative
reforms and is keenly interested in developing the growing markets
between Ireland and China.
<<
profits in the normal way, an increased tax credit is available, which

means that incurring R&D expenses will trigger a deduction for
more than double the amount actually spent against profits.
Finally, the use of the 12.5% tax, allowances for the acquisition of IP and the generous R&D allowances combine to make
Ireland an attractive location to place IP. All of these allowances are available before any structuring is done to enhance the
effective rate. A popular structure that has been used in Ireland
is the Double Irish structure. Since January 1 2015, the original
form of Double Irish is no longer used, however, companies will
always seek to structure their business in the most tax-efficient
way. In addition, the Irish Department of Finance introduced a
new knowledge box system of relief in the budget announcement
made in 2014. Details of the relief will be published as soon as
consultations with businesses and advisors are completed. Government announcements confirmed the commitment of the Irish
government to maintain and increase the tax efficiency of conducting research in Ireland.
Using an Irish company either for an overall structure or as a
holding company for a mini group within a structure can facilitate grouping profits and passing them upwards in a tax-efficient
manner. Further details are outlined below.
Section 3: Investment vehicles
Tax-efficient holding company structures: Private holding
companies set up in Ireland provide tax-efficient mechanisms for
holding shares in subsidiary companies and particularly EU subsidiaries. Not only do these companies benefit from certain tax
exemptions, but the Irish company law regime also offers great
flexibility. Many private companies and family holding vehicles
have chosen Ireland as the base of their European or intermediate holding companies. Advantages for holding companies in
Ireland include dividends being payable without withholding tax
to countries with which Ireland has a double taxation agreement,
certain capital gains tax exemptions on share disposals, a lack of
CFC legislation, no thin capitalisation rules and relief from stamp
duty on share transfers within 90% groups.
Irish trading companies: Regular Irish trading companies
subject to tax at 12.5% with full access to Ireland double tax
treaties (over 70) have proven to be a very popular vehicle for
investment. These are often used as the company of choice for
Chinese aircraft leasing platforms.
Special purpose vehicles: Special purpose vehicles (SPVs) for
structured finance transactions, including bond issuances, financings for international groups, synthetic and cash flow CDOs,
asset-backed commercial paper programmes, securitisations and
a host of other financing transactions, are common in Ireland and
are designed to minimise tax leakage and maximise return for
investors. These transactions have made Ireland a global hub for
financial services and enable Ireland to offer maximum benefits
to international companies and investors in Asia.
Funds: Ireland is a leading on-shore location for global funds.
There are currently approximately 970 billion in net assets in
funds domiciled in Ireland. Ireland offers a highly regulated funds
environment and requires independent custody and administration
ireland
arrangements for all its funds. The Irish funds regime provides for
both UCITS and non-UCITS funds. Ireland has been the fastest
growing UCITS funds domicile and UCITS funds account for
almost 80% of Irish domiciled funds. In addition to being subject to
a legal and regulatory framework that is tailor-made for the funds
industry, there are a number of beneficial tax provisions for funds
domiciled in Ireland there is no Irish tax levied on regulated
funds and also no annual subscription tax for funds, which makes
this jurisdiction stand out from others. Certain Irish funds are also
particularly attractive for use in investing in a variety of investments, including, in particular, A-shares in China.
Section 4: Incentives for individuals
Ireland has recently introduced an Immigrant Investor Programme
which is open to non-EEA nationals and their families who commit
to an approved investment in Ireland. It has proven already to be of
particular interest to high net worth Chinese families (and in some
cases has facilitated their childrens education in Irish schools and
universities). Approved participants in the Programme and their
immediate family members will be granted rights of residence in
Ireland, which will allow them to enter Ireland on multi-entry
visas and remain here for a defined period but with the possibility
of on-going renewal.
Ireland taxes individuals based on the source of income and
gains as well as the residence and domicile of the individual. Irish
sourced income and gains are generally subject to tax in Ireland.
However while Irish resident and domiciled individuals would
generally be subject to tax in Ireland on their worldwide income
and gains, the tax system is quite efficient for individuals coming
to Ireland for a specific period.
In particular, individuals resident in Ireland but not domiciled
will only be subject to tax in Ireland on their Irish sourced
income and gains, and only on their foreign income and gains if
remitted to Ireland, i.e. the remittance basis. Individuals who are
not resident or domiciled in Ireland will only be liable to tax in
Ireland on Irish source income and gains.
Double tax treaties can also reduce any of the taxes mentioned
above.
Section 5: Management and operations
It is relatively easy to establish a legal entity in Ireland. A company
can be set up in about one working week and approval comes from
one government body, the Companies Registration Office. If any
additional specialised regulatory approvals are needed, this would
take longer, as an application would be needed to the appropriate
regulator. However, it should be noted that unless the company
is to engage in a regulated activity, such as banking or insurance,
there is no regulation required to simply set up a company.
The Irish government has engaged in a large scale reformation and improvement of its corporate legislative system which
commences in June 2015. A large number of legislative changes
have been put in place to ensure that companies can be run and
maintained as efficiently as possible.
Currently an Irish company should have two directors (who

should be individuals), a company secretary and a registered
office in Ireland. As an example of improving the legislative environment, the new companies legislation provides that a single
director is sufficient for certain types of companies. It is recommended to ensure that the most tax-efficient structure is selected,
such as the identity of shareholders and the location of directors.
Irish private companies operate in a relatively informal
manner and their business is done through the board of directors.
The day-to-day operations are typically delegated to management.
In the case of inbound investment into Ireland, where a
business requires clarification from the Irish government bodies
on any particular matter, such as a tax confirmation, it is usually
quite easy to arrange a meeting with the Irish Revenue Commissioners (the tax authority of Ireland) who are pleased to
understand and assist new operations in Ireland. Equally, the
Irish government, through the Finance and Justice ministries, are
receptive to suggestions and concerns an investor company may
have in relation to its operations in Ireland.
Section 6: Profit extraction methods
Profits can be extracted from an Irish company in a number of
ways, including:
Dividends: There is no withholding tax on dividends paid
to a Chinese resident shareholder. Dividend payments are not a
deductible expense for an Irish company.
Interest: If the company was funded by loans, profits can be
extracted by way of interest payment. There is no withholding on
interest paid to a Chinese lender. Interest should generally be a
deductible expense where the borrowings were incurred for the
purpose of the trade of the company. There are no thin capitalisation rules in Ireland, but in certain cases the interest will not be a
deductible expense.
Fees: An Irish company might, in certain circumstances, pay
a fee for services rendered to a group company.
Where an SPV is used and formed under a particular tax
regime (Section 110), this company can issue profit dependant
debt, which is like equity, in terms of subordination and being
related to profits, but is technically debt.
Shares in an Irish company can be sold and a non-Irish shareholder typically will not have a liability to capital gains tax on a sale.
Ireland has over 70 tax treaties, and this generally means that
profits can be extracted to individuals in those territories in a taxefficient manner with no withholding.
Section 7: Regulatory regime
Irelands regulatory system emanates mainly from EU law as
enacted in Ireland. In implementing EU law in Ireland, traditionally, Ireland has endorsed a light touch regulatory regime. Since
its inception in 2003, the Irish Financial Regulator has regulated
on a principles basis. Principles-based regulation involves the
>>
ireland
establishment by regulators of the basic principles that a firm is

compelled to follow. The approach involves management internally supervising adherence to these standards and confirming
compliance with these principles to the national regulator. Firms
are subject to less direct intervention than under a rules-based
approach, which is why this is perceived as a light touch regulation. Such a system is reliant on an effective corporate governance
structure and a relationship of trust between the regulator and
firm. However, the Irish Financial Regulator responded to the
financial crisis by changing the rules governing regulation and
moving from a light touch approach to stricter regulatory rules.
Section 8: Legal environment and protections
Ireland is a common law jurisdiction which originates from the
English legal system. As Ireland is a member of the European
Union, disputes involving European law may be referred to
the European Court of First Instance or the European Court of
Justice.
<<
Where parties use a law other than Irish law in their dealings,
it will generally be respected in Ireland, provided there is some
nexus to the law chosen. Furthermore, judgments granted with
Ireland can generally be enforced in another EU jurisdiction
with minimal additional court intervention required. Disputes
in Ireland can be brought before the Irish courts, arbitration or
general mediation discussions. Judgments made in other jurisdictions including outside the EU are also usually enforceable in
Ireland. Ireland has an excellent Commercial Court system that
deals efficiently and speedily with commercial and especially IP
disputes and, as a result, Irish law is often selected where possible,
as disputes can be brought to a conclusion before the Commercial Court within a matter of months. The Irish system respects
the rights of nationals and non-nationals equally.
In conclusion, as an English speaking, EU, common law
country with interesting benefits for investors, Ireland continues
to be a popular destination for investment. The favourable tax
system, geographical location and availability of genuine good
bargains make Ireland a much sought-after jurisdiction both for
investment and as a base to access both the EU and the USA.
Caroline Devlin Diyu Wu

Arthur Cox
19902,770
(OECD)
(IDA) (EI)
Alkermes/Elan
Equifax Inc.
Facebook
Madison Dearborn
12.5%
12.5%
2015
>>
Caroline Devlin
Caroline DevlinArthur Cox
Arthur Cox
Caroline
Diyu Wu
Diyu WuArthur Cox

15
(R&D)
12.5%
201511
2014
10
<<
(SPV)
(CDO)
9,700
UCITSUCITS
UCITS
UCITS80%
(EEA)
90%
12.5%
70%
20156
2015
2003
110
70
2015
>>
11
italy
Italy
Ernesto Pucci and Shenkuo Wu
a. What are the key sectors in your jurisdiction that attract,
or to which the government is seeking to attract, COI?
The Italian government is seeking to attract COI in many key
sectors, such as infrastructure, energy, manufactory machineries,
brands and, in general, market and strategic assets.
In order to attract overseas investments, the Italian government is approving and implementing a number of relevant
reforms with the declared goal of boosting the Italian market.
These reforms mainly relate to the Italian judicial and labour
system, taxation and the digitalisation of public administration,
including but not limited to: the possibility for foreign companies
to apply for standard international tax ruling preliminary to the
investment; 50% corporate tax credits on expenses for employees
operating in research and development activities; reduced taxes
on real estate transactions between VAT payers; simplification of
the authorisation procedures for enterprises; reduction of energy
costs for enterprises and provisions favouring energy saving and
efficiency of buildings; reform of the labour laws applicable to the
hiring and firing of personnel (socalled jobs act); and reorganisation of rules and regulations governing local public services
(waste, urban transport, lighting, water, etc.) that will also favour
investments by foreigners.
b. Is the government generally supportive of COI? Which
government, and regional, bodies are responsible for driving
COI in your jurisdiction?
The entities responsible of driving foreign investment in Italy,
including COI, are Invitalia and ICE or the Italian Trade
Promotion Office.
Invitalia is the national agency for investment promotion
and enterprise development and provides foreign investors
wanting to set up or expand their business in Italy with information regarding local business opportunities and partners. Apart
from support services during the investment process, the agency
provides strategic analysis to identify the best business solution
and offers an overview of the legal and tax system, the labour
market and the national incentive system.
ICE, jointly with the Ministry of Economic Developments
department of internationalisation, provides information,
support and advice to Italian and foreign companies through
a large network of Trade Promotion Offices linked to Italian
embassies and consulates. In order to facilitate the connection
between Italian and foreign businesses it works closely with
local authorities and businesses to facilitate the identification of
possible business partners and organise bilateral trade meetings
12
<<
with Italian companies, as well as providing information, support

and advice as necessary.
a. What are the most common legal entities and vehicles
used for COI in your jurisdiction? How long do they take to
become operational?
The limited liability company (Srl) is the most common legal
vehicle used for doing business in Italy, if the capital is owned by
a small number of members. Srl companies cannot be listed on
the stock market or issue debentures or other negotiable instruments, though they can issue debt notes which can be purchased
by qualified investors. Depending on the value of the transaction and the number of investors, the joint stock company (SpA)
vehicle may be more appropriate. The SpAs capital is represented
by shares.
The incorporations procedures to be followed for an Srl or
an SpA are substantially the same and require the assistance
of an Italian notary. The company can be operative in a week
starting from the date of receipt of the required documents.
b. What are the key requirements for establishment and
operation of these vehicles which are relevant to COI (e.g. is
there a requirement for local directors)?
There are no specific requirements for establishment and operation
of these vehicles which are relevant to COI or foreign investors
in general, unless for specific sectors (see below). For instance,
directors do not need to be Italian citizens or tax residents but
only require an Italian tax code.
Section 3: Investment approval
a. For foreign investment approval (including any national
security review) explain the approval process and timing.
The regulator is basically the government each of the Ministries specifically concerned (Defence, Finance, Economic
Development, Foreign Affairs or Internal Affairs) play a crucial
role depending on the sector at stake. All decisions are objective
and non-discriminatory. And since the interests involved are
prominent public interests, a high degree of discretion is given to
the regulator.
Further to a 2012 reform, ownership caps to foreign investments have been abolished and replaced by the granting of
certain powers to the regulator, such as the right to object and/
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Macchi di Cellere Gangemi is a business law firm founded in 1986 with over 90 highly qualified professionals.
The Firm assists companies in relation to all their matters under Italian, European Community and international
law. In more than twenty years, Macchi di Cellere Gangemi has become a qualified partner of leading Italian
companies and multinational groups. The Firm has extensive experience in all areas of law, with global services
expanded to different areas of expertise and a strong commitment in the corporate, tax, and finance areas.
00197 ROMA
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italy
or veto and/or impose conditions on the execution of certain

extraordinary transactions.
The holder of a strategic asset must notify the government
about any resolution/act concerning a proposed extraordinary
transaction within 10 days or before it is implemented. The
purchaser must also notify the regulator of the acquisition within
10 days. The notice should include, as the case may be, the
company resolution or the information relating to the project of
acquisition, the buyer and the business of the buyer. The regulator,
which may request additional information, may exercise its veto
powers, object or impose conditions within 15 days from the
receipt of the notice (the term is suspended if additional information is requested, which must be delivered within 10 days). The
transaction cannot be implemented before the terms to exercise
the above powers have elapsed without any veto, objection or
conditions. Any veto decision or decision imposing specific conditions may be appealed before the Italian Administrative Courts
where a fast-track procedure will apply.
b. Briefly explain the investment restrictions for any
specially regulated/restricted sectors (natural resources,
financial services, telecoms and infrastructure, etc),
including whether the government is entitled to any special
rights (e.g. golden share) in those sectors.
In the defence and national security sector the government may:
(i) impose, to the purchaser of shares in strategic companies,
conditions related to the security of supplies, the security of information, technological transfers and the control of exportations;
(ii) exercise veto powers in relation to resolutions of strategic
companies on extraordinary subject matters; or (iii) object to the
acquisition of a shareholding in strategic companies which could
jeopardise national security.
In the energy, transport and TLC sectors the government
may: (i) exercise veto powers or impose conditions in relation to
resolutions/acts/transactions involving changes in the ownership,
control, availability or use of the strategic assets; or (ii) impose
specific conditions or, in extraordinary cases, object to the acquisition of controlling shareholding in the strategic companies by
non-EU parties.
c. Which authority oversees competition clearance, when is
notification mandatory, and what is the merger clearance
process (including whether pre- or post-closing)?
The Italian Competition Agency oversees concentration clearance
processes. The Italian competition law requires prior notification
of all mergers and acquisitions when:
the aggregate turnover of the undertaking in Italy exceeds
489 million; and
the aggregate turnover of the undertaking in Italy to be
acquired exceeds 49 million.
Concentrations are meant to be the transactions where,
by means of a merger, the acquisition of control of the whole
or part of another undertaking, or the setup of a joint venture,
leads to a permanent change in the structure of the participating
undertakings.
14
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The notification can be either pre or post-closing, as it is not

a condition precedent. Nonetheless, parties generally prefer to
notify after signing but before closing, to avoid the risk of the
reversal of the operation due to prohibition and/or imposition of
remedies. The concentration review takes up to 30 days with a
possible extension up to 45 days from the notification.
d. Are there any unique processes that potentially could
block a foreign investment, e.g. consent from labour unions?
In general, there are no processes that could block foreign
investors, however, the government may de facto request certain
conditions for transactions that involve a large number of
employees.
e. Are there approval requirements when a foreign investor
increases or exits its investments?
In general, there are no restrictions to investments in Italian
companies. However, the acquisition of shareholdings in one of
the following companies may be subject to duties of disclosure
and/or authorisation: by (i) Italian-listed companies; and (ii)
Italian banks, insurance companies, financial intermediaries and
asset managers.
Author biographies
Ernesto Pucci
Ernesto Pucci is a partner and co-head of the
firms Europe-China desk and focuses on the
internationalisation of enterprises, corporate and
commercial transactions, mergers and acquisitions,
private equity and insurance.
He advises Italian and foreign companies and multinational groups
acting in the financial, insurance, tobacco, energy and health care
industries as well as the general commercial and industrial sectors.
He provides assistance on company reorganisations, M&A and the
drafting and negotiating of SpAs, shareholders agreements and
international commercial agreements. He also provides expert advice
on the procedures of extraordinary administration of large enterprises
and on matters of financial law, such as the implementation of laws
and regulations by the authorities to Italian and financial intermediaries
and securitisation transactions pursuant to law No 130/99 and its
subsequent amendments. He also advises insurance and reinsurance
companies operating in Italy.
Ernesto has been a research fellow in Insurance Law at the Faculty
of Economics and Commerce at the University of Rome La Sapienza
from 2007. He is a member of the IBA and Association for International
Insurance Law [Associazione Internazionale Diritto delle Assicurazioni].
He speaks Italian, English, French and Spanish.
Shenkuo Wu
Shenkuo Wu is the co-head of the firms Europe-China
desk and his practice areas include corporate and
commercial transactions as well as intellectual and
industrial property.
Shenkuo concentrates on international investment
and commercial transactions and provides legal advice to numerous
clients on cross-border activities between China and Italy.
He obtained his law degree at the Zhongnan University of Economics
and Law in 2004 and his LLM at the East China University of Politics and
Law in 2007. He also earned his PhD in law at the University of Verona in
Italy in 2011. He speaks Chinese, Italian and English fluently.
italy
Section 4: Tax and grants

a. Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for FDI into the
country?
Italy has an extensive tax treaty network with over 70 tax treaties in
force. Moreover, under the EU directives, payments of dividends,
interest or royalties to companies resident in other EU member
states are exempt from withholding tax under certain conditions.
dividends or interest paid from an Italian company to a Chinese

