2014FIFTH EDITION|China Outbound Investment GuideA fully bilingual guide published inconjunction with| :Bezen & Partners Bonn Steichen & PartnersCadwalader Wickersham & TaftHomburgerKPMGGuest edited by | :Homburger provides high quality legal advice andrepresentation both domestically and internationallyin signifcant transactions, disputes and complexlegal matters to businesses and entrepreneurs.Corporate | M&A Financial ServicesLitigation | ArbitrationIP | ITCompetitionTaxEmployment LawPrivate ClientsRestructuring | Insolvency White Collar | InvestigationsInsuranceHomburger AGPrime TowerHardstrasse 201 | CH-8005 ZurichP.O. Box 314 | CH-8037 ZurichT+41 43 222 10 00F+41 43 222 15 00www.homburger.chlawyers@homburger.ch Transactions,Disputes, Advice, , Homburger_Imageinserat_210x285mm_002_CLP_ZH.indd 1 21.03.13 13:28www.chinal awandpracti ce.com CHI NA OUTBOUND I NVESTMENT GUI DE 2014>>1EDITORIAL | EditorKatherine Jo (katherine.jo@chinalawandpractice.com)+852 2842 6964TranslatorSusan Mok (susan.mok@euromoneyasia.com)+852 2842 6924Production managerAndy Alcock (andy.alcock@euromoneyasia.com)+852 2842 6928 Sales managerDenny Squibb (denny.squibb@euromoneyasia.com)+852 2842 6945PublisherPeter Ollier (peter.ollier@euromoneyasia.com)+852 2842 6941Published byAsia Law & PracticeEuromoney Institutional Investor (Jersey) Ltd27/F, 248 Queens Road EastWanchai, Hong Kong EUROMONEY INSTITUTIONAL INVESTOR (JERSEY) LTD 2014ISBN 978-962-936-222-5DisclaimerThe material in this periodical does not constitute adviceand no liability is assumed in relation to it. The materials referred to in this publication are publicly available. All information contained herein was believed to be correct at the time of publication in June 2014All rights reserved20146Directors, Euromoney Institutional Investor(Jersey) LtdPeter Richard Ensor, Tony Shale, Anita RyeDivisional director, Legal Media Group Greg KilminsterHead of marketing, AsiaThomas BerryCEO, Euromoney Institutional Investor, AsiaTony ShaleSUBSCRIPTIONS & CUSTOMER SERVICE:Vishal MahtaniTel: +852 2842 6929Fax: +852 2842 7019Email: vishal.mahtani@euromoneyasia.com UK hotline: +44 (0) 207 779 8999US hotline: +1 212 224 3570Email: hotline@euromoneyasia.comExperience paysAlan Wang and Chris CarrFreshelds Bruckhaus DeringerDespite the increasing international presence of Chinese investors, their outbound investments remain constrained by several key challenges. Issues regarding deal certainty, price, deal availability and emerging external regulatory hurdles often emerge, but each transaction is unique. Chinese investors who familiarise themselves with global deal trends can better arm themselves on their outbound journey.Deal certaintyFurther liberalisation of the outbound investment regime is now apparent, particularly around the approvals process, thresholds and timing, which should enhance the prospects of getting deals done. At the end of 2013, the PRC State Council issued the Catalogue of Investment Projects Approved by the Government (2013) (( (2013)) and the National Development and Reform Commission (NDRC) issued its own Measures for the Administration of the Check and Approval and Record Filing of Outbound Investment Projects (), which came into effect on May 8 2014. A step behind, but also in the process of reforming, is the Ministry of Commerce who has recently circulated a draft of the Administrative Measures for Outbound Investment (Revision) (Consultation Draft) () () () ) for public comment. Although these new rules, including the NDRCs Measures for the Administration of the Check and Approval and Record Filing of Outbound Investment Projects () , which came into effect on May 8 2014, are yet to be fully tested in practice, the new rules collectively entail signicant changes for the execution of outbound deals. The bulk of Chinese buyers will benet from the greater regulatory certainty and efciency that accompany reduced administrative burdens. As transaction volume and complexity increase, further regulatory initiatives will help raise deal certainty for Chinese investors looking to acquire higher quality, rather than distressed, assets. Despite the steps toward greater administrative efciency and transparency, PRC regulatory approvals remain one of the key areas of concern for foreign sellers, who we expect