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John Gu, Paul Ma, Chris Mak and Yvette Chan, of KPMG China, argue that lack of compliance is not the problem with the Circular 698 indirect offshore disposal tax rules, but the consistency and transparency with which the circular is applied throughout the country.

The 4th edition of China - Looking Ahead is available as a downloadable pdf

Eric Zhou, Helen Han, Dong Cheng and Melsson Yang, of KPMG China, discuss China Customs’s reforms in areas such as enterprise classification and audits, and how these improvements will help taxpayers.

Though R&D tax incentives are attractive in China, multinational companies should remember that, in return, the authorities expect more than routine work to be carried out, explain Alan Garcia, Bin Yang, Josephine Jiang and William Zhang, of KPMG China.

As noted in last year's edition of China – Looking Ahead, the Third Plenum of the 18th Chinese Communist Party (CCP) Congress in November 2013 gave key priority to fiscal and tax reforms, which were raised to the prominent status of a 'national governance' issue for policy-making purposes. The subsequent Communiqué and Decision by the Central Committee of the CCP on "Deepening of Key Reforms" set principles and targets for tax reform, budget management, and the realignment of central versus local government revenue and obligations, with far reaching restructuring and modernisation of China's fiscal administrative system being pursued on an aggressive timeline.

Taxpayers should make sure they are compliant with rules on equity-based incentive plans and frequent business travellers as the individual income system moves towards comprehensive reform, explain Michelle Zhou, Chris Ho and Barbara Forrest of KPMG China.

The Liechtenstein private foundation (Private Stiftung) is still a well-known instrument for private estate planning in Liechtenstein, especially for foreign investors. After recent legislative changes in Liechtenstein, a foundation may adopt the form of an alternative investment fund (AIF) and therefore access fund taxation rules in Liechtenstein and abroad. This new compound of a corporate, regulatory and tax hybrid vehicle also offers interesting opportunities for setting up a financial holding company without operative functions.

Ayesha Lau, Darren Bowdern, Justin Pearce and Michael Olesnicky of KPMG China explain how the Hong Kong government has changed tax rules in areas such as captive insurance and expense deductibility for payments to overseas companies to maintain its position as an attractive international financial centre in the Asia Pacific region.

China's tax regime is changing fast as it seeks to create a world-class system.

The general rule is to recognise deferred tax liabilities for all taxable temporary differences, except to the extent that they are within the scope of the IRE mentioned in IAS-12.