investor (provided the investor is the beneficial owner of the
dividends or interest) are subject to a withholding tax of 10%.
Section 5: Forex controls and local operations
a. What foreign currency or exchange restrictions should
foreign investors be aware of?
There are no foreign currency or exchange controls in Italy,
except for cash. However, any person entering or leaving the
EU (including Italy) must file a declaration with customs in the
event that he imports/exports either 10,000 or more in cash or
an equivalent amount in other currencies or in easily convertible
assets (e.g. bonds, shares, travellers cheques). Failing to submit
b. What are the applicable rates of corporate tax and withholding tax on dividends?
Italian companies and Italian permanent establishments of foreign
entities are subject to a corporate income tax rate of 27.5% and to
a regional tax on productive activities of 3.9%.
Under domestic law, dividends distributed
to non-resident shareholders are subject to the
Italian companies and Italian permanent
following tax treatment:
as a general rule, dividends distributed to establishments of foreign entities are subject to a
non-residents are subject to withholding tax corporate income tax rate of 27.5% and to a regional
at the rate of 26%. Non-resident shareholders
tax on productive activities of 3.9%
may file a claim with the Italian tax authorities
for the refund of Italian taxes up to 11/26 of
the amount withheld, provided that they are able to prove that a declaration, as well as submitting false declarations, may cause
they paid taxes on the dividends in their country of residence; the seizure of the cash/assets and result in a penalty.
dividends distributed to companies resident in a EU
member state are subject to a withholding tax rate of 1.375%, b. Are there any legal restrictions on bringing in foreign
provided that the companies are subject to tax in their state workers and how difficult is it for foreign investors to secure
expatriate visas for shareholder representatives, senior
of residence;
in compliance with the EU Parent-Subsidiary Directive, managers and workers in practice?
dividends distributed to companies resident in an EU member As for non-EU nationals, the quotas of foreign employees to be
state are exempt from withholding tax if certain conditions admitted within the Italian territory are established every year by
are met (including, inter alia, 10% minimum participation the Italian government. The following documents are required
and a one-year minimum holding period).
for their employment:
Moreover, the 26% dividend withholding tax can be reduced
if a tax treaty is applicable.
c. Does the government have any FDI tax incentive schemes
in place?
A tax exempt investment scheme is the regulated investment
fund. Also, under certain conditions, profit distributions from
regulated investment funds to non-resident investors can be fully
exempt from withholding tax.
d. Other than through the tax system, does the government
provide any other financial support to FDI investors? If so,
please provide an overview.
In the case of foreign investment in companies under restructuring
and with a large number of employees, the government may support
and/or incentivise the investor, by signing specific development
programs granting social security benefits or other advantages.
e. Are there any reciprocal tax arrangements between your
jurisdiction and China? If so, how can they aid investors?
Italy and China entered into a tax treaty effective from January 1
1991, based on the OECD model convention. Under this treaty,
authorisation to hire a non-EU citizen requested by an

employer at the prefects office;
The prefects authorisation to be forwarded to the Italian
consular office for the issuance of the visa;
A visa from the Italian consulate established in the country of
origin;
A permit to stay to be obtained by the worker from the police
authorities upon execution of the employment agreement
between the employer and the worker before the police
authorities.
In general, due to the quota system, the procedure to secure
expatriate visas for shareholder representatives, senior managers
and workers is quite complicated.
The procedure, however, is simplified and the quota system
can be derogated for the following cases:
employees of non-EU companies that are seconded to Italy
for a limited period;
highly qualified workers that present a higher education
qualification and a valid work contract or a binding job
offer. Such workers can apply for clearance and a visa at the
>>
15
italy
Italian embassy in their home country and then obtain, upon

execution of the employment contract, an EU Blue Card;
executives or highly specialised personnel of companies
domiciled in Italy;
university lecturers and university professors who are
expected to have an academic position;
translators and interpreters;
family collaborators employed abroad full time for at least a
year;
individuals authorised to stay for reasons of training/specific
tasks within the scope of employment;
maritime workers;
artistic and technical personnel for opera, theatre, concert or
ballet;
foreign journalists employed by a foreign press company;
diplomats; or
professional nurses hired by public and private health
structures.
In these simplified cases, the procedure to secure expatriate visas for shareholder representatives, senior managers and
workers is quicker and easier.
Specific visas and permits to stay are available for Chinese
citizens who purchase personal real estate in Italy, under certain
conditions.
Lastly, as far as start-ups are concerned, a new type of visa
has been introduced for self-employed people, who are foreign
Action 2010-2013 to strengthen economic cooperation (trade and

investment, cooperation in finance and financial services, science
and technology, innovation, intellectual property protection and
the environment (2010)).
The EU also started a first round of negotiations with China
for an EU-China investment agreement in January 2014.
b. How efficient are local courts enforcement and dispute
resolution proceedings, and are there any procedural idiosyncrasies foreign investors must be aware of?
Commercial disputes in Italy can be efficiently resolved by Italian
courts (either through ordinary or summary proceedings) or, if
agreed upon by the parties, through arbitration.
The court usually decides a case in first instance in about
three to four years and in second instance in about four to
five years, while the length of arbitration proceedings is generally
shorter (about one year), since it depends on the parties terms of
engagement and the governing arbitration rules.
That said, the costs of arbitration proceedings are higher than
the costs required for court proceedings.
c. Do local courts respect foreign judgments and are international arbitration awards enforceable?
Foreign judgments are recognised and enforced in Italy through
different procedures depending on whether the judgment was
issued by a court of an EU member state or by an extra-EU
member state court.
In particular, any judgment, decision and
measure which meets certain requirements, issued
by a court of an EU member state and enforceable in
Commercial disputes in Italy can be efficiently
that state is automatically recognised in the Italian
resolved by Italian courts (either through ordinary
jurisdiction without any special procedure and/or
or summary proceedings) or, if agreed upon by the
any declaration of enforceability being required,
pursuant to the Regulation (EU) no 1215/2012,
parties, through arbitration
Regulation (EC) no 44/2001 and the Brussels and
Lugano II conventions, when applicable.
citizens for the incorporation of innovative start-up companies
Furthermore, for judgments specifically issued by an extra-EU
and have resources dedicated to the start-up amounting to at member state court, there are a number of bilateral conventions
least 50,000. The evaluation of the request is carried out in a relating to the recognition and enforcement of judgments in civil
very short timeframe of 30 days.
matters. Italy and China signed the Treaty on Judicial Assistance
on Civil Matters between China and Italy (1991) which provides
that the decision will be automatically recognised and enforced in
Section 6: Dispute resolution
Italy, unless one of the following circumstances occurs:
a. Does your jurisdiction have a bilateral investment protection treaty with China or other jurisdictions commonly used
for investing into the country?
Starting from the 1980s, Italy and China have signed several
investment agreements, among which are: (i) the Agreement
on Promotion and Protection of Investments (1985); (ii) the
Agreement to avoid double taxation (1986); (iii) the Treaty on
Judicial Assistance on Civil Matters (1991); and (iv) the Cooperation Agreement on Intellectual Property (2004).
More recently, Italy and China executed: (i) a Memorandum of Understanding on cooperation for bilateral investments
between InvestInItaly and the Agency for Investment Promotion
of the Chinese Minister of Commerce (2005); and (ii) a Plan of
16
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the court that issued the foreign judgment had no jurisdiction

over the case according to Article 22 of the Treaty;
the foreign judgment is not final pursuant to the law of the
party where the judgment was issued;
the writ of summons/claim was not properly served upon the
defendant or, in the case of an incompetent defendant, it was
not duly represented in court pursuant to the law of the party
where the judgment was issued;
another final judgment among the same parties and concerning the same matter was issued by the court of the party where
the judgment must be recognised, or the latter has already
recognised a decision issued by a court of a third country
among the same parties and concerning the same matter;
italy
a litigation proceeding is pending among the same parties

and concerning the same matter before the court of the party
where the judgment must be recognised and started before
the notification of the writ of summons of the other proceedings; or
the foreign judgment may jeopardise the sovereignty and
safety of the party that is required to recognise it or is contrary
to public policy.
As for international arbitration awards, in 1969 Italy signed
the New York Convention of 1958 on the Recognition and
Enforcement of Foreign Arbitral Awards. As a consequence, Italy
recognises foreign arbitral awards as binding and enforces them
in accordance with Italian procedural law under the conditions
laid down in the New York Convention.
Therefore, in order for a foreign arbitration award to be
enforced in Italy, it must be filed with the Court of Appeal of the
place of residence of the other party (if it is in Italy) or with the
Court of Appeal in Rome (if the other party resides abroad). In
this case, the Court of Appeal will only check that the formal
requirements of the award are respected, without entering in the
merits of the dispute. The court will then issue an enforcement
order, where the award becomes equivalent to a judgment capable
of enforcement.
d. Are local judgments and arbitration awards from your
jurisdiction generally enforceable in other jurisdictions?
The possibility to enforce Italian judgments and arbitral awards
may vary based on the jurisdiction.
In particular, Italian judgments are enforceable abroad
pursuant to the EU Regulation, Brussels or Lugano Convention,
when applicable.
As mentioned above, Italy is also party to the New York
Convention, which is based on the reciprocity principle for the
recognition and enforcement of arbitration awards made in
the territory of another contracting state. Therefore, an award
rendered in Italy is enforceable in foreign jurisdictions that are
party to the New York Convention.
>>
17
Ernesto Pucci
1.
50%
2.
Invitalia
ICE
Invitalia
ICE
ICE
1.
Srl
Srl
SpASpA
SrlSpA
18
<<
2015
2.
()
1. ()
2012
/
1010
15
10
2. / (
)
()
(1)
(2)(3)
(1)
//
(2)
3.
()
4.89
4900
3045
4.
2.
27.5%
3.9%
26%
11/26
1.375%
-10%
26%
5.
/(1)
(2)
1.
70
Ernesto Pucci
Ernesto PucciMacchi di Cellere Gangemi
-
Pucci
1999130
(2007)
20042007
2011
3.
4.
5.
199111
10%
1.
10,000
2.
2015
>>
19
3.
Regulation (EU) no 1215/2012Regulation (EC)

no 44/2001II

1991

22

530
1.
1980
(1)1985(2)
1986(3)1991(4)
1969
2004
1958
(i)InvestInItaly
2005
(ii)2010-2013
2010
20141-
2.
20
<<
2015
4.
JAPAN
Japan
Yu Wakae
Nagashima Ohno & Tsunematsu
he economic tie between Japan and China is very strong

but, until recently, it has been rather one-sided in terms
of cross-border investments. After the start of the open
and reform policy and the resumption of bilateral diplomatic
relations in the late 1970s, a large number of Japanese companies
invested in various industries in China, which greatly contributed
to Chinas industrial and commercial growth in the subsequent
decades leading up to the present. Currently, more than 20,000
Japanese companies invest and operate in China, and directly or
indirectly generate tens of millions of employment in China. As
compared with a long list of Japan-to-China investments, admittedly, the list is disproportionately shorter for the investments by
Chinese companies into Japan.
Now, we are seeing a surge in Chinese investments globally,
traditionally in emerging economies such as Africa and Latin
America, but recently also into developed economies, including
the US, Europe and Japan. This trend reflects the huge Chinese
capital accumulated through its domestic economic growth and
the greater appetite for growth and profit potentials in overseas
markets. Chinese laws and policies have accommodated this
demand by permitting overseas investment under a simpler and
less burdensome set of procedures.
decision makers of Japan as not only as great travel destination,

but as a great investment target. On the other hand, Japanese
businesses, together with various municipalities across Japan,
are welcoming the Chinese tourists and devising ways of attracting visits and consumption. The depreciated yen, the investment
appetite of Chinese investors, the demand for capital and growth
opportunities on the part of Japanese companies and the Abe
administrations pro-business policies and measures enticing
inbound investment (e.g. the ongoing reductions of corporate tax
rates which are to be implemented gradually) may lead the ChinaJapan investment environment to follow the same pattern. Japans
well-established legal systems and minimal restrictions on foreign
investments will also positively affect future Chinese investments.
Section 1: Key investment areas
Below are some key areas in Japan that may interest Chinese
investors. Respective Chinese investors should look for suitable
targets in Japan and make judgments based on their needs and
expertise.
Real estate: Many Chinese investors believe real estate prices
in China are overpriced and look overseas. After
the burst of the bubble economy in the 1990s,
Chinese investors are also starting to make, or conJapanese real estate prices are already on the
template making, investments into Japan. But given the low side and are very stable. Many are optimispotentials of the two of the three largest economies of tic for future growth, especially before the 2020
Tokyo Olympics.
the world and the investment sectors in Japan that are
Quality products and services: Japan has
attractive to and suitable for various types of Chinese
one of the most mature consumer markets in the
investors, more should be on their way
world, which has enabled many Japanese businesses to improve and sophisticate their products
Chinese investors are also starting to make, or contemplate and services to satisfy consumer needs for high quality products
making, investments into Japan. But given the potentials of the and services. As Chinas consumer market becomes more mature,
two of the three largest economies of the world and the invest- acquiring Japanese companies in consumer-oriented industries
ment sectors in Japan that are attractive to and suitable for various may be helpful for Chinese enterprises.
types of Chinese investors (briefly discussed below), more should
For the elderly: As China rapidly becomes an aged society,
be on their way.
prospects in the life sciences field (most prominently pharmaSome argue that acquisitions by Chinese investors should ceuticals and medical devices) and caregiving industries will be
face great difficulties in Japan, suggesting that they may not promising. Japan became an aged society several decades ago
be welcomed by Japanese targets due to cultural and political and, as a result, there are many Japanese companies providing
concerns. While such claims should not be outright ignored, great products and services in these areas.
Environment: China is finally prioritising environmental
there is another recent phenomenon - a skyrocketing number
of Chinese tourists coming to Japan, visiting various places and protection. Japan faced serious environmental problems in 1970s
buying lots of Japanese goods to bring back into their country. since then, many Japanese companies worked hard to create
With their first-hand experiences of contemporary Japan and and improve technologies to solve these problems cost-effectively,
its goods, we can expect an increased awareness among Chinese which may be also useful for China.
>>
21
JAPAN
Section 2: Foreign investment restrictions

Accustomed to the rigorous regulations for foreign investors in
the mainland, many Chinese investors are surprised to learn the
limited set of restrictions and procedures they will be subject to
when investing in Japan. At the same time, there are some unique
regulations in Japan affecting investors. First, the Japanese regulations of foreign investment follow the negative list model which
has been also adopted in the Shanghai Free Trade Zone (and will
be adopted in the newly-proposed PRC Foreign Investment Law).
Second, corporate laws are simple and allow investors to make
a range of choices as to how they invest. Third, real estate and
labour laws in Japan are very different to those in China.
Restrictions pursuant to specific legislations
Japanese laws generally do not prohibit or restrict investments
by foreign investors (including Chinese investors), except for
very limited types of industries such as broadcasting or aviation,
where shareholding by foreign investors is restricted by specific
legislations and must remain below certain specified thresholds
(e.g. 20% for broadcasting, one-third for aviation).
Forex controls and reporting obligations
In most industries, Chinese companies need only abide by after-thefact reporting obligations under the foreign exchange regulations.
When Chinese investors set up a new corporation in Japan or
purchase shares in a Japanese corporation, the transaction will
generally constitute an inbound direct investment under the regulations stipulated by the Japanese Foreign Exchange and Foreign Trade
Act and it must be reported by submitting a form to the government
authorities within 15 days from the date of the transaction.
However, inbound direct investments in certain specified industries trigger before-the-fact notification obligations where investors
need to notify the government of the proposed deal and wait for
30 days before implementing the transaction. During the waiting
period, which may be extended up to four months, the transaction
is reviewed by the relevant authorities on a case-by-case basis and
may be rejected if found inappropriate for national security or other
concerns. On the other hand, the waiting period may be shortened
to, typically, two weeks (or five business days in some cases) if the
government finds no substantive review is necessary.
The list of industries requiring prior notification include:
(a) national security-related (which also include manufacturing
of goods that would be diverted to military use);
(b) public order-related (e.g. electricity, gas, heat, telecommunications, water and railway);
(c) public safety-related (e.g. production of vaccines and security
guard business); and
(d) other regulated industries (e.g. agriculture and fishery, oil,
leather production, aviation and marine transport).
Merger filing
As a separate matter, a Chinese investment in a Japanese business
may trigger the merger filing requirements under the Japanese
competition laws. In principle, the merger may not be implemented during the 30-day waiting period, if applicable.
22
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Author biography
Yu Wakae
Mr Yu Wakae is a partner of Nagashima Ohno &
Tsunematsu and heads the Shanghai office as chief
representative. Having worked for several years in Beijing
at a major Chinese law firm, he focuses on Chinarelated transactions ranging from M&A and finance to
general corporate matters. A University of Tokyo and Harvard Law School
graduate, Mr Wakae is fluent in English and Mandarin Chinese. He is a
co-editor-in-chief of a bilingual publication called the Legal Guide for
Chinese Companies Investing in Japan (
(20148))
Section 3: Corporate structure and investment

method
Setting up a company
Unlike under the current regime of Chinese laws governing
foreign investment (but similar to the proposed PRC Foreign
Investment Law), the same single corporate law the Companies
Act applies to foreign-invested companies incorporated in Japan
and domestically-held companies. A company can be set up solely
by registering with the local legal affairs bureau (). No government approval is required.
Corporate governance
Chinese investors are often perplexed to learn that joint-stock corporations () are the common corporate
structure for all listed and unlisted companies in Japan and that
there are no longer limited liability companies (
). This does not mean that all companies in Japan are forced to
adopt rigid regulations applicable to listed companies (as in the
case of Chinese joint-stock corporations). Rather, the Companies
Act allows for various types of corporate structures for joint-stock
corporations, which are adopted by a majority of companies in
Japan. For example, companies are not required to have a board
of directors and the number of directors can be freely determined
(but minimum of three if there is a board of directors). The term
of directors and corporate auditors (which are optional) may be
extended to 10 years in the case of closely-held corporations.
One notable restriction different from China was that at least one
representative director (, which roughly corresponds
to chairmanin China, but in Japan a company can have
multiple representative directors) must have a Japanese address.
This restriction was removed in March 2015.
Capital structure
Corporations in Japan, whether listed or unlisted, may issue class
shares and options in accordance with respective rules. Especially
in the case of investments in closely-held corporations, investors
are able to devise and adopt the best capital structure suited to the
capital needs of the company, each investors risk preference and
involvement with the management and other factors. For example,
risk-averse investors may want to insist on getting preferred stock
with some veto rights, while founders with smaller cash outlays
may be granted common stock and stock options which will
incentivise them to improve the companys performance. Issuance
JAPAN
of these securities will involve amendments to the companys

articles of incorporation, board/shareholders resolutions and
other steps in accordance with the Companies Act.
Chinese investors are advised to seek professional advice
on Japanese corporate laws and determine an optimal structure
upon close consultation with Japanese lawyers.
Section 4: Real estate
As discussed above, Chinese appetite for Japanese real estate
property is rapidly increasing. While the purchase and sale of
real estate property is generally free in Japan, investors should
consider retaining professionals to ensure the property is
free of any liens or restrictions and to avoid any unpredicted
burdens.
No special government approval is required when Chinese
companies (including companies incorporated in China or
Japanese companies owned by Chinese companies) purchase real
estate (land and buildings) in Japan. Of course, there are laws and
regulations that are generally applicable to all real estate investors
in Japan, such as the Building Standards Act () and
City Planning Act (), which set out certain restrictions
on the development and construction of property.
A key difference in Japan is that investors get to obtain full
ownership of the land, as opposed to the land use rights that can
be obtained and disposed of for Chinese property. Landowners
are free to use and dispose of its land, unless otherwise restricted
by the City Planning Act or other applicable regulations. Also, in
Japan, land and building attached thereto are treated as separate
For the lease of lands, in principle, a lease term must be 30