to continue with their robust requests to improve deal protection. Mechanisms such as deal deposits, break fees, escrow accounts and other pre-closing security will likely remain important features in outbound deals, particularly those above the new thresholds for which an approval (as opposed to a mere ling) continues to be required. It is important that Chinese buyers engage advisers who are able to communicate with the sell-side in a way that helps the sellers understand the unique processes involved with selling to a Chinese buyer. PriceThe increase in Chinese bidders involved in global M&A has given way to two divergent trends. On one hand, some Chinese pioneers continue to build on their experience and sophistication. These buyers are becoming increasingly savvy in negotiating the right deal terms, including price. Their growing condence will rapidly bridge the sophistication gap with their western counterparts. However, new players increasingly struggle with the complexities of unfamiliar markets, meaning Chinese parties will continue to face challenges regarding price, whether their expectations are too low or they have overestimated the benets of their proposed acquisitions. The impact of and exposure to global markets (including currency markets) in terms of pricing remain a challenge needed to be overcome by adequate risk assessment.Until greater deal certainty involving Chinese buyers emerges as a concrete trend and Chinese companies develop faster internal processes, many will continue to miss out on auction processes, even when a premium is offered. This will be especially so where key deadlines or criteria in process letters are not met, creating the perception of a disorganised buyer.Deal availabilityChinese investors are competing for high-quality assets in active markets still recovering from the effects of the Global Financial Crisis, placing them in the same competition as large private equity 23Political inuenceA large number of Chinese outbound investments, particularly those by state-owned players, are still driven by political dynamics between China and the host nation. These bring complexities to deal execution and can affect deal certainty. Chinese investors would be well-advised to not simply rely on bilateral national ties but pay attention to local political nuances. Experienced deal advisors will be able to help foresee the specic roadblocks ahead and structure the deal by striking the right balance between political and economic considerations.Looking aheadChinese outbound investment is still growing in size and volume and is diversifying. A reversal of this trend in the near future is unlikely, barring a major domestic policy reversal. Indeed, increased complexity and sophistication are evident in both the deals being accomplished and their terms. However, as relative newcomers to global M&A, Chinese buyers still lack solid experience in cross-border deal execution and even more so in post-deal integration, which can turn an otherwise sound acquisition sour. Chinese buyers are encouraged to learn from the growing body of experience and, sometimes painful, lessons that are now available. 2013 (2013)201458) () ()201458 EDITORIAL | Sunseeker InternationalZF Friedrischafen201245CONTENTS | CONTENTS | GERMANY | ........................................................ 6Freshelds Bruckhaus Deringer | LUXEMBOURG | ................................................... 13Bonn Steichen & PartnersMALTA | ........................................................19KPMG | SWITZERLAND | ....................................................27HomburgerTURKEY | .......................................................40Opportunities in Turkeys special investment zones | ..................47Bezen & PartnersUNITED KINGDOM | ..................................................51Freshelds Bruckhaus Deringer | UNITED STATES | .................................................... 