Taxation of liquidating
When liquidating or selling a domestic corporation that is owned by a foreign corporation, some of the rules that normally would not apply to domestic corporations may come into place.
Below we will list some of the issues that we most commonly see apply in these cases.
Amanda holds a Master’s degree in Finance Management from China Renmin University.
She is also a non-executive member of the Beijing Institute of Certified Public Accountants (CPA).
If a sale of stock has taken place and more than 50% of the market value of the corporation’s assets are real property, the sale of stock will be treated as if real property was sold, and the buyer of the stock will be required to withhold an amount equal to 15% of the gross sales price and transfer it to the IRS (Using IRS Form 8288).
Just as it is important to be well informed ahead of setting up a company in China, it is equally as important to plan ahead and to consider getting professional advice and support when you have decided to liquidate your Chinese legal entity.There are some scenarios in which the withholding can be avoided or reduced.One way is to request a certificate of withholding from the IRS through IRS Form 8288-B, which can be presented to the buyer.Amanda has more than ten years of experience working in professional services for China’s accounting, tax, finance, internal control and business sectors.Prior to joining ECOVIS she worked in a Hong Kong-based financial and tax consulting firm.