years or more and landlords are substantially required to renew
the term unless the tenant has failed to pay rent for an extended
period of time. There are special types of land leases providing for
a fixed term which may be executed between parties when satisfying certain formal and/or substantive requirements.
As for buildings, the lease term written in contact is much
shorter (typically two years for residential), but landlords are substantially required to renew the lease unless due to reasons such
as the tenants failure to pay rent for a long period of time. Also,
pursuant to court precedents, landlords may not terminate the
lease agreement even when the tenant has breached the contract
except under extremely limited circumstances. Investors may
consider executing fixed term leases to protect their rights and
interests and ensure predictability.
Section 5: Labour and employment
Chinese investors must be aware of various costs for operating
businesses in Japan, and labour costs are one of the key factors to
consider. There are many particularities of Japanese labour laws
and practice that Chinese investors should keep abreast of.
Restricted termination
Some claim Japan is more socialistic than China with respect to
the legal protection of employee rights, and there is some truth
to this. Traditionally, Japanese employees are hired by a company
with no fixed term immediately after college graduation, and
they get to work for the same company until their retirement age
(typically at 60 years old) (this practice is known
as the Permanent Employment System). The
In order to allow businesses in Japan to operate
Japanese labour laws, initially provided in court
more cost-competitively, the Abe administration
precedents but later codified into law, protect this
traditional and prevalent labour practice. Most
is contemplating introducing the white collar
typically, even if an employer is contractually
exemption system
entitled to terminate a labour contract, a termination without an objective and logical reason
real estate properties and may have different owners, which may based upon social convention will be considered abuse of termination rights and held invalid and void. Many fired employees
lead to complicated legal consequences when investing in them.
All Japanese real estate property is registered in the national in Japan file lawsuits on this ground. The judgments are made
real estate registration system, with all details of the real estate on a case-by-case basis but often ruled in favour of employees.
and any subsequent collateral and other interests. Any party may To avoid uncertainties involved with disputes, many employers
obtain copies of the registration book to access these details. choose to make extra severance payments and mutually terminate
As the Japanese real estate registration system is old, some land labour contracts.
In principle, employers are required to pay a minimum of
(and, in some cases, buildings) may have a long history of chains
of transfer of ownership and/or other interests between various 25% of overtime if employees work for more than 40 hours in
parties. Effective due diligence is necessary to ensure the invest- a week, excluding managers. 25% seems small, but due to the
Japanese practice of working long hours, employers may incur
ment is free from any legal issues.
substantial overtime costs. Work hours should therefore be
Protection of tenants
properly managed and recorded. In order to allow businesses in
Japanese real estate laws provide a greater protection of tenants. Japan to operate more cost-competitively, the Abe administration
As revenue from a purchased real estate property is, in most is contemplating introducing the white collar exemption system
cases, realised by renting out to residents or business operators, where no overtime charge will be necessary for certain non-managers who satisfy certain requirements.
investors should be aware of the applicable rules.
24
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2020
20%
(1)
(2)
(3)
(4)
2015
>>
25
20153
(20148)
26
<<
2015
25%
Nigeria
Nigeria
Tiwalola Okeyinka
LEX
Section 2: Investment vehicle
What are the key sectors in your jurisdiction that attract, or

to which the government is seeking to attract, COI? Is the
government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in
your jurisdiction?
The Nigerian government is generally supportive of investments from China. In fact, Nigeria currently has several bilateral
agreements and memoranda of understanding (MOU) with the
Peoples Republic of China. The key sectors which are subjects
of these agreements include infrastructure (public), oil and gas,
power, agriculture, communications and tourism.
The bilateral relations between Nigeria and China are mostly
facilitated by the Federal Government and the Ministry for Trade
and Investment, with the President taking the lead and with
support from states governors and relevant ministers.
Some of Chinas current investments in Nigeria include:
What are the most common legal entities and vehicles

used for COI in your jurisdiction? How long do they take
to become operational? What are the key requirements
for establishment and operation of these vehicles which
are relevant to COI (e.g. is there a requirement for local
directors)?
If a foreign company wishes to do business in Nigeria directly,
without investment in an existing entity, it is required by law to
first incorporate a separate legal entity in Nigeria for that purpose,
by registering with the Corporate Affairs Commission (CAC).
Certain categories of foreign companies may, however, apply
to the President of Nigeria for exemption from local incorporation. These are:
1. Development of 110 villas near the Lekki Free Trade Zone

by the Chinese Civil Engineering Construction Corporation
(CCECC). The project was announced in 2013, in addition to
a further commitment of about US$1 billion for more projects
in Nigeria.
2. In July 2013, the China Development Bank (CDB) signed
a US$100 million facility agreement with the First Bank
of Nigeria in order to boost lending to small and medium
scale enterprises in the country and stimulate the Nigerian
economy.
3. The Federal Ministry of Trade and Investment (Nigeria) and
the Sanshui District Bureau of Economy, Science and Technology Development Promotion in China signed an MOU
in 2013 to facilitate the transfer of skills and technologies,
including a trade cooperation agreement between many of
the factories in Nigeria and the industrial park within the
Sanshui Economic Development Zones.
4. In 2013, Unicontinental International Engineering Company,
a Chinese mining company, signed a multi-million dollar
joint venture agreement with a Nigerian company, Multiverse plc to commence work on new mining projects in the
country. The joint venture plans to build quarries that would
supply granite and minerals to support infrastructure projects
across the country.
5. In 2013, a US$20 billion MOU was signed between Power
China and the Ministry of Power to generate 20,000 megawatts
of electricity for Nigeria.
(a) foreign companies invited to Nigeria by or with approval

of the federal government to execute a specified individual
project;
(b) foreign companies executing individual loan projects on
behalf of donor countries or international organisations;
(c) foreign government-owned companies engaged solely in
export promotion activities; and
(d) engineering consultants and technical experts engaged in any
individual specialist projects under contract with any of the
governments of the federation, their agencies or other bodies
where the contract is approved by the federal government.
A company may be incorporated as either a private or a public
company in any of the following forms:
(a) company limited by shares, which is a company having the
liability of its members limited to the amount, if any, unpaid
on the shares held by them;
(b) company limited by guarantee, which is a not-for-profit entity
having the liability of its members limited to the amount that
they have undertaken to contribute (or guarantee) in the
event of the company being wound up; or
(c) unlimited company, which is a company not having any limit
on the liability of its members.
For the purpose of registration with the CAC, there are no
residency or nationality restrictions with respect to shareholders
or directors of the company. As such, all of a companys shareholders and directors can be foreign persons or entities.
The registration of a company with the CAC will usually take
about one to two weeks. Post-registration filings include:
>>
27
Nigeria
Registration with the Nigerian Investment Promotion Commission

A company with foreign shareholding is required to register with
the Nigerian Investment Promotion Commission (NIPC), especially where the company may in future seek pioneer status or
require other services from the NIPC.
Business permit
A company with foreign shareholding is required to register with
the Ministry of Interior and obtain a business permit. A business
permit is a permanent approval granted to a company with
foreign shareholders to carry on business in Nigeria. To qualify,
the company must have a minimum share capital of NGN10
million (Rmb330,000).
Tax registration
All companies are expected to register at the relevant tax office for
income tax purposes. They are also required to register for Pay as
You Earn (PAYE) and value-added tax (VAT) purposes within six
months of incorporation.
Upon registration, a tax identification number (TIN) and VAT
registration number will be allocated to each registered company.
These numbers must be inserted on all the companys invoices.
Registration for corporate tax and VAT may take up to two weeks
and obtaining a Tax Clearance Certificate may take another two weeks.
Immigration
Expatriate quota
An expatriate quota is the permit granted a company to employ
expatriates to specifically approved positions. Companies wishing
to obtain expatriate quota are required to apply to the Ministry of
Interior in the prescribed form.
The quota may either be granted as Permanent until
Reviewed (PUR) or for a renewable term, usually of two to three
years at each instance. The PUR is usually granted with respect to
the chief executive position in the company.
One of the functions of the Ministry of Interior is to monitor
the execution of the quota positions granted in order to ensure
effective transfer of technology to Nigerians and the eventual
indigenisation of the positions occupied by the expatriates.
Emphasis is therefore placed on employing Nigerians to understudy the foreign experts and acquire relevant skills for the
eventual take-over of the expatriate quota positions.
Processing expatriate quota approvals can take about 10-12
weeks. The application is usually processed simultaneously with
that of the business permit.
STR visa and CERPAC
A foreigner who has been employed to take up an expatriate quota
position would in the first instance require a Subject-to-Regularisation (STR) visa to enter Nigeria for the purpose of taking up
the employment. An STR visa may be obtained from the Nigerian
mission in the country where the applicant has been domiciled
for at least six months.
A foreigner with an STR visa is required to regularise his stay
in Nigeria by applying for and obtaining a Combined Expatriate
Residence Permit and Alien Card (CERPAC) from the Nigerian
Immigration Service within 90 days of his entry into Nigeria.
28
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Once the CERPAC is issued, the expatriate will be expected to

register his presence at the immigration office closest to his place
of residence or occupation.
Temporary Work Permit
Temporary Work Permits (TWPs) are usually issued to expatriates invited by corporate bodies to provide specialised services,
such as after-sales installation, maintenance, repair of machines
and equipment and other services that require special skills or
expertise. It is issued by and obtainable only from the office of the
Comptroller General of Immigration at the Nigeria Immigration
Service Headquarters in Abuja.
The process may take between one and two weeks.
a. Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into
the country? Are there any reciprocal tax arrangements
between your jurisdiction and China?
Nigeria has signed a number of double taxation treaties with
countries including China. Residents of these countries enjoy a
preferential withholding tax rate of 7.5% on payments of interest,
rent, royalties and dividends that are subject to Nigerian taxation.
Corporate tax
The profits of a Nigerian company accruing in, derived from,
brought into or received in Nigeria are subject to income tax at
the rate of 30% of taxable profits.
Withholding tax
Where payment is due to a company or individual with respect to
goods or services supplied by the recipient or the payment is of a
dividend, interest on loan or rent, the payer is required to deduct
a portion of the payment by way of withholding tax and to remit
the tax withheld to the appropriate tax authority. The tax remitted
will be held by the tax authority to the credit of the recipient
concerned and be available for set-off against the income tax due
from the recipient.
The rate of withholding tax on dividends is 10%.
The tax withheld from a dividend, interest on loan or rent
is the final tax due from a foreign company or a non-resident
recipient of the payment.
The dividend (net of withholding tax) received by a company
out of the profits of another company are regarded as franked
investment income of the company receiving it and are not charged
to further tax. In the event that the dividend is redistributed to the
companys shareholders and withholding tax is to be deducted
from it in accordance with the law, the company may set off the
withholding tax which it has itself suffered on the same income.
in place?
Yes. One incentive involves obtaining pioneer status. Under the
Nigeria
Industrial Development (Income Tax Relief) Act of 1970, an industry

or a product may be declared a pioneer industry or product if (i)
the industry is not carried on in a scale suitable to the economic
development of Nigeria; (ii) there are favourable prospects of
further development; or (iii) it is expedient in the public interest to
encourage the development of the industry in Nigeria.
Pioneer status is granted to companies to encourage the development or establishment of an industry and to enable a company
in the industry or manufacturing a product to make a reasonable
level of profit within its formative years.
A company with pioneer status is entitled to a tax holiday of
three years which may be renewed for a further period of two
years. Dividends received by shareholders are also exempted
from withholding tax.
An application may be made by a company for the issue of a
pioneer certificate with respect to any industry declared a pioneer
industry, provided that the qualifying capital expenditure to be
incurred on or before production day is at least NGN10 million
(Rmb330,000).
Other tax reliefs and incentives include:
(a) Investment allowance: An investment allowance of 10% of
expenditure incurred on plant and machinery.
(b) Rural investment allowance: An allowance ranging from 5%
to 100% of capital expenditure incurred on the provision of
facilities such as electricity, water, tarred road or telephone for
the purpose of a trade or business which is located at least
20km away from the facilities.
(c) Research and development: Deduction of research and
development costs from taxable profits. The amount deducted
will not exceed 10% of the total profit of the company as
ascertained before any deduction is made.
(d) Tax reliefs and incentives applicable to specific sectors.
(e) Losses may be carried forward indefinitely.
The Nigerian Investment and Promotion Commission Act (NIPC)
Author biography
Tiwalola Okeyinka
Tiwalola Okeyinka is a member of the corporate
commercial group at LEX. Tiwalolas main practice
areas are corporate commercial, intellectual property,
insurance, corporate governance and regulatory
compliance.
Tiwa advises on business entry requirements, including compliance
with the relevant regulations in Nigeria. Her work also involves the
protection of intellectual property rights, including trademarks, patents,
industrial designs and copyright, IP portfolio management and the
provision of franchising and licensing advice as well as legal solutions for
combating counterfeit products and parallel imports.
Tiwa has a law degree from one of Nigerias most prestigious
universities and was called to the Nigerian Bar in 2010. She is a member
of the Nigerian Bar Association and International Trademark Association
(INTA) where she also currently serves on the Issues Identification
Sub-Committee. She has attended a number of local and international
conferences and seminars.
30
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provides that the federal government of Nigeria will not acquire any
enterprises unless the acquisition is for a public purpose or in the
national interest and is done under a law that makes provision for:
(a) fair and adequate compensation; and
(b) a right of access to the courts for determining the investors
interest or right and the amount of compensation to which he
is entitled.
Save for the above, the nationalisation or expropriation of any
enterprise is prohibited.
What foreign currency or exchange restrictions should
The Central Bank of Nigeria (CBN) maintains general surveillance over the foreign exchange market. The principal law
regulating the foreign exchange market is the Foreign Exchange
(Monitoring and Miscellaneous Provisions) Act (FX Act) of 1995.
Pursuant to powers conferred under the FX Act, the CBN has
issued a Foreign Exchange Manual which is intended to guide
applications for foreign exchange transactions in Nigeria.
Foreign currency is freely obtainable on the Autonomous
Foreign Exchange Market (AFEM) subject to minimum documentation requirements. Transactions in the AFEM can be
conducted in any convertible foreign currency through authorised dealers (commercial banks).
The application and approval formalities in relation to foreign
currency payments/receipts are determined by the activity the
payment or receipt is for.
Import of investment capital
There are no prior approvals required to be obtained in order to
import foreign capital. Foreign capital may be imported into Nigeria
through accounts operated with any of the commercial banks in
Nigeria. It will be evidenced by a Certificate of Capital Importation (CCI), which is statutorily required to be issued by the bank
through which the capital is imported within 24 hours of import.
Repatriation of dividends, loan repayments and capital
Any person who invests foreign equity or loan capital in any enterprise in Nigeria and obtains a CCI is guaranteed unconditional
transferability of funds in freely convertible currency with respect
to:
dividends or profits (net of taxes) attributable to the
investment;
payments for the purpose of servicing a foreign loan; or
the remittance of proceeds (net of taxes) and other obligations
in the event of sale or liquidation of the business or interest
attributable to the investment.
The CCI issued at the time of import of capital together with
the other relevant documents are required to facilitate the repatriation of dividends, loan repayments and capital respectively.
Tiwalola Okeyinka
LEX
()
1. 110
201310
2. 201371
3.
2013
4. 2013Unicontinental International Engineering

CompanyMultiverse plc
5. 2013
20020,000
()

(1)
(2)
(3)
(4)
(1)
()
(2)
()
(3)
1(330,000)
10-12
2015
>>
31
Tiwalola Okeyinka
Tiwalola Okeyinka LEX
Tiwalola
Tiwa
Tiwa
2010
90
1.
7.5%
2.
30%
10%
()
3.
1970
()
(i)
(ii)(iii)
32
<<
2015
32
1(330,000)
(1) 10%
(2) 5%
100%
20
(3)
10%
(4)
(5)
4.
(a)
(b)
1995()
()
24
()

()
offshore
Offshore
Tim Prudhoe and Shaun Z Wu
Kobre & Kim
hinese business has an increasingly global perspective.

