Cross-border tax compliance: A must for Chinese enterprises going global | Global Expansion Insights

In recent years, Chinese enterprises have been accelerating their pace of "going global", with the scale of overseas investment, factory establishment, and mergers and acquisitions continuously expanding. Meanwhile, the wave of global tax transparency is sweeping across: the CRS (Common Reporting Standard) led by the OECD and BEPS 2.0 (Global Minimum Tax) are reshaping the cross - border business environment.

Cross - border tax compliance is no longer an "elective course" but a compulsory one for enterprises to enter the international market.

For government departments, this is an important means to implement international rules and promote the internationalization of the business environment; for enterprises, it is a moat to enhance credibility and ensure long - term development.

Global trend:

From "tax avoidance" to "compliance"

As of now, more than 150 countries and regions have joined the CRS network, and China is also fully aligning with relevant rules. Tax authorities can more accurately identify the cross - border assets and transactions of enterprises and individuals through the automatic exchange of financial account information. Meanwhile, the implementation of BEPS 2.0's global minimum tax system is also progressing, posing new challenges for large multinational enterprises in tax planning and compliance.

In this context, enterprises must realize that the era of relying on "information asymmetry" is over. Transparency and compliance can not only reduce potential risks but also are the prerequisites for gaining the trust of international partners and an important cornerstone for the country to promote enterprises to go global.

Three typical pain points

and solutions

Pain point 1: Obstruction of overseas profit repatriation

Many enterprises find it difficult to repatriate their overseas profits back to China after making profits abroad. The reason is often that they did not handle the ODI (Outward Direct Investment) filing at the initial stage of investment or lacked a compliant capital path design, resulting in the funds being "stuck overseas", which not only affects cash flow but also increases the tax burden.

Solution Plan the capital channel at the investment stage and ensure the compliant and smooth repatriation of profits through ODI filing, cross - border capital pools, etc.

Pain point 2: Lack of substantial business in the corporate structure

Some enterprises only register "paper companies" overseas without real office space, personnel, or business support. Such arrangements are not only likely to be regarded as "tax avoidance" in the local area, leading to the loss of tax incentives but also can be penetrated and identified in the CRS information exchange, attracting more regulatory attention.

Solution Set up regional headquarters overseas, allocate necessary personnel and business functions to ensure that the corporate structure has "substantial business", which can not only meet regulatory requirements but also legally enjoy treaty benefits.

Pain point 3: Risk of freezing overseas accounts and assets

In recent years, some enterprises have experienced the freezing of bank accounts and restricted funds due to unreasonable equity structures or compliance disputes in the target country. The compliance penalty case of the Indian government against Xiaomi highlights the direct risks brought by unreasonable structures. On the contrary, some enterprises have completed compliance arrangements before investment, achieving smooth profit repatriation and successful financing.

Solution Introduce a risk isolation mechanism in the structure design, such as hierarchical shareholding and clear division of rights and responsibilities, to ensure that a single dispute will not endanger the overall business operation.

From cost to value:

The dual significance of compliance

Many business owners often regard cross - border tax compliance as an "extra burden". In fact, compliant arrangements can not only reduce risks but also bring quantifiable benefits and long - term competitive advantages.

On the one hand, compliance can lead to direct tax savings. By making good use of the bilateral tax treaties signed between China and various countries/regions, enterprises can often reduce the withholding tax on cross - border payments such as dividends, interest, and royalties from 10% - 15% to 5% or even lower.

On the other hand, compliance is the key to enhancing international credibility and cooperation convenience. Overseas banks increasingly value the compliance certificates of enterprises when opening accounts, and investors also focus on cross - border structures and tax arrangements during due diligence. The lack of compliance design often leads to banks refusing to open accounts and investment stagnation. On the contrary, clear and transparent compliance arrangements can not only improve the efficiency of cross - border cooperation but also gain trust and smooth passage for enterprises at key nodes such as financing, listing, or international mergers and acquisitions.

In other words, cross - border tax compliance is not only a means to "prevent risks" but also a strategic asset to "reduce costs", "strengthen credibility", and "promote development", which also conforms to the national policy of promoting enterprises to go global in a compliant manner.

Platform empowerment:

Building a compliant ecosystem for going global

Enterprises not only need market opportunities but also compliant support during the process of "going global". To this end, the China Enterprises International Service Center is joining hands with top domestic and overseas service providers to build a full - chain support system covering policies, laws, finance, and taxation.

U&I Group, as the overseas legal and tax service partner of the platform, will, with more than two decades of experience in cross - border structure and compliance practice and a service network covering more than 160 countries and regions around the world, work with the platform to provide enterprises with an overall solution of "compliance check - structure optimization - risk isolation". The collaboration between the platform and service providers is forming a compliant ecosystem of "government guidance - platform coordination - professional implementation", helping Chinese enterprises to operate steadily in the global market.

Cross - border tax compliance is a threshold that enterprises going global must cross. It is not only a protective net against regulatory requirements but also the cornerstone for enterprises to gain trust and achieve sustainable development in the global market.

This is not only a compulsory course for enterprises to enhance their competitiveness but also an important measure for the country and local governments to support the high - quality development of the private economy going global. Compliance is not only an escort but also a pass.

In addition, the center will have an in - depth dialogue with the Hangzhou partner of U&I Group. We will combine typical cases to deeply share how enterprises can transform risks into competitiveness through compliant arrangements. We sincerely invite you to follow our subsequent reports!

This article is from the WeChat official account "Hangzhou Qiantang Enterprise Going Global Service Base", and is published with authorization from Qiantang.