59Cadwalader, Wickersham & Taft LLPGERMANY67ask the purchaser to submit relevant information on the transac-tion. Within two months of receiving the requested information, the BMWi is entitled to prohibit or otherwise restrict the planned transaction if it is considered a threat to public order or security oftheFederalRepublicofGermany.Withinthistimelimit,the transaction remains subject to the condition subsequent that the BMWi prohibits the acquisition. To avoid uncertainty on timing, investorsmayapplyforabindingcertifcateofcompliance whichtheBMWiissueswithinonemonth,unlessitdecidesto initiate a formal investigation.Itisworthpointingoutthat,asexplainedbelow,theBMWi applies a very investment-friendly approach and to date has never blocked any COI transaction.b. Briey explain the investment restrictions for any specially regulated/restricted sectors (natural resources, nancial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors.Ifanon-Germancompanyacquiresadirectorindirectstakeof atleast25%ofthevotingrightsinaGermancompanyengaged inspecifcindustrialsectors,foreigninvestorsarerequiredto notifytheBMWi.Tisholdstrueforcorporationsthatproduce or develop military goods specifed in the war weapons list of the GermanWarWeaponsControlAct(Kriegswafenkontrollgesetz), speciallydesignedmotorsorgearsforcombattanksandother armoured military tracked vehicles, and products with IT security functions for the processing of national classifed documents. In suchcases,executionofanacquisitionbytransferoftheshares isprovisionallyinefectiveuntiltheBMWiexpresslyclearsthe transactionordoesnotinitiateaformalinvestigationwithin onemonthofthenotifcation.Ifitinitiatesaninvestigation,the investor is required to provide relevant information to the BMWi. TeBMWimay,withinonemonthofreceiptofsuchinforma-tion, prohibit or otherwise restrict the planned transaction if it is considered a threat to material security interests of the Federal Republic of Germany.c. Which authority oversees competition clearance, when is notication mandatory, and what is the merger clearance process (including whether pre- or post-closing)?COI in Germany may trigger merger control requirements under nationallawiftheyconstituteaconcentration,whichincludes notonlytheacquisitionofcontrolbutalso,interalia,anyother combination enabling at least one company to exercise a compet-itivelysignifcantinfuenceonanotherpartyofthetransaction. Note that the concept of a concentration is somewhat diferent underEuropeanrules.Forinstance,acquisitionsofminority shareholdingsnormallydonothavetobenotifedunderthe current regime.Merger control under European rules is regulated by the EU Merger Regulation (EUMR) and enforced by the European Com-mission(Commission).IncasesnotgovernedbytheEUMR, Germanmergercontrol,regulatedbytheActagainstRestraints of Competition (Gesetz gegen Wettbewerbsbeschrnkungen, GWB) maybeapplicable.SuchlegislationisenforcedbytheFederal Cartel Ofce (Bundeskartellamt, BKartA).A transaction will have to be notifed to the Commission if:the aggregate worldwide turnover of all the parties exceeds 5 billion; andthe aggregate EU-wide turnover of each of at least two parties exceeds 250 million.TeEUMRalsoappliestosmallertransactionsthathavean impactonatleastthreeMemberStates.Tesetransactionsare caught by the EUMR where:theaggregateworldwideturnoverofallthepartiesexceeds 2.5 billion;the EU-wide turnover of each of at least two parties exceeds 100 million;in each of at least three Member States the aggregate turnover of all the parties exceeds 100 million; andineachofatleastthreeMemberStatesmentionedimmedi-ately above, the turnover of each of at least two parties exceeds 25 million.A notifcation obligation to the Commission does not exist if each of the parties achieves more than two-thirds of its aggregate EU-wide turnover in one and the same Member State.German merger control rules generally apply when:theaggregateworldwideturnoverofallthepartiesexceeds 500 million;the turnover in Germany of at least one of the parties exceeds 25 million; andtheturnoverinGermanyofanotherpartyexceeds5 million.Bothmergercontrolregimesaremandatoryandsuspen-sory,meaningthatthetransactionmustnotbecompleteduntil clearance has been obtained.d. Are there any unique processes that potentially could block a foreign investment, e.g. consent from labour unions?Generallyspeaking,foreigninvestmentsarenotsubjecttothe priorconsentoflabourunionsorsimilaremployeerepresenta-tions.Insharedeals,priorconsultationsmayberequiredifan investoracquirescontrolofacompany.However,failureto complywithsuchobligationwillnotafectthevalidityofthe transactionbutcouldgiverisetoafne.Ifoperationalchanges in the business are