Companies such as Sinopec, Fosun and Anbang have
received widespread coverage in Chinese and worldwide media by
investing abroad and expanding business into overseas markets.
This phenomenon is not only the result of the macro-economic policy of the central government, but is also driven by the
need of the Chinese investors themselves for extensive resources
and capital, advanced technologies and management, broader
(and more international) brand recognition and new business
opportunities.
Development and Reform Commission (NDRC) came into effect

in May 2014. This further streamlined and simplified the regulatory scheme for COI and delegated significant regulatory power
to the NDRCs lower levels.
According to the World Resources Institute, 68% of Chinas
outbound direct investment stock in 2013 was in Asia. If one
extracted the potential flows to the offshore financial centres
(OFCs), the geographical distribution of Chinas outbound
foreign direct investments stock varied materially. This shows the
significant role OFCs play in COI.
With the preferential treatment given under the Mainland and
Hong Kong Closer Economic Partnership Arrangement (CEPA)
and various policies promulgated by the central government to
facilitate communication with businesses in the mainland, Hong
Kong is usually the home to many direct holding companies of
mainland entities. However, Chinese investors needs for flexibility and confidentiality cannot always be fully satisfied with the
legal regime in Hong Kong. This is where the Caribbean jurisdictions step in and is why they have become such familiar aspects
of doing business into and now out of China.
Statistics show Chinas current outbound investment is totalled

at US$660 billion. A whopping 60% of that investment is concentrated across Hong Kong, the Cayman Islands and the British
Virgin Islands (BVI). With COI expected to double to US$1.2
trillion within the next decade, these and other Caribbean jurisdictions will likely continue to be the favourite offshore financial
centres for use by Chinese investors.
Although the benefits of investing abroad are widely perceived
from within the PRC, an increasing number of Chinese investors Section 2: Investment vehicles and incentives
now realise that specific Caribbean issues arise if and when an
investor-related dispute evolves. As a result, an understanding of Of the several OFCs based within the Caribbean region, each is
the Caribbean dynamics of these investments is more important known to have a particular focus. The BVI, for instance, is the
than ever and, if properly managed, can retain many of the advan- worlds leading centre for company incorporations. According to
tages of Caribbean business structuring.
the BVI Financial Commissions Statistical Bulletin for the third
Official statistics published by Chinas
Ministry of Commerce (MOFCOM) show that
between 2004 and 2014, non-financial outbound An increasing number of Chinese investors now
direct investment grew from US$3.62 billion to
US$102.89 billion. China was ranked third in realise that specific Caribbean issues arise if and
the world in terms of foreign direct investment when an investor-related dispute evolves
(FDI) outflows by the United Nations Conference on Trade and Development for 2012 and
2013. The 2014 China Outbound Direct Investments Statistics quarter of 2014, the BVI has over 480,000 active companies. It
Bulletin by MOFCOM, the National Statistics Bureau and the is also a leading domicile for offshore trusts and hedge funds.
State Administration of Foreign Exchange is expected to be According to BVI authorities, more than 40% of the BVIs financial
published in September this year, but the clear message is that service business comes from China and other Asian countries.
Chinas investment outflows are expected to surpass its inflows Such is the market penetration that BVI is a general term used
for the first time.
to refer to the offshore companies in PRC and Hong Kong.
To encourage and facilitate Chinese investors going overseas,
Bermudas insurance and reinsurance business is highly
the regulations on outbound direct investments in China have regarded in the onshore world. Bermuda is the largest domicile
been updated since March 2009. In particular, the Measures for in terms of active captive insurance companies with a total of
the Administration of Check and Approval, and Record Filing 1,200 as of the end of 2014 and is continuing to see new captive
of Overseas Investment Projects promulgated by the National insurance businesses relocating to the area. The Cayman Islands
>>
33
offshore
The Cayman Islands have gone even further with the Confidential Relationships (Preservation) Law (2009 Revision) (CRPL)
which protects business activities by prohibiting the disclosure
of all confidential information arising during the course of a
professional relationship. However, the CRPL is not a blocking
statute as it contains a mechanism for information to be disclosed
in certain limited circumstances. These include to the police
and where an application is made under the CRPL to disclose
documents. Where disclosure is made pursuant to the CRPL
itself, the Cayman court will be careful to limit the manner in
which the documents can be used.
However, the reality of absolute confidentiality is diluted as
a result of various supra-national legislative initiatives. These
initiatives include anti-money laundering legislation requiring
trustees and other fiduciaries to report suspicious activity. In
both Hong Kong and Cayman, suspicious activity includes, for
example, where a client conducts a transaction
which is inconsistent with a customers known,
legitimate business or personal activities or with
One of the main attractions of establishing
the normal business for that type of account.
investment vehicles in the Caribbean is the ease
Anti-money laundering laws both in Hong Kong
with which they can be set up and administered
and Cayman are similar with respect to tippingoff and make it a criminal offence to disclose
information to the target of any investigation
Many offshore jurisdictions are now recognised and approved which is likely to prejudice that investigation into suspicions of
as domiciles for major stock exchanges in the world, which gives money laundering.
Chinese investors access to capital markets in the US, UK and
In addition, many OFCs have signed Tax Information
Hong Kong. The HKEx Fact Book for 2013 reports that, as of the Exchange Agreements (TIEAs). The Cayman Islands, the BVI,
end of 2013, Cayman companies represented 41% of companies and Bermuda have all entered into TIEAs with China. Under
listed on the Hong Kong Stock Exchange, while Bermudan this regime, information is provided in response to individual
companies represented 32%.
requests rather than a routine exchange of information.
The use of offshore vehicles also introduces greater tax effiThe current global initiative advocated by the G20 and
ciencies when compared with onshore jurisdictions. In many supported by the Organisation for Economic Co-operation and
instances, offshore jurisdictions are either tax neutral or have Development (OECD) to improve transparency will change the
signed double taxation treaties with China.
way TIEAs operate. A system of automatic or routine information
exchange is envisaged and will not only provide information on
non-compliance with tax rules but will increase voluntary comSection 3: Confidentiality legislation
pliance among non-resident tax payers. The initiative, which will
be implemented next year, has been gaining momentum in the
The rules regarding confidentiality and preventing public access offshore world and has been adopted by a number of countries
to information is another feature to which Chinese investors including Cayman, Bermuda, the BVI and the Turks and Caicos
gravitate. Information on shareholders in offshore jurisdictions Islands. Routine information exchange will start in October 2017
is not generally public, unlike in Hong Kong where the names and apply to accounts opened on or after January 1 2016.
and addresses of directors and shareholders are made available
for inspection to any person on payment of certain fees, unless
the court considers it amounts to an abuse of legal rights, under Section 4: Company registries
the new Hong Kong Companies Ordinance that came into effect
on March 3 2014.
The information that can be obtained about companies registered
The confidentiality regime existing in Caribbean OFCs remains in OFCs currently remains limited. The statutory requirements
for companies to file registers listing directors and shareholdone of the most significant attractions to Chinese investors.
Some but not all jurisdictions have their own confi- ers are of little value to a third party enquirer who is seeking to
dentiality legislation which precludes (by creation of criminal identify the individual owners of a registered company. Generally,
offences) access to information from service providers. The BVI the only documents that may be accessed are the Certificate of
has codified the common law duty of confidentiality in relation to Incorporation, the Memorandum and Articles of Association and
banks in the BVI Banks and Trust Companies Act, 1990 (Amended information confirming the identity of the companys Registered
1995). The BVI must therefore rely on the common law in relation Office. Information as to the identity of the ultimate owners is not
accessible to the general public.
to non-banking professional relationships.
are known for investment funds and, according to the Cayman
Islands Monetary Authority, have more than 11,000 registered
mutual funds.
One of the main attractions of establishing investment vehicles
in the Caribbean is the ease with which they can be set up and
administered. A Cayman Islands or BVI company, for example,
takes only a few days to incorporate. Caymans laws allow investors
to operate investment funds through a number of vehicles, the most
commonly used being an exempted company, a segregated portfolio
company, a unit trust or an exempted limited partnership.
In the Cayman Islands, exempted companies may redeem or
purchase their own shares and operate as open-ended corporate
funds. An exempted company can also be established as a segregated portfolio company, which makes it possible to provide a
means for different groups to protect their assets when carrying
on business through a single legal entity.
34
<<
WWW.KOBREKIM.COM.HK
The Global Litigation Boutique for International Disputes
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Kobre & Kim brings together a seamlessly integrated team
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NEW YORK | LONDON | HONG KONG | WASHINGTON DC | SAN FRANCISCO | MIAMI | CAYMAN ISLANDS | BRITISH VIRGIN ISLANDS
offshore
Issues surrounding access to information were highlighted

recently, as Caribbean islands responded to the UK government
and the European Unions initiative to create public registers of
legal and beneficial ownership information on overseas shell
companies and trusts.
The proposal, aimed at increasing transparency, was rejected
by a number of Caribbean islands. In early February 2015, BVI
officials announced the result of the public consultation that more
than 80% of BVI residents and financial services industry practitioners were against the proposal. Although the BVI government
has not yet officially said no to the creation of a public register, by
all indications, it will also reject the proposal. Public consultation
to adopt steps to improve transparency within the BVIs existing
system is ongoing. The BVI government is yet to confirm when
this consultation is due to close.
The Cayman Islands government rejected the proposal stating
that Caymans existing regime already requires corporate service
providers to make this type of ownership information available to
law enforcement, tax and regulatory authorities. Caymans government has said that it will instead seek to enact legislation to
make the current process easier.
Turks and Caicos Premier Rufus Ewing responded to statements made by the UK Opposition Labour Party Leader, the Rt.
Hon. Edward Milliband, who charged UK Overseas Territories of
not complying with UK directives on creating public central registries of beneficial ownership. Premier Ewing emphasised that the
Island is in fact well regulated and compliant with global standards.
Section 5: Disclosure and evidence-gathering
tools
Where your client is actually the one seeking information, confidentiality of course may be unhelpful. Three types of discovery
orders are generally seen in the OFC offshore courts:
(i) a Norwich Pharmacal order, which allows information from a
third party that has innocently become involved with or has
facilitated anothers wrongdoing. Once an order is granted,
the third party must provide the applicant with full information including the location of assets and the identity of the
wrongdoers.
(ii) a Bankers Trust order, by which it is possible to obtain
information to identify the location of assets. For example,
the order can be used to obtain account information from
financial institutions in support of proceedings. An application for this order can only be made if a bank has funds
relating to a claim, there is strong evidence that fraud has been
committed and there is some urgency to the application.
(iii) orders used to assist in foreign bankruptcy proceedings.
Another route to obtaining information may be a court-tocourt request or Letter of Request (also sometimes known as
Letters Rogatory). The major OFCs are signatories to the Hague
Convention on the Taking of Evidence Abroad in Civil or Commercial Matters via their status as Overseas Dependent Territories
of the United Kingdom (including the BVI, Bermuda and Cayman).
36
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Author biographies
Tim Prudhoe
Tim Prudhoe is a commercial litigator and arbitrator with
extensive experience in relation to international financial
centres. In addition to his work in the BVI, Turks & Caicos
Islands, Bermuda and several other offshore jurisdictions,
he also undertakes work in the English courts as a
barrister. His unique combination of onshore and offshore trial experience
is especially suited to multi-jurisdictional disputes, specifically involving
insolvency and fiduciary disputes.
Tim is a frequent speaker at conferences both in the Caribbean and
elsewhere, where he lectures on a wide range of topics including prejudgment injunctive relief, directors and other fiduciaries duties. He has
served as chair of judges in respect of the Society of Trusts and Estates
Practitioners (STEP) Caribbean Conference industry awards and has
been on the steering committee for the STEP Caribbean Conference
for several years. He is an author for the main work of Gore Browne on
Companies (chapters on non-standard incorporations and annual returns
for companies: both evolving fields).
Prior to joining Kobre & Kim, Tim was based in the Caribbean where
his work spanned the major offshore financial centres, representing
clients across a wide range of jurisdictions in disputes involving
contentious insolvency, commercial litigation and arbitral disputes relating
to the fiduciary and financial services industries.
Shaun Z Wu
Shaun Wu is an experienced attorney who focuses on
international litigation and arbitration, regulatory and
internal investigations as well as the enforcement of
high-value awards and judgments in complex, crossborder cases. He has particularly in-depth experience
working with Asia-based clients, and especially on China-related matters.
Shaun has acted in a range of international disputes involving
governments, state-owned enterprises, multinational corporations and
high net worth individuals, including litigation and arbitration under the
major arbitral rules (ICC, LCIA, HKIAC, SIAC, JCAA, UNCITRAL). He
is admitted to the Chartered Institute of Arbitrators (CIArb) and the
Hong Kong Institute of Arbitrators (HKIArb), and has published widely
on international dispute resolution and cross-border enforcement.
In addition, Shaun has experience managing court litigations across
Asian jurisdictions as well as assisting clients in conducting internal
investigations and compliance reviews.
Prior to joining Kobre & Kim, Shaun practised at King & Spalding,
where he focused on international arbitration and cross-border dispute
resolution.
This means that a party may request, through its home court, the
assistance of a foreign government and/or court in obtaining the
production of evidence. Where disclosure is sought in the context
of an injunction in existing proceedings, the applicant seeking
information should be careful not to overlook the terms within an
underlying contract, such as the joint venture agreement or trust
instrument, as they may compel disclosure in certain instances.
With COI expected to double in the next decade, OFCs such as
the Cayman Islands, the BVI, and Bermuda will continue to play
an important role in the resulting financial flows. The Caribbean
will continue to enjoy popularity in China due to factors such as
tax neutrality and confidentiality.
offshore
As investments both into and out of China structured via the

OFCs continue to increase, it is inevitable that Chinese investors
will face similarly increasing numbers of disputes in the OFCs
themselves. The types of litigation already experiencing strong
growth include shareholder and joint venture disputes as well
as involuntary bankruptcy/insolvency as a dispute resolution
mechanism.
Last year saw a number of disputes in the Caribbean involving
offshore holding companies. These included:
which sometimes includes applications for the appointment

of (provisional) liquidators;
beneficial owners rights and potential cause of actions against
trustee companies; and
joint venture disputes involving one or more shareholders seeking to take control of the joint venture from other
shareholder(s).
In addition, the recent draft of the new PRC Foreign Investment Law reignited the discussion on the future of the variable
interest entity (VIE) structure, a creative design of contractual
arrangements that gives Chinese companies in the restricted
industries access to the foreign capital market. The proposed new
law introduced the standard of actual control when defining
shares in a BVI company allegedly holding or associated with

Gaddafi assets;
shares in a BVI company holding the second largest private
residence in London;
shares in a BVI company allegedly owned
by a Ukrainian oligarch subject to a US$30
million debt liability in Russia; and
The recent draft of the new PRC Foreign Investment
Cayman Islands companies owned by elusive
Law reignited the discussion on the future of the
tech tycoon William H. Millard who owed
taxes of more than US$100 million in the variable interest entity (VIE) structure
Commonwealth of the Northern Mariana
Islands.
foreign investment and seems to block the practice of VIEs by
These examples illustrate that disputes often require some defeating its purpose once it becomes effective. Depending on
how the final version and its interpretation end up, disputes are
element of asset recovery.
Chinese investors have been involved in the following types likely to arise from that aspect.
of disputes with an offshore element:
To be better prepared, Chinese investors need to first understand
that Caribbean jurisdictions are neither 100% protected bunkers
an offshore construction project going sour;
against creditors or other stakeholders nor informational black holes
control of holding companies or master funds in the for relevant government agencies. As discussed above, there are
Caribbean jurisdictions;
tools in the offshore jurisdictions to be deployed in order to obtain
applying for or defending recognition and enforcement of information about offshore interests and assets, and there are official
foreign judgments or arbitral awards in the Caribbean courts, channels for government agencies to obtain such information.
>>
37
Tim Prudhoe Shaun Z Wu
201448
6,600
60% 20141200
12,000

11,000
20042014
36.21,028.920122013
20132013
2014 41%
9 32%
20093

20145
68%

201433

1990
38
<<
2015
1995
2009
CRPL
CRPL
CRPLCRPL
TIEA
TIEA
20
TIEA
Tim Prudhoe
Tim Prudhoe
Prudhoe
STEP
STEP
Gore Browne
Prudhoe
Shaun Z Wu
CIArb
HKIArb
King & Spalding
201710201611
20152
80%
Edward Milliband
Rufus Ewing
(1) Norwich Pharmacal
(2) Bankers Trust
(3)
2015
>>
39
William H. MillardMillard
40
<<
2015
Switzerland
Switzerland
Dieter Gericke, Felix Dasser, Marcel Dietrich, Gregor Bhler, Reto Heuberger and Martin Grod
Homburger
1. Why should Chinese businesses be interested
in Switzerland?
Switzerland was among the first non-communist countries to
recognise the Peoples Republic of China in early 1950. Swiss
companies have been among the first to invest in China. In
2013, the two countries signed a Free Trade Agreement (FTA)
which entered into force on July 1 2014.
Internal stability, external neutrality and tradition of government non-interference.
Independence (not part of the European Union), open market
and own currency (Swiss Franc).
Tradition of successful companies and entrepreneurship
combined with innovation, top-notch technology and
developed financial services.
Business friendly and reliable civil law system with economic
freedom and freedom of contract. Chinese civil law has partly
been based on German and Swiss law.
Swiss law is often used as a neutral, predictable and flexible
law for international contracts with or without a Swiss angle.
It is the number one substantive law in ICC arbitrations.
Transparent legislation with no overregulation of business
and markets.
Cooperative authorities and no corruption.
Reasonable tax rates.
Excellent education and flexible labour market.
Highly-developed place of arbitration and litigation.
Numerous small and large companies from all over the world,
including China, the US, the EU, Japan, Russia, India, Middle
East, Latin America and Africa invest or list in Switzerland,
acquire Swiss companies, use Swiss law for international
agreements or choose Switzerland as a hub for their international activities or for dispute resolution.
2. To what extent is foreign involvement in
M&A transactions in Switzerland regulated or
restricted?
There are no general restrictions on capital transactions between
Switzerland and foreign investors that would allow government agencies to influence or restrict the completion of business
combinations or other M&A transactions. However, there are
industry-specific regulations and approval requirements (see
question 8). Considering real estate, the Federal Act on the Acquisition of Real Estate by Persons Abroad restricts the acquisition
by a foreign person or a foreign-controlled company of nonwww.chinalawandpractice.com
commercial real estate in Switzerland. Furthermore, the Swiss

constitution stipulates a general limitation insofar that no more
than 20% of the total stock of residential units and the gross residential floor area in any commune can be used as a second home.
The acquisition of shares in a company whose statutory or factual
business purpose is trading in non-commercial real estate is also
subject to approval, except for listed companies.
3. What investment options are available to
prospective foreign investors and acquirers of
companies in Switzerland?
Chinese investors can invest in or through a Swiss or a foreign
company without any particular restrictions. In terms of Swiss
legal entities, the most common Swiss legal forms are the AG
(Aktiengesellschaft: stock corporation) and the GmbH (Gesellschaft mit beschrnkter Haftung: limited liability company).
Generally, no government approval is required for the formation
of a Swiss company.
The stock corporation is a legal entity with one or more
shareholders (physical persons, partnerships or legal entities),
and a minimum share capital of CHF100,000, of which at least
CHF50,000 must be paid up. It must be registered in the commercial register of its domicile, which does not list the shareholders
of the corporation or their respective holdings in the corporation.
Fundamental decisions require approval by the shareholders
meeting. Management is carried out by the board of directors or
management. There are no citizenship requirements for shareholders or the board or management. However, at least one
person with residence in Switzerland must have the power to
bindingly represent the corporation.
The limited liability company is a legal entity with one or more
members (physical persons, partnerships or legal entities), and a
minimum nominal capital of CHF20,000. It must be registered in
the commercial register of its domicile, which lists the members
and their quota in the company. The company acts through the
members meeting, which can delegate management to managers.
At least one person with residence in Switzerland must have the
power to bindingly represent the company.
Acquisitions: Prospective Chinese acquirers may acquire
a Swiss business or parts thereof by purchasing the shares of a
company (share deal), by purchasing all or specific assets (asset
deal), by a statutory merger or, in the case of listed companies, by
a public offer for the shares (public takeover).
Co-investments: In case of venture capital and other direct
investment transactions, several investors often join forces for
>>
41
Switzerland
the investment and to govern the company. For this purpose, the
articles of incorporation and a shareholders agreement provide for
board representation, preference rights, veto rights, information
and other rights of the investors and regulate rights of first refusal
and co-sale rights and obligations in view of a potential exit.
Corporate reorganisation structures: The Federal Merger
Act provides for a variety of instruments to accomplish corporate
reorganisations. For example, merger, demerger or transformation (change of corporate form).
4. What requirements are placed on foreign
investors?
Generally, there are no particular requirements with regard to
investments in private companies. For companies listed on a
Swiss stock exchange, the requirements that need to be observed
by any investor, irrespective of nationality, include:
offer is announced, the offer documentation must disclose the

