A 360-degree look at secondment tax issues: China and the US

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By Roberta Chang

In this article, Roberta Chang discusses the recent guidance issued by the Chinese State Administration of Taxation on when a foreign company’s secondment arrangement into China will be deemed to have created a taxable presence. Christine Lane and Gene Magidenko comment on how the Chinese regulations on cross-border secondment arrangements differ from those under US tax laws.

When structuring cross-border secondment arrangements, a foreign company dispatching the secondee (the Home Country Entity) to a company in China (the Host Entity) will typically maintain its employment relationship with the secondee in order to: prevent the application of PRC employment law (which is generally more employee friendly) and; preserve the secondee’s participation in their home country benefits.

However, focusing on these goals exposes the arrangement to the risk of the Home Country Entity being deemed to have a permanent establishment (PE) in China.

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