a part, or likely consequence, of an asset deal and these have material adverse efects for the workforce or sub-stantial parts thereof, the works council has the right to negotiate withthesellersmanagementtoreconcileinterestsandagreeon thedetailsoftheoperationalchangeaswellasonasocialplan (which will typically provide for fnancial compensation to ofset economic disadvantages sufered by the employees). Employees may also object to a transfer of their employment relationship in case of an asset deal. In case of such objection, the afected employees are not transferred to the purchaser together withthebusinessorbusinessunitbutremainemployedwith thebusinessseller.Dependingonthenumberofemployeesor GERMANY89EU,EEAorSwitzerland,maybeemployedinGermanyonlyif theyhavearesidencepermitthatprovidesforapermissionto work.Usually,thegrantofanysuchvisaissubjecttoalabour markettestwhichisperformedbytheFederalEmployment Agency to ensure that there is no German, EU, EEA or Swiss job seekeravailabletoflltheposition,toavoiddetrimentalefects to the German labour market and to ensure that foreign workers are not employed at poorer working conditions than comparable Germanemployees.However,asfromAugust12012,foreign workerswhohaveanacademicorequivalentqualifcationand evidence of a job ofer in Germany with a level of income above a defned minimum salary have easier access to the German labour market. Section 6: Dispute resolutiona. Does your jurisdiction have a bilateral investment protec-tion treaty with China or other jurisdictions commonly used for investing into the country?Germanyhasbilateralinvestmentprotectiontreatieswithboth ChinaandHongKong.Tesetreatiesaimtocreatefavourable conditionsforandtoencourage,promoteandprotectinvest-ments made by investors in China and Hong Kong, respectively, intoGermanyandviceversa.TeefectforinvestorsinChina and Hong Kong investing into Germany is that they enjoy, among other things:free admission of their investment into Germany;fairandequitabletreatmentoftheirinvestmenttothatofa German national or a national of any other country;protection against expropriation of their investment; compensationforcertaintypesoflossesinrelationtotheir investment; andfreedomtotransfertheirinvestmentandthereturnonsuch investment out of Germany.b. How efcient are local courts enforcement and dispute resolution proceedings, and are there any procedural idio-syncrasies foreign investors must be aware of?Germancourtsareveryexperiencedaswellascostandtime efcientwhenitcomestocommercialdisputes.Regionalcourts provideforspecialisedChambersforCommercialMatters and,beforedesignatedcourts,oralhearingsmaybeconducted inEnglishlanguage.TeRuleofLawIndex2014ofTeWorld JusticeProjectranksGermany3rdoutof99countriesinCivil Justice (UK 14th, USA 27th).c. Do local courts respect foreign judgments and are inter-national arbitration awards enforceable?Diferent rules apply when assessing whether the German courts will enforce a foreign judgment depending on the jurisdiction in which the foreign judgment was given. IfthejudgmentwasgiveninacountryoutsidetheEUthat doesnothaveanapplicablebilateralormultilateralagreement withGermanyonreciprocalenforcementofjudgments(for instanceChinaandHongKong),itsenforceabilitywillbe governedbyGermanlaw.UnderGermanlaw,onlyjudgments giveninacountrythatequallyenforcesGermanjudgements aregenerallyenforceable(reciprocity).JudgmentsfromChina andHongKongareconsideredtobegenerallyenforceablein Germany.GermanyisasignatoryoftheNewYorkConventiononthe Recognition and Enforcement of Foreign Arbitral Awards and has enacted the requisite domestic legislation to bring it into force. d. Are local judgments and arbitration awards from your jurisdiction generally enforceable in other jurisdictions?Diferent rules apply when assessing whether a German judgment willbeenforceableinaforeignjurisdictiondependingonthe jurisdictioninwhichenforcementissought.Indetermining theenforceabilityofaGermanjudgmentinanyothercountry (includingChinaorHongKong),thelocallawofthatcountry will apply.ArbitralawardsmadeinGermanywillgenerallybe enforceableinotherstatesthataresignatoriestotheNewYork Convention,subjecttocertainexceptions.Notably,Chinaand Hong Kong will only enforce arbitral awards made in the territory of another contracting state (such as Germany), and only where the issues arbitrated arose out of legal relationships that are con-sidered commercial under local law.10113.