relevant details of these transactions.
Transaction agreements: If an offer is recommended, the
bidder usually enters into a transaction agreement with the
target. The terms of such agreement are subject to review by
the TOB and must be disclosed in the offer prospectus. The
transaction agreement sets out: the terms and conditions of the
offer; the targets duty to support the bid and to recommend its
acceptance to its shareholders; and the targets future management structure. No-shop undertakings by the target are also
frequent and, in principle, permissible under Swiss corporate
and takeover law.
Break fees: Usually, transaction agreements provide that the
target can withdraw against payment of a break fee if a competing
offer is superior. There is no specific restriction, like percentage
of transaction value, on break fees. However, they are restricted
as a result of directors fiduciary duties and the purpose of the
takeover rules to create a level playing field for offers and to
safeguard the freedom of choice of shareholders.
Notification to the target and the stock

exchange if a bidder (directly, indirectly or in
concert with a third party) acquires or sells Usually, transaction agreements provide that the target
shares or equity-linked securities and thereby can withdraw against payment of a break fee if a
reaches, exceeds or falls below the thresholds competing offer is superior
of 3, 5, 10, 15, 20, 25, 331/3, 50 or 662/3% of all
voting rights in the target company;
Listed corporations need to disclose, in their annual business
Mandatory offer: A person holding, directly or indirectly,
report, the identity of shareholders or organised groups of or acting in concert with another person, more than 331/3% of
shareholders with a beneficial interest of more than 5% in the the voting rights of a company with a primary listing on a Swiss
corporations shares, to the extent that the interest is known to stock exchange is required to submit a public tender offer for
the corporation; and
all listed equity securities of that company. A potential targets
In the context of a public offer for the shares of a listed articles of association may, however, provide for an opting-out
company, the bidder and all shareholders holding more (no mandatory offer obligation) or an opting-up (increase of the
than 3% of the voting rights of the target must report all triggering threshold to up to 49% of the voting rights).
acquisitions and sales of equity securities in the target and,
Minimum price rule: In case of a mandatory offer (including
if applicable, in the company whose securities are offered in offers that would exceed the triggering threshold), the offer price
exchange for the equity securities of the target.
may not be set below the minimum offer price, which is the
higher of the following:
5. Are there any specific regulations or regulatory bodies governing public takeovers?
The Swiss Takeover Board (TOB) and the Swiss Financial Market
Supervisory Authority FINMA supervise public takeover offers.
The TOBs orders are binding and enforceable, unless appealed.
6. What are the methods by which a public
takeover can be achieved?
Stake building: Potential bidders often seek to acquire a significant stake in the target via acquisition of shares prior to the
launch of the public tender offer (see question 4). This can be
achieved through undertakings from the targets major shareholders to tender their shares or an outright purchase before the
offer is announced. If undertakings or acquisition agreements are
entered into during the 12-month period before the public tender
42
<<
The volume-weighted average price of the stock exchange

transactions in the 60 trading days before formal preannouncement or publication of the offer (or a valuation in case
of illiquid stock); or
The highest price paid by the bidder or persons acting in
concert with the bidder for shares in the company in the
preceding 12 months.
Conditions for a takeover: Voluntary public takeover offers
may be made subject to conditions precedent only if the conditions are beyond the bidders control. Where the nature of the
conditions precedent is such that the bidders cooperation is
required for their satisfaction, the bidder must take all reasonable
steps to ensure that the conditions are satisfied. With the approval
of the TOB, the offer may be made subject to subsequent conditions if the advantages of the conditions for the bidder outweigh
the disadvantages for the targets shareholders (e.g. obtaining regulatory approvals). Typical conditions include the following:
Transactions,
Disputes, Advice
Homburger provides high quality legal advice and

representation both domestically and internationally
in significant transactions, disputes and complex
legal matters to businesses and entrepreneurs.
Corporate | M&A
Financial Services
Litigation | Arbitration
IP | IT
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Tax
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Homburger AG
Prime Tower
Hardstrasse 201 | CH-8005 Zurich
P.O. Box 314 | CH-8037 Zurich
T +41 43 222 10 00
F +41 43 222 15 00
www.homburger.ch
lawyers@homburger.ch
Switzerland
Minimum acceptance threshold. The TOB requires that the

threshold not be unrealistically high also considering shares
already owned by the bidder. Typical thresholds are 67% in
solicited offers and 51% in unsolicited offers. In practice, most
offers reach acceptance levels of over 95%, thereby permitting
a squeeze-out of minority shareholders (starting at 90%).
Merger control, regulatory (including regarding listing or registration of shares offered in exchange for the targets shares)
or shareholder approval.
Material adverse effect (MAC) conditions. The typically
accepted thresholds are 10% of EBITDA, 5% of turnover or
10% of the targets net asset value.
A bidder required to submit a mandatory offer cannot make
that offer subject to conditions, other than those required to
comply with regulations, aimed at registration with voting rights
or protecting the economic substance (crown jewels) of the target.
Funding commitments: Funding must be in place before the
offer is announced. The bidder can make a formal pre-announcement of the offer before it has committed to funding. The actual
offer must contain details of the sources of financing and confirmation by the independent review body that financing is
available. The certain funds requirement imposes restrictions on
permitted conditions of the financing commitment.
7. To what extent have material adverse change
(MAC) clauses become more important in light
of the current economic climate?
The Swiss economy and Swiss companies have not been as
severely affected by the financial crisis as other Western jurisdictions. Rather, businesses headquartered in Switzerland do
and, throughout the crisis, did fairly well. Since Switzerland has,
with the Swiss Franc, its own and traditionally stable currency,
the Euro crisis had limited effects on the economic climate for
Swiss companies, except that exports have been affected by weak
foreign currencies. Companies typically hedge against exchange
rate risks. In addition, the Swiss National Bank supported the
Euro if the exchange rate dropped below CHF 1.20 for 1 EUR
until January 15 2015. Together with the discontinuing of the
minimum exchange rate, the Swiss National Bank lowered the
interest rate on sight deposit account balances that exceed a given
exemption threshold to -0.75%.
Nevertheless, the financial crisis has led to more carve-outs
from MAC conditions for adverse effects that are the result of
general market conditions and the financing environment. In
addition, commitment letters that secure the financing of an
acquisition have become common also in private acquisitions
and more often allow the seller to rely on the commitment.
8. Which regulated financial industries have
maximum foreign ownership thresholds?
There is no limitation on foreign ownership in the financial
industry. However, owners or acquirers of important stakes in
44
<<
financial institutions are subject to scrutiny over reputation, compliance and sound business conduct, and financial institutions
under foreign control may require a special licence.
Banks and securities dealers: All banks or securities dealers
incorporated or having a place of business in Switzerland must
have a FINMA licence before starting operations. Qualifying
shareholders, like individuals or entities owning directly or indirectly 10% or more of the banks or securities dealers capital or
voting rights or otherwise exerting a significant influence, are
also subject to scrutiny by FINMA. Shareholders who acquire or
sell a qualifying shareholding, or who increase or decrease their
shareholding beyond 20, 33 or 50%, must notify FINMA before
completing the transaction. An additional licence is required for
a Swiss bank or securities dealer under foreign control or in case
of changes in the foreign control.
Insurance companies: If an individual intends to, directly or
indirectly, acquire a participation in a (re-)insurance company
domiciled in Switzerland, it must notify FINMA if, as a result,
it reaches or exceeds the thresholds of 10, 20, 33 or 50% of the
capital or voting rights of the Swiss (re-)insurance company.
Investment fund managers: Qualifying shareholders, i.e.
persons or entities owning directly or indirectly 10% or more
of the capital or voting rights of the fund manager or otherwise
exerting a significant influence on the fund manager, are subject
to scrutiny by FINMA.
9. What policies are in place for Chinese
companies wishing to list on capital markets in
Switzerland?
Switzerlands regulated securities market consists mainly of the
SIX Swiss Exchange (SIX). SIX is a regulated securities exchange
market in Zurich and the reference market for more than 40,000
securities, connecting investors, issuers and participants from all
over the world. Within SIX, the Regulatory Board determines
listing admissions and ensures that issuers fulfil their obligations
during listing.
Typically, admission is granted based on a prospectus in line
with international standards. Prospectus review by the listing
authorities is a formal one (mainly completeness) and does
not extend to verification of the content. However, incomplete,
incorrect or misleading information in the prospectus may trigger
prospectus liability of those responsible for the misinformation.
For the primary listing, non-Swiss issuers have to comply
with the same listing requirements as domestic issuers. Requirements include that:
at least 25% of the issuers shares will be free-floating;
the free-float has an expected market capitalisation of at least
CHF25 million; and
the issuers reported equity capital must be at least CHF25
million.
Once listed, the issuer is subject to ongoing obligations for
maintaining the listing. Such continuing obligations include (in
case of equity securities):
Switzerland
periodic reporting in compliance with financial reporting

standards recognised by SIX;
disclosure of price-sensitive facts (ad hoc publicity);
disclosure of management transactions; and
disclosure of substantive shareholdings.
For secondary listed foreign issuers at SIX (issuers with a
primary listing elsewhere), regulatory and ongoing disclosure
requirements are relaxed and largely refer to the filings and rules
of the primary stock exchange.
10. What are the main features of Swiss merger
control?
Legal framework: Merger control in Switzerland is governed by
the Federal Act on Cartels and Other Restraints of Competition
(Cartel Act) and the Ordinance on the Control of Concentrations
of Undertakings (Merger Control Ordinance).
Notification duty: Planned concentrations of undertakings,
mergers as well as acquisitions of sole or joint control, must be
notified to the Swiss Competition Commission (ComCo) prior
to their implementation if the statutory turnover thresholds are
met. This is the case if in the last business year preceding the
concentration:
the undertakings concerned achieved a combined turnover of
at least CHF2 billion worldwide or, alternatively, a combined
turnover of at least CHF500 million in Switzerland; and
cumulatively
each of at least two of the undertakings concerned achieved a
turnover of at least CHF100 million in Switzerland.
However, a notification duty exists irrespective of these
turnover thresholds if an undertaking participates in a concentration which has been established in a final and binding
decision under the Cartel Act that it has a dominant position in
a specific market in Switzerland and which concerns this market
or an upstream or downstream or neighbouring market. Special
rules apply to insurance companies, banks and other financial
intermediaries.
Substantive test: The ComCo may prohibit a concentration or authorise it subject to conditions and obligations if the
concentration:
creates or strengthens a dominant position in a market
by which effective competition can be eliminated; and
cumulatively
does not lead to any improvement of the competitive situation
in another market which outweighs the disadvantages of the
dominant position.
Procedure (with suspensive effect): The Cartel Act distinguishes between the preliminary investigation, (Phase I
one-month waiting period) and a possible in-depth investigation (Phase II four months) as follows:
Phase I (preliminary investigation): Phase I starts on the

day following the receipt of the complete notification. The
ComCo then is required to notify the parties within one
month whether it intends to initiate an in-depth investigation. In most cases the ComCo will issue a so-called comfort
letter. It can also authorise a concentration subject to conditions and obligations in the form of a formal decision. The
law states that a concentration is deemed to be cleared if
no notice is given within the period of one month. This is a
rather theoretical case because in practice the ComCo always
informs the notifying party that there is no reason to open an
in-depth investigation.
Phase II (in-depth investigation): The decision to enter Phase
II is officially published and the subsequent in-depth investigation has to be completed within an additional four months.
Phase II may be terminated as follows: unconditional authorisation; authorisation subject to conditions and obligations;
prohibition; or withdrawal of notification.
11. What have been the major recent developments in competition policy?
On May 17 2013, the Swiss Federal Council and the European
Commission signed a bilateral agreement concerning cooperation in the application of their competition laws which entered
into force on December 1 2014. This agreement allows competition authorities to exchange information they have obtained in
their respective investigations. However, the exchange of information, according to the European Commission, is subject to
strict conditions for protecting business secrets and personal
data. The bilateral agreement foresees specific prerequisites for
information exchanges. As an example, without the respective
parties consent, both authorities have to investigate the same
or a related conduct or transaction and the receiving authority
can use the evidence only for the enforcement of its competition
rules. In addition, no evidence can be used to impose sanctions
on individuals. However, the agreement remains a purely procedural one and does not provide any substantive harmonisation of
competition laws.
12. What tax treaties has Switzerland signed that
would benefit Chinese investors?
Switzerland has concluded over 90 double taxation treaties,
including treaties with China, Hong Kong and Singapore. In
addition, it has concluded an agreement with the EU that grants
full relief from withholding tax on intra-group payments of
dividends, interest and royalties.
On September 25 2013, China and Switzerland signed a
revised treaty, which entered into force on November 15 2014.
This treaty provides for maximum withholding tax rates of 5%
on intragroup dividends, 10% on interest and 9% on royalties.
The treaty with Hong Kong, which entered into force on
October 15 2012, provides for maximum withholding tax rates of
0% on intra-group dividends, 0% on interest and 3% on royalties.
>>
45
Switzerland
The revised treaty with Singapore, which entered into force on

August 1 2012 , provides for maximum withholding tax rates of
5% on intra-group dividends, 5% on interest and 5% on royalties.
With respect to Swiss taxes, these rates apply to the extent
that the Swiss taxes are not lower. In particular, they do not apply
to royalties since Switzerland does not levy any withholding taxes
on them. Further, Switzerland does not levy any withholding
taxes on certain types of interest, in particular, interest on intragroup loans or on loans that do not qualify as bonds or notes.
13. What tax advantages does Switzerland offer

for Chinese investors?
Switzerland offers relatively moderate corporate income tax rates
(depending on the region, i.e. state, between 12% and 24%) and
value added tax rate (8%). Interest expenses on loans from related
parties are deductible provided that they are in line with the thin
capitalisation rules and the arms length rules for related party
loans.
Switzerland unilaterally, irrespective of the application of any
double taxation treaty, exempts all the profit attributed to foreign
permanent establishments and foreign real estate from its tax
base.
In addition, the Swiss participation exemption regime applies
at the federal and regional levels to all Swiss resident companies
and permanent establishments of foreign companies that own
a qualifying participation in a subsidiary. The participation
exemption is granted regardless of whether there is any taxation
at the level of the subsidiary or whether any double taxation treaty
applies. Switzerland has not introduced any Controlled Foreign
Corporation (CFC) rules. A qualifying participation has different
thresholds depending on whether the exemption is granted for
dividends or for capital gains from the disposal of shares. The
thresholds are:
for dividend income: an equity investment of at least 10% or

with a value of at least CHF1 million; and
for capital gains from the disposal of shares: an equity investment of at least 10% that has been held for at least one year.
Several further special regimes and reliefs are beneficial for
investments:
Regional holding company: Not only the income from participations but all income is exempt from regional and communal
corporation tax, if a company qualifies as a holding company.
At the federal level, on the other hand, a holding company is
an ordinary taxpayer at standard rates of 8.5% (7.8% before
taxes), but the participation exemption regime described
above applies to income from participations. Holding
company status is granted if the following requirements are
met: the main purpose of the company is the holding and
management of long-term financial participations in the subsidiary companies; at least two-thirds of either the assets or
the income is composed of or derived from participations;
and the company is not engaged in any commercial activity
46
<<
in Switzerland. There are certain differences in which activities are accepted by the regions. In general, management and
administration of the company itself is tolerated.
Mixed companies (trading, IP, etc.): A Swiss company or a
branch of a foreign company qualifies for the tax privilege of a
mixed company at the regional and communal level if it does
not engage in any commercial activity within Switzerland or if
it engages in such activities to only a small extent. In general,
at least 80% of the income must be derived from abroad and
at least 80 % of the expenses have to be foreign expenses.
Therefore, mixed companies are often used for international
trading, licensing and franchising activities. Swiss source
income is taxed at standard rates, whereas foreign source
income is only partially included in the Swiss tax base. Thus,
depending on the specific regional requirements, the specific
regional tax rates and the amount of Swiss source income,
the overall tax rates of mixed companies in Switzerland for
federal, regional and communal tax purposes vary between
8% and 11%.
State aid: Since Switzerland is not a member of the EU, it is,
in principle, not limited by the European prohibition on state
aid. However, Switzerland has introduced unilateral rules that
limit the application of state aid to certain regions that are
economically not well developed. Depending on the size and
the function of the newly established business, an exemption
of up to 50% from regional or communal income taxes and,
in specified areas, also from federal income taxes for a period
of up to 10 years, may be granted. Depending on the area and
the structure, the exemptions may even be extended after the
10-year period has lapsed.
Principal structures: Swiss principal companies of international groups can benefit from a special tax treatment
for federal income tax purposes. A principal company is a
company with several high-level employees that assumes risks
and responsibilities for certain activities, such as purchasing, research and development, manufacturing, distribution,
marketing strategy and logistics. Provided that the sales are
made exclusively through commission agents or limited risk
distribution companies of the group, the principal company
can reach a reduced Swiss tax base that results, in combination with the regional tax regime of the mixed company, in
tax rates as low as approximately 5 to 7%, depending on the
set-up and location.
No withholding tax on royalty income and certain types of
interest payments: see question 12.
In order to maintain a sustainable and advantageous tax

environment, the current consultation draft for a corporate tax
reform includes several measures replacing the regimes of the
holding company, mixed company, principal company and
finance branch. Among others, the consultation draft proposes
the introduction of a licence box regime as well as a notional
interest deduction. Moreover, a general reduction of the cantonal
corporate income tax rates is being considered. Some cantons
have already decided to decrease the tax rates. The new regulations are likely to enter into force in or after 2019. Overall, the
measures proposed under the corporate tax reform will further
Switzerland
expand the spectrum of investors that can benefit from Switzerlands favourable tax environment.
14. What exit mechanisms are in place in Switzerland and how will these affect investors when
they want to get their money out?
fabric designs) or three-dimensional (such as furniture) objects.

