FOREIGN DIRECT INVESTMENT DECISIONS & TAX PLANNING FOR CHINESE FIRMS

Authors

  • KOLLRUSS THOMAS

Abstract

This article is concerned with the role of tax planning in the foreign direct
investment (FDI) decisions of Chinese multinational corporations (MNCs).
It can be shown that tax planning (intergroup debt financing) enables Chinese
firms to locate value-added chain and direct investment (e.g. production)
in high-taxed foreign countries by offsetting the relatively high tax burden.
Therefore, tax planning can be regarded as an instrument to enhance the
competitiveness of a foreign country as a location for Chinese firms’ direct
investment regarding the net after-tax profits as a key determinant of decisions.
In this respect, this article shows how Chinese firms can utilise tax planning to
select Germany as a target location for direct investment. Moreover, Chinese
firms may use Germany as an intermediary location for tax planning, especially
for structuring Chinese FDI in the USA. In this respect, thin-capitalisation
and CFC rules must be considered as main restrictions for optimising the tax
burden (effective tax rate/ETR).

Author Biography

  • KOLLRUSS THOMAS

    Dr. Thomas Kollruss is working for Ernst & Young
    Wirtschaftsprüfungsgesellschaft, Frankfurt a.M./Eschborn
    in the areas of International Tax Services (ITS Core)/
    International Taxation. He advises domestic and foreign
    Multinational Firms (MNCs) in all aspects of International
    Taxation and is engaged in International Tax Planning
    and Structuring. Furthermore, he is the author of several
    publications in the areas of International Taxation, Taxation
    of Companies and Business Taxation, particularly published
    in well-recognized scientific double-blind peer-reviewed
    journals.

Published

2018-05-22