()(GesetzgegenWettbewerbsbes-chrnkungen,GWB)(Bundeskartellamt,BKartA)(1)50(2)2.5(1)25(2)(3)(4)2500(1)5(2)2500(3)5004.5. 25%25%1.20143285%2. 15%5.5%15.8%7%()17.15%29%32%3. //44.Heiner BraunHeiner Braun20112013HeinerChambers GlobalIFLR 1000JUVEMaximilian PlatzerMaximilian 1213Section 1: China outbound investmenta. What are the key sectors in your jurisdiction that attract, or to which the government is seeking to attract, China outbound investment (COI)?SomeoftheleadingsectorsintowhichtheLuxembourggov-ernmenthasbeenseekingtoattractforeigninvestmentare biotechnology/healthtechnologies,e-commerce,logisticsand eco-technologies.Over the past few years, Luxembourg has become a focal point forChinesecompaniesoutboundinvestmentbytheirsettingup ofshore companies in Luxembourg through holding and pooling investments.Luxembourgisalsoanobviouschoicetolocateall kindsof(pan-European)operations,whetheritisaEuropean headquartersforChinesebanks,whereLuxembourgistoactas Europeshubforrenminbiproducts(IndustrialandCommercial Bank of China (ICBC), Bank of China (BoC), Chinese Construc-tion Bank), or for structuring tax-efcient acquisitions in Europe.Te Luxembourg Stock Exchange is one of the leading listing places for renminbi denominated bonds in Europe. Luxembourg is the most important hub for cross-border renminbi business in the Eurozone and it is the only country in Europe with renminbi denominated mutual funds.b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?Te government, banking and fund associations and the fnancial regulatory authority of Luxembourg have continually shown their support for foreign investors, including COI. Te tax authorities inparticularapplyapragmaticapproachtoforeigninvestment with a tax-efcient structure for repatriation of profts and access to a broad double taxation treaty network which includes China, Hong Kong and various other Asian countries.Section 2: Investment vehiclesa. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?Undertakings for Collective Investment in Transferable Securities (UCITS) is the retail fund vehicle distributed on a pan-European basisthatbeneftsfromaEuropeanpassport.Tismakesthem freelymarketablethroughoutEuropeandsubjectonlytoa simplifednotifcationprocedure.Te2008Memorandumof Understanding signed between Luxembourg and China qualifes UCITSaseligibleassetsinChinaundertheQualifedDomestic Institutional Investors (QDII) regime. Luxembourg is one of very fewfnancialcentrestohavesuchanagreementinplacewith China. Luxembourghasdevelopedvariousalternativeinvestment products and bespoke investment structures such as hedge funds and funds of hedge funds, private equity vehicles and real estate funds.Terecentimplementationofthealternativeinvestment fundmanagement(AIFM)regimeisexpectedtocreateaglobal alternativeinvestmentfundbranchfornon-UCITsfunds.In 2004and2007respectively,Luxembourgcreatedtheinvestment companyinriskcapital(SICAR)andthespecialisedinvestment fund (SIF). In addition, fnancial holding companies (SOPARFIs) are unregulated entities ofen used for the efcient structuring of investments in combination with SIFs and SICARs.UCITs,SIFsandSICARsareallregulatedentitiesforwhich theapprovalprocessbytheLuxembourgfnancialregulatory authority (CSSF) may take two to three months. Formanyyearsnow,Luxembourghasbeenusedforinter-nationalacquisitionsstructuringviaunregulatedvehicles (SOPARFIs), which can be up and running within a few weeks.In order to ofer high net worth individuals (HNWI) a fexible vehiclefortheirwealthmanagement,Luxembourgintroduced in2007theFamilyWealthManagementCompany,commonly known as the SPF (Socit de gestion de Patrimoine Familial), for the purpose of the acquisition, holding, management and sale of fnancial assets.AdrafbillhasbeenpresentedtoParliamentwhichissoon expectedtobeadoptedintolawandwillintroducetheLuxem-bourg private foundation regime (foundation patrimoniale), a new wealth management regime expected to be a suitable solution to secure private or business assets, to separate economic ownership from decision-making authority or to protect private spheres.b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?TereisaminimumsharecapitalfortheUCITs,SIFs,SICAR and SOPARFI. Regarding the