Protection is granted upon registration of the design in the design
register. In order to be eligible for registration, the design has to
be significantly new and distinctive from prior forms. Further, it
is required that the design is not exclusively owed to the technical
function of the relevant object. Protection is granted for an initial
period of five years and may be extended for four subsequent
periods of five years each.
Copyright protection is granted for works of literature and
art, such as books, paintings, architecture, photography, music
and computer programs. In general, only creations of the human
mind which are of individual nature qualify as protected works.
Registration is neither required nor possible; thus, protection
is granted upon the creation of the work without further steps
required. The author has the right for commercial exploitation and is further the holder of a number of moral rights (for
example, the right to be acknowledged as the author). Copyright
There are no restriction on, or approval requirements for, capital

transfers from Switzerland abroad. Generally, exits can take the
form of a sale of shares or assets, dividend payments, capital
reductions, liquidation, initial public offering (IPO), cross-border
merger or redomiciliation. Flows of funds may, however, also take
the form of advisory or management fees, royalties, payments for
supply or manufacturing and other commercial activities.
Switzerland does not levy any withholding tax on capital
gains from the disposal of the shares of a Swiss company. Only
if the Swiss company is a real estate company, a
regional capital gains tax may be due in the case
Generally, exits can take the form of a sale of shares
of the sale of the shares.
However, since Switzerland normally levies a or assets, dividend payments, capital reductions,
35% withholding tax on dividends, investments liquidation, initial public offering (IPO), cross-border
into Switzerland are usually structured in such
merger or redomiciliation
way that a double taxation treaty applies which
reduces this withholding tax. Many Swiss treaties,
including the one with Hong Kong, provide for 0% withholding protection expires 70 years (general rule) and 50 years (computer
programs) after the death of the author, respectively.
taxes on intragroup dividends.
An exit by way of redomiciliation is deemed to be a liquidaTrade secrets and confidential information are protected
tion for tax purposes and thus triggers corporate income tax and by various provisions of Swiss law. Civil law protection of trade
withholding tax on dividends (liquidation proceeds). The general secrets is most importantly addressed in the Swiss Act Against
principles apply including the participation exemption for equity Unfair Competition (UCA). The UCA makes it civil tort to entice
investments and the reduction of the withholding tax in cases of the workers, agents or ancillary persons to disclose or uncover
application of a double taxation treaty (see questions 12 and 13).
trade secrets of their employer or principal. Further, anyone
who exploits results of work entrusted to him (for example,
tenders, calculations and plans) without authorisation commits
15. What protection is available for intellectual an act of unfair competition. Finally, the exploitation or discloproperty (IP) in Switzerland?
sure of manufacturing or trade secrets is deemed to be an act of
unfair competition and, thus, unlawful if such secrets have been
Swiss law provides for the protection of registered IP rights obtained in an unfair or otherwise unlawful way. Apart from the
(patents, trademarks and design rights) as well as unregistered IP legislation against unfair competition, other civil law provisions
also address the protection of trade secrets such as the statutory
rights (copyright, trade secrets and confidential information).
Patents are registered protective rights granted for techno- employment law, which stipulates confidentiality obligations.
logical inventions. Protection is granted upon registration in the From a criminal law perspective, the violation of certain provipatent register. An invention is only eligible for patentability if it is sions of the UCA related to trade secrets qualifies as a criminal
new compared to state of the art, as of the application or priority offence. Besides, the Swiss Penal Code (PC) penalises the betrayal
date, and if it is non-obvious to the man skilled in the relevant of a trade or manufacturing secret as well as the exploitation of
art. The patent is valid for a maximum duration of 20 years from such betrayal. Furthermore, industrial espionage is penalised
under the PC.
the application date.
Trademarks are registered protective rights that protect signs
Moving intellectual property to Switzerland may be ben(letters, words, numbers, designs, three dimensional forms, colour eficial from various points of view. First, Swiss tax laws offer a
combinations or sounds) or denominations in order to distin- number of attractive opportunities, such as the holding company
guish goods or services from one another. Protection is granted regime, special taxation of income generated by IP rights and no
upon registration of the trademarks in the trademark register for withholding tax on royalties (see questions 12 and 13). Second,
an initial period of 10 years. It may be extended for an unlimited Swiss contract law allows the parties a maximum of freedom to
number of subsequent periods of 10 years each.
agree on tailor-made agreements, such as licensing agreements.
Design rights are registered protective rights that grant pro- Third, the courts (including the Federal Patent Court) provide
tection for visible forms of two-dimensional (patterns, such as for an efficient and impartial enforcement against infringement
>>
47
Switzerland
Author biographIES
Dieter Gericke
Dieter Gericke is a partner and head of the corporate
and M&A practice team and of Homburgers China
group. His practice focuses on cross-border mergers
& acquisitions, private equity, capital markets
(including IPOs) and finance. He advises on matters
of corporate law and securities regulations.
Felix Dasser
Felix Dasser heads the litigation and arbitration
practice team. He advises and represents companies
in international commercial disputes in litigation and
arbitration proceedings, as well as on white collar
crime and regulatory compliance. He also sits as an
arbitrator.
Marcel Dietrich
Marcel Dietrich is a partner in the competition &
regulatory and corporate practice teams, and in
the white collar and investigations working group.
His practice focuses on Swiss and European
competition and antitrust law as well as on
administrative law and regulated markets.
Gregor Bhler
Gregor Bhler is the deputy head of IP & TMT and
partner in the competition & regulatory practice
team. He focuses on intellectual property law,
information technology and unfair competition
law (advisory work as well as representation in
contentious matters).
Reto Heuberger
Reto Heuberger is a partner in the tax practice team.
He focuses on tax planning and the structuring
of M&A transactions, reorganisations, relocations,
investment management structures, family offices
and trusts.
of IP rights of foreign owners. Generally, Switzerland has a long

tradition of valuating and protecting innovations and IP and
of creating a stable and moderate tax environment for their
exploitation.
16. What dispute resolution procedures are
available and how popular are they with foreign
investors?
Switzerland is one of the leading arbitration venues in the world.
Based on the latest statistics available, Switzerland takes second
place in the International Chamber of Commerces statistic of
venues. In the year 2013, Switzerland saw 94 new ICC cases,
versus 119 for France, 72 for the UK, 38 for the US and 33 for
Singapore. Switzerland is also the home of the Court of Arbitration for Sports and thus the venue of most major sports disputes,
including those in relation to the Olympics Games and FIFA.
The popularity of the use of Swiss substantive law to govern
48
<<
international contracts is evidenced by its second position in

ICC disputes (15.6 % UK law, 10.1% Swiss law and 8.7 % US law,
according to the latest statistics).
Arbitration in Switzerland may be based on any set of rules
that the parties may choose. Apart from ICC rules, the Swiss
Chambers Swiss Rules for International Arbitration that are based
on the UNCITRAL Arbitration Rules are very popular. More than
two thirds of the parties arbitrating under the Swiss Rules are
non-Swiss, in line with the average percentage of foreign parties
in all international proceedings in Switzerland.
Switzerland has a long tradition of solving international
disputes in an efficient, neutral and professional manner, catering
to the needs of international business people, governments and
athletes alike. The arbitration law is attuned to the needs of international arbitration. A unique feature of Swiss arbitration law is
the direct and only recourse to the Swiss Supreme Court for any
challenges against an arbitral award. This setting-aside procedure
typically takes less than six months, with less than 7% of all
awards being vacated.
What if arbitration is not possible? Unlike courts in other
jurisdictions, the Swiss commercial courts willingly assist the
parties in finding a reasonable solution to their dispute early on
in the proceedings and based on prima facie assessment of the
strengths and weaknesses of the case by the court itself. Further,
the parties need not fear expensive and disruptive document
production proceedings that are known from common law jurisdictions (no discovery).
17. What bilateral agreements has Switzerland
signed that would benefit Chinese investors?
On July 6 2013, Switzerland, as the first continental European
country to do so, signed an FTA with China which entered into
force on July 1 2014. The FTA does not only improve mutual market
access for goods and services but also enhances legal certainty concerning the protection of IP and the bilateral economic relations
in general. In parallel with the FTA, an agreement on cooperation
on labour and employment issues was concluded on the same day
which is linked to the FTA by a reference.
The FTA aims to dismantle tariffs fully or partially, sometimes
subject to a transition period, for the vast majority of bilateral
trade. At the entry into force of the FTA, Switzerland abolished
the remaining tariffs on Chinese industrial products. Likewise,
China dismantled its tariffs on Switzerlands industrial exports,
either from the entry into force of the FTA or within periods
of five to 10 (in a few cases 12 or 15) years. The dismantling
period is applicable to products for which China has expressed
to have a specific need for adjustment (e.g. selected products
in the watchmaking, machinery and chemical-pharmaceutical
sectors). Regarding agriculture products, the FTA will enable
Swiss products to be imported tariff-free or at reduced tariffs
into China. Conversely, Switzerland will grant preferential tariff
treatment for selected products to be imported from China.
Based on the Customs Union between Switzerland and Liechtenstein, the FTA also applies for trade in goods to the Principality
of Liechtenstein.
Switzerland
Regarding trade in services, the FTA is based on the General

Agreement on Trade in Services (GATS) of the World Trade
Organisation (WTO) but includes additional and more detailed
rules. As in GATS, traffic rights in air transport are not covered
by the FTA. Compared to GATS, Chinas commitment in the FTA
contains additional sectors and improvements such as financial
services, environmental services, air transport services and
logistics services. Conversely, Switzerland improves its specific
commitments in relation to financial services, air transport
services, private sector training services and for additional
activities by highly qualified providers of short-term contractual services. However, measures governing access to the labour
market or permanent residency remain unaffected by the FTA.
The FTA also improves the level of protection and enforcement of IP rights in selected areas as compared with the
multilateral standards of the WTO. As an example, besides introducing sound trademarks as a new category of trademarks, the
FTA also regulates the patenting of biotechnological inventions in
accordance with the European Patent Convention. Furthermore,
the level of protection for geographical indications for wines and
spirits according to the Agreement on Trade Related Aspects
of Intellectual Property Rights of the World Trade Organisation (TRIPS) is extended to all products. Goods and services are
therefore, amongst others, protected from misleading indications
of origin, country names and national flags.
In parallel with the FTA, Switzerland and China concluded
an agreement on cooperation on labour and employment issues.
Therein, the parties reaffirm their commitments arising from their
membership of the International Labour Organisation (ILO) and
the Ministerial Declaration of the United Nations Economic and
Social Council (ECOSOC) on Full Employment and Decent Work

(2006), as well as the ILO Declaration on Social Justice for a Fair
Globalisation (2008). Furthermore, besides reaffirming to enhance
the fundamental rights at work and to generally improve the
working conditions, Switzerland and China also agreed to effectively implement their labour legislations. Besides that, the parties
acknowledge not to reduce their level of labour standards in order
to attract more investment or to obtain a trade advantage.
On January 8 2014, the bilateral agreement between China
and Switzerland regarding the illegal import and export of
cultural assets and the return of those entered into force. This
bilateral agreement regulates the trade of cultural assets as stipulated in the catalogue from the prehistoric times up to 1500 A.D.
Such cultural assets can be imported to the territory of a party if
the export regulations of the other party are properly followed.
China and Switzerland are currently in negotiations regarding
a reciprocal social security agreement. The goal of this agreement
is to regulate certain social security matters. As an example, individuals from China and Switzerland who are posted to work in
the other country will only be required to pay social security contributions in their respective home country.
On January 21 2015 the Swiss National Bank and the Peoples
Bank of China (PBOC) signed a memorandum of understanding on the establishment of a renminbi Clearing Arrangement
in Switzerland. Furthermore, the PBOC decided to extend the
pilot scheme of Renminbi Qualified Foreign Institutional Investor
(RQFII) to Switzerland with a quota of Rmb50 billion. This
arrangement will promote the use of renminbi by enterprises and
financial institutions in cross-border transactions and will also
facilitate bilateral trade and investment.
>>
49
Dieter Gericke, Felix Dasser, Marcel Dietrich, Gregor Bhler, Reto Heuberger Martin Grod
Homburger
1)

1950
2013
201471
2)
20%
105
4)
3)
AG Aktiengesellschaft GmbH Gesellschaft

mit beschrnkter Haftung
50
<<
2015
3%5%10%15%20%25%331/3%
50%662/3%
5%
3%
5)
TOBFINMATOB
6)
12
TOB
33 1/3 %
49%
7)
2015
1151.21
-0.75%
8)
10%
20%33%50%
(
)()10%
20%33%50%
TOB
10%
TOB
67%51%
95%90% 9)
SIXSIX
SIX4
SIX
10%5%
10%
60
12
2015
>>
51
25%
2500
2500
SIX
SIX
ComCo
ComCo
ComCo
11)
2013517
2014
121
10)
12)
ComCo
20
5
1
ComCo

52
<<
2015
90
20139252014
1115
5%10%
9%
20121015
0%0%
3%
201281
5%
5%5%
13)
12%
24%8%
Controlled Foreign Corporation
10%100
10%
1
14)
IPO
35%
0%
1213
8.5%7.8%
IPO

15)
80%
80%

8%11% 20

1010

50%
10
10

5
5

5%7%

12
7050
UCA
UCA

2019

2015
>>
53
UCA
PC
PC
1213
16)
201394
11972
3833
15.6%10.1%
8.7%
UNCITRAL
6
7%
17)
201376
201471
510
54
<<
2015
1215
Dieter Gericke
Dieter GerickeHomburger/
Felix Dasser
Felix Dasser/
Marcel Dietrich
Marcel Dietrich
/
Gregor Bhler
Gregor Bhler/
Reto Heuberger
Reto Heuberger
2006
201418
1500
2015121
(RQFII)
500
2015
>>
55
Turkey
Turkey
Yeim Bezen, Zekican Saml, Uur Sebzeci, Can zilhan and Onur Okan
Bezen & Partners

As of December 31 2014 there were 41,398 companies in
Turkey which had foreign shareholders, 646 of which were
COIs. The number of COIs was 112 in 2003 which increased
to 540 at the end of 2013. This number gradually increased to
646 in 2014. The exceptional increase in the number of COIs
illustrates the dramatic increase in Chinese investors interest
in Turkey.
Chinese investors have a wide range of investment fields in
Turkey. They have a leading role in the mining sector. China is the
third highest investor in the Turkish mining sector after Germany
and the United Kingdom. Chinese investors have also focused on
commercial trading, manufacturing, hotels and restaurants, sales,
transportation, agriculture, maintenance and repair of motorised
goods, construction, telecommunications and the generation and
distribution of energy in Turkey.
The investment incentive scheme (see Section 4) introduced in 2012, among others, provides incentives for large-scale
investments.
Large scale investment can be in relation to refined petroleum
products, production of chemical products, harbour and
harbour services, automotive OEM, automotive supply industries, production of railway locomotives and cars, transit pipeline
transportation services, electronics production, production
of medical, high precision and optical equipment, production
of aircraft and spacecraft and/or related parts or production of
machinery and mining. Large scale investments benefit from VAT
exemption, customs duty exemption, tax reduction, contribution
to investment by the State, social security premium support, land
allocation and income tax withholding allowance.
In line with the Turkish governments 2023 targets for the
centennial of the Republic, the sectors identified for large-scale
investments provide a good guideline of where the government
is seeking to attract foreign direct investment (FDI), including
COI. If the target projects can be realised, they are expected to
generate a trade volume of approximately US$1 billion between
China and Turkey.
Turkey attracted US$12.9 billion of FDI in 2013, a 38% increase
from the previous year. According to the United Nations Conference
56
<<
on Trade and Development, Turkey, with an inbound FDI figure of

US$12 billion, is the 19th highest FDI recipient country.
The bilateral trade volume between Turkey and China reached
US$28 billion (Rmb175.2 billion). Also, statistics from the PRC
Ministry of Commerce shows that Chinese non-financial FDI
reached US$178 million (Rmb1.11 billion) in the first six months
of 2014. This is an increase of 47.2%.
In order to attract US$80 billion of FDI per year by 2023, the
Turkish government has incorporated the Republic of Turkeys
Prime Ministry Investment Support and Promotion Agency
(ISPAT) with the goal of providing assistance to investors before,
during and after their entry into Turkey through a one-stop shop
approach. The importance given to COI is illustrated by the fact
that ISPAT provides assistance to potential investors in, among
other languages, Chinese.
Section 2: Investment vehicle
become operational?
Joint stock companies and limited liability companies continue to
be the most common forms of legal entities for foreign investors.
Chinese investors have chosen to facilitate their investments
generally through limited liability companies. 602 of the entities
which were incorporated by Chinese investors were limited
liability companies, whereas 44 of them were incorporated as
joint stock companies.
The procedures for the establishment and operation of these
types of entities are quite similar and generally take around six
business days once the required documentation is in place.
With the enactment of the Foreign Direct Investment Law (No
4875) (FDI Law) in 2003, foreigners and Turkish nationals have
been subject to equal treatment. Accordingly, with the exception
of a small number of special sectors, foreigners are subject
to the same rules with respect to their investments as Turkish
nationals/entities.
However, operationally, once a Chinese investor intends to
employ foreigners, each foreign employee is required to obtain a
work permit if the employee does not fall within the exceptional
cases provided by the relevant legislation.
BEZEN &
PARTNERS
Quotations
Excellent on all fronts, Bezen & Partners are very responsive, have business acumen, understand the issues and are
good value for money.
Services of the highest level with timely responses, great experience and knowledge.
Exceptional value and quality consultancy in very complicated fields of law.
Clients are impressed with the groups responsiveness, commerciality, intellectual resources and experience with
international clients.
The response times and quality of advice given is excellent at Bezen & Partners, which is praised for its intellectual
power.
City training, high standard English, good response times and sound local knowledge
Legal 500 EMEA Guide
Experience
Bezen & Partners advises a wide range of Asian clients including investors, sponsors and developers in transactional
matters as well as regulatory matters in the Turkish energy (particularly nuclear, coal and gas); manufacturing and
infrastructure markets.
Bezen & Partners partners have extensive experience in complex cross-border transactions, gained through their
employments in magic circle law firms and Turkish Governmental Authorities. Its lawyers come from various backgrounds.
All are either foreign educated (some are doubled qualified) and/or possess cross-border work experience. They are
known as commercially oriented lawyers who possess a business like approach.
Rankings
Practice Areas
Chambers Europe, 2014
Antitrust & Competition

Arbitration & Litigation
Band 2 in Banking & Finance

Band 2 in Projects & Energy
Band 2 in Corporate/M&A
Capital Markets
Corporate & Commercial
Energy
Legal 500, 2014
Finance
Band 1 in Projects & Project Finance

Band 2 in Banking, Finance and Capital Markets
Band 2 in Corporate and M&A
Mergers & Acquisitions
Infrastructure
Privatisation
Real Estate
www.bezenpartners.com
Sultan Selim Cd. Lalegl Sk. NEF 09 Plaza A Blok K.12 Sanayi Mah. Kathane 34415 stanbul, Trkiye
*stanbul *Ankara *Mersin
Turkey

As indicated above, the FDI Law diminished any prior approval
requirements for FDI. However, if investing into a Turkish entity,
the foreigner must notify the Ministry of Economy so that the
inflow of FDI in Turkey can be tracked.
The notification carries more of a statistical purpose and
therefore requires basic information in relation to the investment,
such as where the foreign investment inflow is from, the purpose
of the entity, the names of the relevant entities/individuals making
the investment and the amount of the investment.
financial services, telecoms and infrastructure etc.),
While the FDI Law diminished any need to obtain an approval
for foreigners to make investments in Turkey, there are still
certain regulated markets which foreigners have limited access
to due to certain specific legislations. For companies operating in
the maritime and civil aviation markets, foreign shareholding is
limited to 49% and the maximum foreign shareholding allowed
for a broadcasting entity is 50%.
In relation to other regulated markets such as electricity, mining, petroleum, banking, telecommunications and civil
aviation, prior approval of the relevant regulatory government
agencies is required in order to effectuate a share transfer with
companies which operate in such markets.
Aside from the limitations provided above, acquisition of real
estate by foreigners is also subject to certain limitations which are
worth mentioning. Accordingly, the total area of the real estate
and limited rights in rem which a foreign real person can acquire
in Turkey cannot exceed 30 hectares or 10% of the land of the
relevant municipality subject to private ownership.
Only foreign legal entities which fall within the scope of a
specific legislation such as the Tourism Encouragement Law (No
2634), the Petroleum Law (No 6491) or Industrial Zones Law (No
4737) can acquire real estate in Turkey.
Turkish companies controlled by foreign investors can acquire
real estate in the country provided that the acquisition falls within
the scope of activities provided in their constitutional documents.
Depending on the location, the acquisition of real estate by a
foreign real person, a foreign legal entity or a Turkish legal entity
controlled by foreign shareholders is subject to the approval of
the commanderships which is authorised by the Turkish General
Staff or the relevant Governorship.
The Turkish Competition Authority (TCA) is the governmental
body which ensures the formation and development of markets
for goods and services in a free and sound competitive environment in Turkey. In order to achieve this goal, the TCA carries out
58
<<
antitrust reviews of transactions prior to their consummation if:

