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Knowledge is the key to unlocking China

Tommy Chan is a tax practitioner at East Asia Sentinel Group in Hong Kong, and like Cassons, is a BKR International member. Tommy’s firm shares best practice with partners around the world to meet the business and financial needs of their clients. We spoke to Tommy about what it's like to do business in Hong Kong. 

Q What consideration should be given when a UK business begins to think about doing business in China?

On the plus side, Chinese people are interested in foreign brands and look favourably upon British goods — and tend to be willing to pay more for them. However, the tax system is complex and there are restrictive rules in sending money out of China.

Q What is the most important piece of advice you would give to UK businesses?

I’d say a well-developed business strategy based on up-to-date and local knowledge is essential. The insights of professional advisers are critical. It’s crucial to carry out detailed feasibility and due diligence studies prior to committing investment to ensure commercial objectives can be realised.

Q In which sectors do the biggest opportunities lie? What about geographic regions?

Selling foreign goods or brands to consumers via an online platform represents a big opportunity. There will be more and more Chinese cross-border shoppers in the next few years. Consumers want access to genuine, quality, foreign products and are prepared to pay a premium for it.

Q What is the biggest challenge a UK business looking to export to China need to overcome?

There are several. Large parts of the economy are closed to full foreign participation; there is strong competition from well-resourced state-owned enterprises; the business culture and tax system is complex; the language barrier, plus there’s a need for patience to build up trust and networks. On top of these there are foreign exchange controls and a significant time difference to keep in mind.

Q Do you have any specific examples of where you or your firm helped a UK business overcome any  challenges?

We had a client who is a UK resident who set up his own company in China, and is now thinking about exiting and returning back to the UK. We conducted an income and capital gain tax planning exercise, considering the date from which he becomes UK residence; the split year treatment and the liquidation and UK tax implications of this.

We also considered the pre-arrival tax planning re-distribution of dividends and realising capital gains during his non-UK residence period and advised on tax efficient ways of extracting profits from the company without falling foul of anti-avoidance rules, while at the same time using family members’ tax allowances in the UK.

Q Which support agencies should UK businesses be speaking to?

A tax advisor

This article was first published in the January / February 2018 edition of Lancashire Business View magazine.

Cassons, part of the Baldwins group,  are members of BKR International, a leading global association of accounting firms, and work with firms across the globe to assist businesses with international trade.

9 Jan 18
Tommy Chan, Tax Practitioner at East Asia Sentinel Group, Hong Kong