SOPARFI and the SIFs and SICARs establishedincorporateform,therearenoresidenceornation-alityrequirementsfortheshareholdersorboardmembers. However,underLuxembourglaw,acompanyisofLuxem-bourgnationalityifitsdomicile(itsseatofadministration)is LuxembourgAlain Steichen and Laurent LazardBonn Steichen & PartnersLUXEMBOURG1415 d. Other than through the tax system, does the govern-ment provide any other nancial support to FDI investors? If so, please provide an overview.SuccessiveLuxembourggovernmentshavebeenproactivein attractingforeigninvestmentsinvariousindustriesthrough oferingcapitalinvestmentsubsidies,equipmentfnancingand fnancialassistance(throughtheStatelendingagency,SNCI), loansatreducedrates,cashgrantsforinvestmentsinhightech-nologyandR&Dofinnovativeproductsaswellasindustries involvedinmanufacturingprocessesandservices,andfnancial incentivestoaudiovisualproductionsusingproductionand location facilities within the Luxembourg territory.e. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors? TereisanagreementbetweenChinaandLuxembourgforthe avoidance of double taxation and the prevention of fscal evasion with respect to taxes on income and capital.Section 5: Forex controls and local operationsa. What foreign currency or exchange restrictions should foreign investors be aware of? None.b. Are there any legal restrictions on bringing in foreign workers and how difcult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice? AcitizenofaTirdCountry(anon-EUcountry)requiresa permittoworkasanemployee.Tispermitalsoservesasa residencepermit.Tisworkpermitmustbeappliedforbefore enteringthecountryunlessthepersonisalreadyalegalnon-working resident. AsanincentiveforattractinghighlyskilledworkerstoLux-embourg, certain costs borne by the employer for the move, stay andexitoftheemployeeinLuxembourg,maybeexemptfrom taxtotheemployeeduringafveyearperiod(whileremaining tax is deductible at the level of the employer).Section 6: Dispute resolutiona. Does your jurisdiction have a bilateral investment protec-tion treaty with China or other jurisdictions commonly used for investing into the country? TereisanagreementbetweentheBelgian-Luxembourg EconomicUnionandtheGovernmentofthePeoplesRepublic ofChinaonthereciprocalpromotionandprotectionofinvest-ments, which was signed on June 6 2005.b. How efcient are local courts enforcement and dispute resolution proceedings, and are there any procedural idio-syncrasies foreign investors must be aware of? Luxembourg courts are reasonably efcient. Civil and commercial disputes before the District Court are introduced through a writ of summons. Interim remedies are sometimes available in urgent cases to avoid imminent damage or to abate an illegal nuisance. c. Do local courts respect foreign judgments and are inter-national arbitration awards enforceable? Luxembourgispartytoanumberoftreatiesforthereciprocal recognitionandenforcementofforeignjudgments,notablythe Brussels I EU Regulation and the Lugano Convention of October 30 2007. In the absence of such a regulation or convention, recog-nition and enforcement of foreign judgments may be obtained in accordance with applicable exequatur provisions and general Lux-embourg rules applicable to the recognition and enforcement of foreign court decisions. In order to declare the foreign judgment enforceable,theLuxembourgcourtwillverifycertainmatters such as the enforceability of the foreign judgment in the country oforigin,thatthecountryoforiginhadjurisdictionaccording to its own rules and to Luxembourg confict of jurisdiction rules, thattheforeignjudgmentwasregularaccordingtotheproce-dural rules of the country of origin and did not violate the rights ofdefence,and,mostimportantly,thattheforeignjudgmentis not contrary to Luxembourg international public policy.Luxembourg is party to the New York Convention of June 10 1958ontheRecognitionandEnforcementofForeignArbitral Awardsandwillrecognisearbitralawardsasbinding,and willenforcetheminaccordancewiththerulesofprocedureof Luxembourg,undertheconditionslaiddownintheNewYork Convention (which lays down grounds for refusal of recognition and enforcement of an award).d. Are local judgments and arbitration awards from your jurisdiction generally enforceable in other jurisdictions?Teanswertothisquestionisreallydependantonthejuris-dictioninwhichenforcementofLuxembourgjudgmentsand arbitration awards is sought. However, it is certainly relevant that asfarasenforcementwithinEuropeisconcerned,Luxembourg judgments are enforceable in other European countries pursuant to the Brussels I EU Regulation and the Lugano Convention. As mentionedabove,LuxembourgisalsopartytotheNewYork Convention, which is based on the reciprocity for the recognition andenforcementofarbitrationawardsmadeintheterritoryof another contracting State.16175. 