(a) the total turnovers of the transaction parties in Turkey exceed
YTL100 million (Rmb256 million), and turnovers of at least two
of the transaction parties in Turkey each exceed YTL30 million
(Rmb77 million); or (b) the turnover in Turkey for the acquired
asset or operation in acquisition transactions or for at least one
of the transaction parties in merger transactions exceeds YTL30
million (Rmb77 million), and at least one of the other transaction parties has a global turnover exceeding YTL500 million
(Rmb1.28 billion).
Once the fundamental terms of the transaction are clear and
the conditions are met, the parties of the transaction apply by
completing a form. Following the submission of the application
to the TCA, the TCA is required to respond to the clearance
application within 30 days. In the event the TCA fails to respond
within the said timeframe, the transaction will be deemed to
have cleared.
Aside from the limitations and approvals provided above, there
are no unique processes which could potentially block a foreign
investment.
Except for regulated markets where share transfers require the
approval of a specific regulator and notification to the Ministry
of Economy in relation to the FDI, there are no approval requirements when a foreign investor increases or exits its investments.
country?
Promoting growth and attracting FDI has played and continues to
play a pivotal role in shaping policies in Turkey. For this purpose,
various regional and sector-specific incentive schemes have been
introduced and various double tax treaties have been put in place
over the years.
While these generally are not FDI specific, they are useful
for foreign investors in reducing the tax exposure of their investments, thereby giving investors more room for returns.
Incentive scheme
The Council of Ministers Decision (No 2012/3305) dated June 19
2012 introduced an incentive scheme with various advantages for
both local and foreign investors.
The incentives system recognises four types of incentive
implementations (i.e. general incentive implementation, regional
incentive implementation, implementation for large-scale investments and implementation for strategic investments) and nine
incentive items (i.e. support elements (destek unsurlar)). These
incentive items and their classification under the incentive implementations are as follows:
Turkey
Incentive
Implementations
Incentive Items
General
Customs
duty
exemption
VAT
exemption
Income tax
withholding
SSP
Employer
Support
Regional
Customs
duty
exemption
VAT
exemption
Tax
Discount
SSP
Employer
Support
Land
allocation
Interest
support
Income tax
withholding
Large-Scale
Investments
Customs
duty
exemption
VAT
exemption
Tax
Discount
SSP
Employer
Support
Land
allocation
Income tax
withholding
SSP
Employee
Support
Strategic
Investments
Customs
duty
exemption
VAT
exemption
Tax
Discount
SSP
Employer
Support
Land
allocation
Interest
support
VAT refund
Free zones*
Free zones are established pursuant to the Law on Free Zones (No
3218) for the purpose of promoting investment relating to the
export of goods.
Broadly speaking, operators benefit from exemptions from
customs taxes, value added tax, income withholding tax on salary
payments and transferring operating profits offshore or to their
respective parent companies in Turkey.
Technological development zones*
Technological development zones are established pursuant to
the Law on Technological Development Zones (No 4691) for the
purposes of promoting R&D investments.
Operators benefit from government support on social security
payments and value added tax-exempt sales for certain products
originating from technological development zones for designated
periods of time.
SSP
Employee
Support
Income tax
withholding
SSP
Employee
Support
for FDIs through general incentive schemes, there are no largescale tax incentive schemes that apply specifically to FDIs.
Please see the incentive system summarised under Section 4a
above.
Author biographies
Yesim Bezen
Yesim Bezen is a founding partner of Bezen & Partners.
She assists international clients in a wide variety of
transactions, most notably in banking, finance, asset and
project finance transactions. Yesim is a qualified solicitor in
England & Wales. She completed her training with and was
employed by a magic circle law firms London office from 2001 to 2007.
Organised industrial zones*

Organised industrial zones are established pursuant to the
Law on Organised Industrial Zones (No 4562) for the purposes
of promoting industrial investments in designated industrial
zones.
Operators benefit from value added tax exemptions on the
purchase of land in the zones and exemptions from property
taxes for a designated period of time.
* A list of free zones, technological development zones and
organised industrial zones in Turkey can be accessed at (http://
www.invest.gov.tr/en-US/infocenter/publications/Documents/SPECIAL-INVESTMENT-ZONES-TURKEY.pdf).
Zekican Saml
Zekican Saml is an attorney registered with the Istanbul
Bar. He joined the Bezen & Partners team in August 2009
following his graduation from Ankara University Faculty
of Law. Zekican advises both domestic and international
clients on any matters related to regulatory and real estate
issues.
The current rate of corporate tax is 20% of taxable profits (based
on worldwide income for tax residents in Turkey and Turkey
income for limited taxpayers).
The rate of withholding that applies on dividend payments
to non-Turkish residents is 15% unless a lower rate is provided
under a double tax treaty.
Can zilhan
Can zilhan is an attorney registered with the Istanbul
Bar. He joined the Bezen & Partners team in June 2010
following his graduation from Marmara University Faculty of
Law. Can advises both domestic and international clients
on any matters related to finance and corporate issues.

in place?
While certain additional deductions from the tax base are allowed
Uur Sebzeci
Uur Sebzeci is an attorney registered with the Istanbul
Bar. He joined the Bezen & Partners team in September
2009 following his graduation from Ankara University
Faculty of Law. Uur advises both domestic and
international clients on any matters related to commercial
law, commercial disputes, M&A and employment issues.
Onur Okan
Onur Oksan is an attorney registered with the Istanbul Bar.
He joined the Bezen & Partners team in July 2011 following
his graduation from Galatasaray University Faculty of Law.
Onur advises both domestic and international clients on
any matters related to regulatory and real estate issues.
>>
59
Turkey

Turkey and China have signed a double tax treaty on May 23 1995
which came into force on January 1 1998 (Tax Treaty).
The Tax Treaty provides measures for the prevention of double
taxation with respect to capital gains, income tax on profits and
lowers withholding on profits to 10%.
Chinese FDI controlled directly through China would benefit
from the favourable cross-border tax regime and reduced withholding on dividends which would lower the overall tax exposure
on investments.
Turkey does not have a strict currency control regime and the
Turkish currency (Turkish lira) is convertible into other currencies in the country. Companies and individuals are entitled to
maintain foreign currency deposits and transfer funds in both
local and foreign currency offshore, provided that the transfers
are made through banks.
b. Are there any legal restrictions on bringing in foreign
workers and how difficult is it for foreign investors to secure
managers and workers in practice?
There are certain criteria that need to be met in order to employ
foreign workers. These primarily include a minimum paid-in
capital of YTL100,000 (Rmb256,000) or a turnover or export
revenue in excess of the applicable threshold (YTL800,000 (Rmb2
million) for turnover and US$250,000 (Rmb1.56 million) for
export revenue) and the need to maintain a ratio of 1:5 foreign to
Turkish workers.
Provided the applicant meets the criteria, the process is
relatively straightforward with permits being issued on average
within four to six weeks of application.
Turkey and China signed a bilateral investment protection treaty
on November 13 1990 which came into force on August 1 1994.
60
<<
Certain protections are offered to qualifying investments

under this treaty, such as the so-called most favoured nation
clause, which provides that the contracting states would offer to
each other not less than what they offer to other investors under
similar circumstances.
Turkey is party to various others investment protection
treaties (including the CIS and European countries).
Turkey is a civil law country with its civil and commercial laws
modelled on the Swiss and German law systems and with other
laws largely following European Union (EU) guidelines as part of
the EU compliance effort over the last decade.
The Turkish court system is generally criticised for being inefficient in terms of timing with an average claim taking over one
year to be finalised. It is common practice for foreign investors to
opt for international or domestic arbitration.
Turkey is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Accordingly,
foreign arbitral awards will be recognised and enforced in Turkey
unless it falls within the exceptions in Article 5.
Foreign court judgements will be enforceable in Turkey
pursuant to the Private International and Procedural Code of
Turkey (No 5718), unless:
there is no (contractual or de facto) reciprocity between
Turkey and the jurisdiction where the judgement has been
awarded;
the judgement relates to a matter which falls exclusively
within the jurisdiction of the Turkish courts;
the party that enforcement is sought against has objected to
the award before Turkish courts on the basis that he has not
been properly summoned or served in connection with the
proceedings; or
the judgment is against the public order of Turkey.
This depends on the rules of the jurisdiction where enforcement
is sought. In general and as explained above, Turkey is a civil law
country with civil and commercial laws very similar to European
countries.
Yeim Bezen, Zekican Saml, Uur Sebzeci, Can zilhan Onur Okan
Bezen & Partners
1.
2014123141,398
6462003112
20135402014646
2012()
2023
10
2.
2013129
38%
12019
280(1752)
20146
1.78(11.1)47.2%
2023800
ISPAT
ISPAT
ISPAT
1.
602
44
2.
()
20034875
1. ()
//
2. / (
)
()
,
49%
50%
3010%
2634
64914737
2015
>>
61
3.
()
TCA
TCA
(a)
2.56
7,700
(b)
7,700
12.8
TCATCA30
TCA
4.
5.
1.
20126192012/3305
62
<<
2015
(destek
unsurlari)
*
3218
*
4691
*
4562
* (http://
www.invest.gov.tr/en-US/infocenter/publications/Documents/SPECIAL-INVESTMENT-ZONES-TURKEY.pdf).
2.
20%
15%
3.
4.
1
5.
1995523
199811
10%
1.
2.
1025.6
80
20025156
1:5
1.
19901113
199481
2.
3.
Yesim Bezen
Yesim BezenBezen & Partners
Yesim
20012007
Zekican Saml
Zekican SamlAnkara
20098Bezen &
PartnersZekican Saml
Uur Sebzeci
Uur SebzeciAnkara
20099Bezen & Partners
Uur Sebzeci
Can zilhan
Can zilhanMarmara
20106Bezen &
PartnersCan zilhan
Onur Okan
Onur OkanGalatasaray
20117Bezen &
PartnersOnur Okan
5718:

;
;

;

4.
2015
>>
63
United Kingdom
United Kingdom
Simon Weller
Freshfields Bruckhaus Deringer LLP
The UK government, through the UK Trade & Investment department, has detailed a wide range of sectors in which it is seeking to
attract COI including aerospace, automotive, energy, information
and communication technologies and life sciences. Notable COI
in the UK includes:
(a) oil and gas, e.g. PetroChinas oil refining and trading joint
venture with INEOS;
(b) infrastructure, e.g. China Investment Corporations acquisition of a 10% stake in Heathrow Airport Holdings;
(c) real estate, e.g. Dalian Wandas acquisition of a development
site on Londons South Bank; and
(d) nuclear, e.g. the proposed (and UK government approved)
joint investment by China General Nuclear Power Group
and China National Nuclear Corporation in a 30-40% stake
in the consortium developing the Hinkley Point C nuclear
reactor.
The UK government expressly welcomes Chinese investors. At a
speech to students at Peking University in 2013, George Osborne
(the UKs Chancellor of the Exchequer) stated one of my
principal goals this week is not just to increase British investment
in China. But to increase Chinese investment in Britain... Indeed
specifically, they work with the China-Britain Business Council,

which has a presence in 13 cities across China.
become operational?
Foreign investors will generally use a legal entity that most suits
their corporate and tax structuring goals (and it could be incorporated outside the UK, although UK regulators can occasionally
be wary of the use of acquisition entities incorporated in jurisdictions perceived as offshore tax havens). The most common UK
legal entity is a limited liability company (which could be private
or public, with the key distinction being that only public limited
companies may offer shares to the public). Other business vehicles
include partnerships, limited liability partnerships and branches
of overseas companies. All of these entities and vehicles may be
established and become operational within a short period of time.
Joint ventures between Chinese companies and established
UK companies are often used to gain experience of working in the
UK, e.g. the Beijing Construction Engineering Group partnered
with Carillion, the British construction company, on the 800
million development of Airport City Manchester.

Chinese investors may establish and operate any of these vehicles
in the same manner as local investors and no
regulatory approvals are required to set up
these vehicles in the UK. There are no residency
Joint ventures between Chinese companies and
requirements for directors of a UK company,
established UK companies are often used to gain
although there may be tax residency considerexperience of working in the UK
ations which affect the location of management.
I would go as far as to say that there is no country in the west that
is more open to investment especially from China.
In mid-2014, David Cameron and Premier Li Keqiang signed
trade deals worth 14 billion and the China Development Bank
signalled its intention to invest further in next generation nuclear
plants, the High Speed 2 rail link and telecommunications in the
UK.
UK Trade & Investment has the main responsibility for
driving foreign direct investment (FDI) in the UK. For COI
64
<<

Unlike in many other European jurisdictions, there are currently
no general restrictions on foreign investment in the UK,
although there may be a requirement for sector-specific regulatory approvals or competition approvals (see responses 3b and 3c
below). The failed bid by Pfizer for AstraZeneca (in May 2014)
United Kingdom
triggered heated political debate about whether a public interest

requirement should be introduced in the UK, and - whether or
not this leads to any new regulation - it serves as a reminder of
some of the broader issues that may need to be dealt with on high
profile acquisitions, particularly in the run-up to the UK general
elections in May 2015. Note also that UK businesses often have
interests or customers abroad, which could mean that a UK
investment triggers foreign investment approval requirements in
other jurisdictions.
While there are no general restrictions on investment, in certain
cases investors may need sector-specific approval or the UK government may have the power to restrict investments or changes
of control, for example:
and EU-wide revenue thresholds. The application of the concentration test is quite complex, but in general terms, a concentration
will arise where there is a pure merger between two or more firms
or where one or more firms acquires control in another firm. A
minority investment which does not confer any controlling rights
will currently not meet the concentration threshold.
The EUMR regime is mandatory and suspensory, meaning
that completion of the COI must be automatically suspended
and no integration may begin until the COI has been reviewed
and cleared by the European Commission. The European Commission has the power to impose financial penalties of up to 10%
of the aggregate turnover of the relevant parties to the transaction and to invalidate to mergers if the parties do not file before
closing.
If the COI does not meet the thresholds for an EUMR
filing, it should then be considered whether a filing in the UK
(and in any other relevant EU member state) should be made.
As of April 1 2014, the CMA is the regulator responsible for
merger control in the UK. A transaction will come under the
CMAs remit where two or more enterprises cease to be distinct,
meaning that they are brought under common control; and
either the targets turnover in the UK exceeds 70 million or a
combined share of supply or purchases of goods or services in
the UK (or a substantial part of it) of 25% is created or enhanced
by the transaction.
broadcasting and newspapers: the Secretary of State may

intervene to ensure plurality of the media;
water: mergers of licensed water companies are subject to a
compulsory reference to the UK Competition and Markets
Authority (CMA);
defence and national security: the Secretary
of State has the power to intervene to ensure
The UK runs a voluntary and non-suspensory merger
that investments in these sectors promote the
control regime meaning that there are no penalties
public interest;
banks and insurance companies: parties need for failing to file or for implementing the transaction
to have regulatory consent for any direct or
before clearance
indirect transfer of a controlling interest in
such companies - usually 10% or more of the
voting rights; and
The UK runs a voluntary and non-suspensory merger control
companies that hold oil or gas licences: a change of control regime meaning that there are no penalties for failing to file or for
could result in that licence being revoked if the change of implementing the transaction before clearance. A large number
control prejudices the companys ability to meet its licence of deals are, however, in practice pre-notified to give the parties
commitments, liabilities and obligations.
legal certainty since the CMA can investigate a deal whether
or not the parties have filed and can impose hold-separates on
A small number of UK companies still have golden shares completed deals.
conferring special rights to the UK State, for example companies
in the defence sector, but such rights are limited and may be d. Are there any unique processes that potentially could
unenforceable as a matter of EU law except in cases in which the block a foreign investment, e.g. consent from labour unions?
golden share is necessary to maintain national security.
While many employees in the UK are members of various trade
unions, there is no general statutory requirement to consult
with employees before undertaking an acquisition of shares in a
company that has employees in the UK. However, asset deals process (including whether pre- or post-closing)?
unlike share deals - are likely to require an employee consultation
The COI may trigger a filing requirement under either EU or exercise where the employing entity of any employees will change
UK merger control regimes, but not both. This is because the or if the employment of any employees may be terminated as a
EU regime offers a one-stop shop for European merger control, result of the asset deal. A failure to carry out such a consultation
meaning that if the filing thresholds under the EU Merger Regula- exercise will not affect the validity of any transaction but could
tion (EUMR) are met, a single merger control filing will need to result in a significant award of damages against the seller and/or
be made to the European Commission and separate filings to the the purchaser.
Many UK companies have liabilities under defined benefit
EU member state authorities will not be required.
An EUMR filing will be required where the transaction pension schemes. The UK Pensions Regulator has a broad power
amounts to a concentration; and the parties meet certain global to require companies to financially support or contribute to
>>
65
United Kingdom
under-funded pension schemes of companies in their corporate

group. This can lead to large and unexpected liabilities for purchasers which acquire such companies. Accordingly, if there
is a pension deficit in the target group, a purchaser would be
advised to engage with the Pensions Regulator and the trustees
of the target companys pension scheme before undertaking the
acquisition.
There are no approval requirements that are specific to foreign
investors increasing or exiting their investments.
country?
The UK has one of the largest networks of double tax treaties and
agreements in the world, making the UK an attractive regime
for holding companies and giving a high degree of flexibility in
structuring FDI transactions.
The UK has relatively generous rules permitting tax relief for
interest, including on loans to fund equity purchases and on shareholder debt. Investments into the UK will therefore generally be
structured to maximise UK interest relief (i.e. investing through
a mixture of debt and equity, having regard to transfer pricing
issues and other anti-avoidance rules). UK withholding tax on
interest then needs to be considered; where withholding would
otherwise apply it may be possible to mitigate it under an applicable double tax treaty.
The UK government has committed itself to making the UK
the most competitive tax regime in the G20. In line with that
ambition, the full rate of UK corporation tax chargeable in respect
of the profits of a UK-resident company has been progressively
lowered over recent years, and as of April 1 2014 stands at 21%.
The rate is scheduled to fall to 20% on April 1 2015.
The UK does not generally impose withholding tax on
dividends or other distributions, irrespective of the location
of the recipient. Withholding at a rate of 20% may in some circumstances apply to distributions by certain types of investment
fund (including real estate investment trusts, property authorised
investment funds and investment trusts) but may be capable of
being mitigated under an applicable double tax treaty.
in place?
Although the UK government does not have any tax incentive
schemes in place that are specifically applicable to FDI, the UK
government is committed to making the UK attractive to international business, including by maintaining a competitive tax
regime.
The UK revenue authority also has a specific team devoted
66
<<
to supporting inward investment by providing written rulings to

clarify the UK tax consequences of significant investments in the
UK.
The UK has a number of incentive regimes that are applicable
to all taxpayers, including a system of tax relief for expenditure on
research and development and a patent box regime which applies
a reduced rate of tax to profits that are attributable to qualifying
patents and certain other intellectual property rights.
Although the UK government does not offer any grants or other
non-tax incentives that are specifically applicable to FDI investors,
there are various forms of grants that might be available for FDI,
including: Enterprise Zones; Regional Growth Fund; and the
Grant for Business Investment Scheme.
There is a double taxation agreement in force between China and
the UK. It was substantially renegotiated in 2011 and is largely
consistent with the model double tax convention produced by
the Office for Economic Co-ordination and Development (the
OECD).
There is also a double taxation agreement in force between
Hong Kong and the UK, dating from 2010. Again, this largely
follows the OECDs model treaty.
Both treaties provide for mitigation of withholding tax on
interest payments. Under the China-UK treaty the rate of withholding on UK source interest paid to a resident of China may
be reduced from 20% to 10% (or, in the case of certain government bodies, eliminated entirely). Under the Hong Kong-UK
treaty, UK withholding on interest will generally be eliminated
for payments to a Hong Kong resident.
There are no foreign currency or exchange restrictions in the
UK. It should be noted that the UK does have sophisticated antimoney laundering and anti-bribery regimes, which apply equally
to both foreign and domestic investors and assist in increasing
transparency for investors and reducing corruption.
In his speech at Peking University in 2013 (see response 1b
above), George Osborne made clear that there was no limit on
the number of Chinese tourists who can visit the UK, no limit on
the amount of business China can do with the UK and no limit
on the number of Chinese people who can live as students in the
UK. On the same trade trip, the Chancellor also announced a
United Kingdom
relaxation of the rules for visa applications for Chinese visitors

to the UK.
Although the rules for Chinese visitors have been relaxed,
there is no special regime for Chinese nationals who wish to
move to the UK to live and work. Instead, these individuals must
apply for immigration permission in the same way as all other
individuals who are not from the European Economic Area or
Switzerland. This generally requires the UK employer to be registered as a sponsor and to support the applicants visa application.
Nationals of countries within the European Economic Area and
Switzerland do not require permission to work in the UK.
The UK has bilateral investment protection treaties with both
China and Hong Kong. These treaties aim to create favourable
conditions for and to promote and protect investments made
by investors in China and Hong Kong, respectively, into the UK
and vice versa. The effect for investors in China and Hong Kong
investing into the UK is that they enjoy, among other things:
free admission of their investment into the UK;
equal treatment of their investment to that of a UK national
or a national of any other country;
compensation for certain types of loss in relation to their
investment;
protection against expropriation of their investment; and
freedom to transfer their investment and the return on such
investment out of the UK.
English law is one of a handful of preferred governing laws for
international transactions. English courts are very experienced
and reasonably efficient in determining commercial disputes.
London is also a preferred seat for international arbitration
among commercial counterparties. This is due to its reputation
as a neutral and impartial jurisdiction, the prevalence of English
law as a governing law and the large pool of specialist barristers,
solicitors and arbitrators available.
Different rules apply when assessing whether the English courts
will enforce a foreign court judgment depending on the jurisdiction in which the foreign court judgment was given. If the
judgment was given anywhere else (i.e. in a country that does not
have an applicable bilateral or multilateral agreement with the
UK on reciprocal enforcement of judgments, for instance China
Author biography
Simon Weller
Simon Weller is a corporate partner in the Hong Kong
office of Freshfields. His practice focuses on domestic
and cross-border public and private M&A, joint ventures
and private equity.
Simon graduated with a law degree from Clare
College, Cambridge University, and joined Freshfields in London as a
trainee in 1997. He became a partner in the firms London private equity
practice in 2008 and relocated to Hong Kong in 2011.
Simons recent M&A experience includes advising Dalian Wanda
Group on its acquisition of Sunseeker International, Cheung Kong
Infrastructure on its takeover of Northumbrian Water Group, Tesco on the
establishment of a joint venture with China Resources Enterprise and
Hutchison Whampoa on its US$5.6bn strategic alliance between
AS Watson and Temasek.
or Hong Kong), its enforceability will be governed by English

common law. Under English common law, to be enforceable the
foreign court judgment must be a money judgment for a fixed
sum, final and conclusive in the court which pronounced it and
it must have been given by a court regarded by English law as
competent to do so. Further, under common law the judgment
cannot simply be registered in England; rather, fresh proceedings
must be issued in England to enforce the judgment as a debt. In
the absence of accusations of fraud, it is unlikely, however, that the
merits of the case decided before a competent foreign court would
need to be reconsidered by the English courts and so summary
judgment (i.e. a speedy and early hearing of a claim without the
need for a full trial) is likely to be given in such circumstances.
The UK is a signatory of the New York Convention (which
provides for the recognition and enforcement of foreign arbitral
awards by contracting states) and has enacted the requisite
domestic legislation to bring it into force. There are almost 150
signatories to the New York Convention, including China, whose
territory for the purpose of the New York Convention includes
Hong Kong.
Different rules apply when assessing whether an English judgment
will be enforceable in a foreign jurisdiction depending on the
jurisdiction in which enforcement is sought. In determining
the enforceability of an English judgment in any other country
(including in China or Hong Kong), the local law of that country
will apply.
Arbitral awards made in the UK will generally be enforceable
in other states who are signatories to the New York Convention,
subject to certain exceptions. Notably, China (whose territory for
the purpose of the New York Convention includes Hong Kong)
will only enforce arbitral awards made in the territory of another
contracting state (such as the UK), and only where the issues
arbitrated arose out of legal relationships that are considered
commercial under local law.
>>
67
Simon Weller
1.
(1) INEOS
(2)
10%
(3)
(4)
C
30-40%
Carllion8
2.
()
2.
2013

1. ()
23
(20145)
20155
......
2014140
2
2. / (
)
()
13
1.

CMA

10%

68
<<
2015
5.
1.
3.
()
2.
G20
20144121%
20154120%
10%
20%

201441CMA
3.

25%CMA

CMA
4.
4.

5.

2011

2015
>>
69
2010
20%
10%
1.
2.
20132
1.
2.
70
<<
2015
Simon Weller
Simon Weller
Simon
1997
2008
2011
Simon
Sunseeker International
Northumbrian Water Group
56
3.
150
4.
United States
United States
Rocky T. Lee
Section 1:China outbound investment (COI)
through entities, unincorporated branches, and limited liability

companies (LLCs).
Chinese investment into the US is typically structured
through the use of a special purpose vehicle (SPV), which is often
domiciled offshore in a tax-friendly intermediary jurisdiction. A
standard SPV setup may only take two to three weeks; however,
before a Chinese company is permitted to conduct outbound
investment, it may need to obtain approvals from Chinese government regulatory bodies, such as the State Administration of
Foreign Exchange (SAFE) and/or the National Development
and Reform Commission (NDRC), as well as at provincial levels,
which can take anywhere from two to eight months, depending on
the companys industry, size and nature of the outbound investment and other conditions. Not all Chinese companies require
approval from these Chinese regulators to conduct outbound
investment.

The US has a fundamentally open economy with low barriers of
entry for non-US investors. As the US is a developed nation
pursuant to the WTO, it does not restrict investment by sector,
and there is no equivalent to Chinas Foreign Investment Industrial
Guidance Catalogue (), which categorises
investment into sectors as either encouraged, permitted, restricted
or prohibited to foreign investment. In mid-2012 the US Department of Commerce launched SelectUSA, a federal program
designed to attract, retain and expand foreign investment in the
US. The program targets 18 key sectors in which the US aims
to attract investment: aerospace, education, energy, media and
entertainment, pharmaceuticals, travel, tourism and hospitality.
The US is very supportive of Greenfield investments, where a foreign investor constructs new
operational facilities from the ground up, creating The US is very supportive of Greenfield
new long-term jobs in the US.
investments, where a foreign investor constructs
new operational facilities from the ground up,

new long-term jobs in the US
b. Is the government generally supportive

creating
of COI? Which government, and regional,
bodies are responsible for driving COI in your
jurisdiction?
The US upholds a longstanding open investment policy, and
continues to be the largest recipient of foreign investment in the
world. The government system is broken down into federal, state
and local county levels, so Chinese investors can expect potential
regulatory processes at each level. Currently, the SelectUSA
federal program is the largest driving force responsible for
Chinese outbound investment into the US. However, many city
and state government officials have taken the lead in attracting
Chinese investment as well by creating independent state-funded
programs.
become operational?
How a Chinese investor structures its legal entities and
long-term operations in the US effectively defines how it will
be taxed, and thus the decision can have a significant impact
on profitability. US regulations generally allow businesses to
choose a classification as a corporation, partnership or flowwww.chinalawandpractice.com
Assuming there are no regulatory hold-ups in the US, the

establishment of an LLC, which is typically the entity of choice,
can take one to two months, after which a business can become
operational with a functional bank account and a federal and
state tax identification number.
Investors must complete basic establishment requirements in the
selected SPVs jurisdiction and comply with charter documents
such as the companys memorandum of association, articles of
association, appointment of directors, and capital investment
amount. Most importantly and often times difficult, however, is
the opening of a bank account for the SPV. Requirements such
as Anti-Money Laundering (AML) compliance and Know Your
Customer (KYC) analysis to ensure anti-bribery compliance can
slow a company down from opening a bank account, and thus
establishing an SPV. Global banking is highly regulated, especially for Chinese-sourced money.
Investors may also be impacted by Chinas proposed draft PRC
Foreign Investment Law, released by the Ministry of Commerce
(MOFCOM) on January 19 2015. In particular, if a Chinese
>>
71
United States
investor utilises an SPV and subsequently reinvests funds into

China, the investor may be subject to a review by MOFCOM and
may need to demonstrate Chinese citizenship or that the SPV is
Chinese-controlled. If unable to present such proof, the reinvestment into China may face similar industry and foreign exchange
restrictions as those faced by foreign corporations. Investors
should take this into account while planning their long-term
strategy, if the law goes into effect.
When investing in or acquiring business assets in the US, a
Chinese investor should be aware of two major approvals that
may be necessary, depending on the nature of the investment CFIUS and merger control review (see 3c).
Established in 1975, CFIUS is an inter-agency committee of
the US government that is made up of representatives from federal
agencies and offices. CFIUS establishes the process for reviewing
the national security impact of foreign acquisitions, joint ventures,
and certain investments into US-located businesses.
The CFIUS notification process is entirely voluntary and has
no mandatory waiting period before a transaction can close.
Investors should assess whether or not their transaction could elicit
national security review, because if an investigation is undertaken
post-closing, it could potentially result in the entire transaction
being shut down and the necessity to unwind the transaction.
CFIUS timing and review procedures is as follows:

Initial Review Period - 30 days

Investigation Period - 45 days
Presidential Review Period - 15 days

While the United States has a general policy of openness to foreign
investment, it does restrict foreign investment in certain circumstances. These include, for example, transportation, aircraft,
shipping, communication and energy, as well as certain licensed
businesses, such as banking and insurance. Restrictions are often
in relation to ownership rules, such as restricting the percentage
of foreign ownership in a business in a certain sector.
Under US antitrust law and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (HSR Act), the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have the
authority to review proposed transactions that can affect competition in the US and are over a certain size, though certain
exemptions apply. Both agencies can block deals that they believe
72
<<
would lessen competition, give the newly merged company the

ability to raise prices above competitive levels or decrease quality
or output below competitive levels. Prior to completing certain
mergers, joint ventures, tender offers, stock or asset acquisitions
or exclusive license, both parties must file a Premerger Notification Report Form with the FTC and DOJ and observe a statutory
waiting period (usually 30 days) before closing, unless the FTC or
DOJ challenge the deal. A premerger notification is only required
if the transaction meets both the size of person and size of
transaction thresholds, which are updated annually.
Other than the CFIUS review (see 3a) and merger review (see 3c),
there are no other major processes that could potentially block
foreign investment into the US.
Increasing or exiting investments generally do not require
approvals, unless the investment is in restricted sectors (see 3b)
or an increase in investment triggers CFIUS review or merger
review (see 3c).
country?
The United States has one of the most complex tax codes in the
world. Interestingly, the US tax laws are very similar to Chinas
tax laws. Typically Chinese investors set-up tax-efficient structures by way of an SPV in an offshore tax-friendly jurisdiction,
such as the British Virgin Islands or Cayman Islands (see 2a).
Additionally, due to the favourable tax treaties between Mainland
China and Hong Kong under the Closer Economic Partnership
Arrangement of 2003 (CEPA), many Chinese investors will also
establish a Hong Kong company as part of their offshore investment structure.
The corporate income tax rate in the US varies between 15% and
35%. The rate on the highest income bracket of corporations
is 35%, and then state and local governments may also impose
income taxes ranging from 0% to 12%. US tax law requires withholding tax for non-US persons (non-resident aliens) at a rate
of 30% on payments of US source stock dividends, short-term
capital gain distributions and substitute payments in lieu.
in place?
The US government offers significant opportunities and tax
incentive schemes for foreign investors. Greenfield investments
often qualify for subsidised loans and other tax incentives from
federal, state, and local governments. Tax incentives, financial
United States
and managerial assistance are also available to small businesses

and entrepreneurs through the Small Business Administration
(SBA). Various states and cities promote tax incentive schemes
for certain types of business investments.
The federal government provides government loans and grants to
small businesses through the SBA, which are available to foreign
investors.
There are no meaningful reciprocal tax arrangements between
the US and China from a foreign investment perspective, thus
Chinese investors are advised to establish cross-border entity
structures that take advantage of alternative tax-friendly jurisdictions (see 2ab).
The US does not impose any foreign currency or exchange
restrictions. The US has rigorous banking rules that impose withholding obligations from time to time and all Chinese investors
must at all times comply with anti-money laundering rules.
Visitors and workers from China must apply for a visa to enter
the US. Visas are not difficult to obtain as long as proper procedures are followed. Applicants must show that they qualify under
provisions of the Immigration and Nationality Act, must have
legitimate reasons to travel and must not have a criminal record.
The US does not have a bilateral investment treaty (BIT) with
China, though it does have BITs in force with 48 other nations.
Investments from China are not typically structured through
these other BIT nations; however, depending on the type of
investment and complexity of the investor structure, there may
be advantages provided by a BIT nation.
Dispute resolution in local courts is not very efficient (in terms
Author biography
Rocky T. Lee
Rocky T. Lee is the Asia managing partner and the head
of Cadwaladers Greater China corporate practice. With a
broad practice in China outbound mergers & acquisitions,
private equity and venture capital, foreign exchange and
antitrust law matters, Rocky is widely recognised as
one of the top China-US legal advisors. He has particular expertise in
Chinas restricted industries such as internet, technology, banking, funds,
e-commerce, education, energy, financial services, healthcare, media
and entertainment, publishing and telecommunications. He is highly
regarded for his knowledge of the complex regulations governing foreign
investment in China, foreign exchange, and cross-border transaction
structuring.
Rocky represents Chinese state-owned enterprises, multinationals,
financial institutions, hedge funds, private equity funds, and public and
private companies in complex-cross border transactions. In addition,
he regularly provides legal advice for a number of public and private
companies in a variety of areas, including contractual negotiation,
financial structuring, corporate governance, and other general legal
matters. He has also served as special counsel to independent directors
committees in complex mergers and contested going-private transactions
and leveraged buyouts.
He is consistently listed as one of the top lawyers in both China and
the US. His team was awarded Law Firm of the Year in Private Equity &
Venture Capital 2014 and twice awarded Deal of the Year 2014 by China
Business Law Journal and AsianMENA Counsel. Rocky was included
as the US Best Lawyers Advisory Boards sole China Expert in 2013.
Chambers Asia has listed Rocky as a Band 1 Leading Lawyer (the
highest possible ranking) for four years. Top Capital awarded Rocky Best
Legal Counsel of Investment Institutions and Counselor of the Year in
Venture Capital and Private Equity numerous times.
Rocky is admitted to practise in California, and is fluent in Mandarin
Chinese and English.
of timing) and can become costly, especially in comparison to

China, as attorney costs are generally much higher in the US.
Chinese investors should be aware that rules with respect to
damage and evidence are quite different in the US. Damages can
include actual, consequential and possibly punitive damages.
Chinese investors should also know that litigation legal fees
are relatively expensive.
The US and China are both members of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards of 1958
(New York Convention), therefore international judgments and
arbitration awards are recognised and enforced as long as they
are not against public policy and local law.
As a member of the New York Convention, US judgments and
arbitration awards are enforceable in all 152 member states of
the Convention, and only about 40 nations have not adopted the
Convention.
>>
73
1.
2012
18
2.
()
2.
KYC
2015119
1. ()
3
1.
1975
SPV

74
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(1) - 30
(2) - 45
(3) - 15
2. / (
)
()
3.
()
1976
HSR
30
4.
1
3
5.
China Business Law Journal2014

2014
20142013
30%
3.
4.
1.
1
2003
CEPA
2.
15%35%
35%0%12%
5.
12
1.
2015
>>
75
2.
2.
3.
1958
1.
48
48
76
<<
2015
4.
152
40
ka
Chinas most
prestigious
annual legal
awards
ED
I
the Kath T O RI
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e.j ne A L
o@ Jo
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ina 5 2
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law 28 IRI
an 4 2
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B e i j i ng S eptembe r 17 2 0 1 5
CLPs ninth awards ceremony

and annual flagship event
categories for 2015 include:
9 deal categories
5 team categories
21 firm categories
4 regional city categories
18 individual categories
4 in-house categories
www.china law a n d pra c tice .com
A slick operation that is well integrated

and on top of legal developments.
A technically able team that comes up
with ideas and propositions.
Chambers Asia-Pacific (2014)
HARNEYS | Hong Kong
www.harneys.com
The leading BVI law firm for over 55 years.

A growing and dynamic Cayman practice.
Our partners have been described by clients as a pleasure to work with,
a formidable team in the offshore investment funds space, understanding the
business of the client and knowing everything about BVI law.
For more information contact:
Colin Riegels
PARTNER - Banking, Finance & Corporates
colin.riegles@harneys.com
Lisa Pearce
PARTNER - Investment Funds
lisa.pearce@harneys.com
Jonathan Culshaw
ASIA MANAGING PARTNER - Investment Funds
jonathan.culshaw@harneys.com
Matt Roberts
PARTNER - Investment Funds
matt.roberts@harneys.com
Anguilla
British Virgin Islands
Cayman Islands
Cyprus
Hong Kong
London
Mauritius
Montevideo
Mauritius service provided through an association with BLC Chambers.
Sao Paulo
Singapore
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China Outbound

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China Law & Practice2015