1.2. 29.22%15%3. 80%()()()4.((SNCI))5.1.2.() ()1.-2005662.3. ()20071030Alain SteichenAlain SteichenBonn Steichen & Partners1996Steichen100701994Laurent LazardLaurent LazardBonn Steichen & Partners1819Section 1: China outbound investment a. What are the key sectors in your jurisdiction that attract, or to which the government is seeking to attract, China outbound investment (COI)?Te fexibility that Malta ofers as a jurisdiction within the EU has ledtotheriseofthecountrysreputationasacost-efectiveand tax-efcient jurisdiction of choice. Te principal industry sectors attractingattentionlatelyareaircrafleasingandfnancing, holdinganddevelopmentofintellectualproperty,groupfnance andtreasuryactivities,securitisation,insurance,assetman-agementandinvestmentfundactivities,shipregistrationand fnancing,researchanddevelopmentactivities,highvalue-add manufacturingactivitiesincludingpharmaceutical,ICTand sofwaredevelopmentandlogistics/transhipmentactivities. Dependinguponthenatureandscopeofactivities,allinvestors may beneft from both fscal and non-fscal incentives.b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?Yes,theMaltesegovernmenthasalong-standingrelationship withChinaandseveralbusinessdelegationswhichhavebeen organisedbyMaltaEnterpriseandledbythegovernmenthave visited China to explore COI prospects. Section 2: Investment vehiclesa. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?Tevariousinvestmentvehiclesincludelimitedliability companies,commercialpartnerships,trusts,foundationsand other investment vehicles such as companies with variable share capital(SICAVs)andfunds.Temostcommonareprivate limitedliabilitycompanies,whichwouldtypicallytakebetween oneandfvedaystobecomeoperational,withmostentities enjoyingsame-dayregistrationwhereallrequireddocumenta-tion is readily available.b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?Limitedliabilitycompaniesrequireaminimumequityinvest-mentof1,165(Rmb10,000)andalocally-registeredaddress. Most entities require at minimum the registration of their statute settingouttheentitysobjectives,ownershipandmanagement. Te entities may be owned and managed by any person, whether resident or non-resident in Malta.Section 3: Investment approvala. For foreign investment approval (including any national security review) explain the approval process and timing. TeMaltaFinancialServicesAuthority(MFSA)isthefnancial servicesregulator.Regulatedfnancialentities,includingbanks, insurancecompanies,assetmanagementcompaniesandinvest-mentfunds,needtonotifytheMFSAtoobtainalicenceto carry out their activities. Such a licence may contain restrictions astowhomaycontroltheregulatedentity;however,theseare usually based upon experience, track record and integrity of the persons and are not blanket foreign ownership caps or legislative restrictions. Onasidenote,thecarry-onofcertaintypesofactivitymay of course require authorisation depending on the type of activity. Tiswouldtypicallybedeterminedonthebasisoftheactivi-ties to be carried on by the entity rather than on the basis of the shareholders nationality. b. Briey explain the investment restrictions for any specially regulated/restricted sectors (natural resources, nancial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors. MaltadoesnotgenerallyapplyrestrictionstoFDI,thoughfor licensed entities one would need to examine any requirements for persons who may be in a controlling position of such a licensed entity. c. Which authority oversees competition clearance, when is notication mandatory, and what is the merger clearance process (including whether pre- or post-closing)?TeOfceforCompetitionoverseescompetitionclearancein terms of the Control of Concentrations Regulations (2002), which, MaltaAndr Zarb and Simon XuerebKPMGMALTA2021e. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors? Yes,MaltaenjoysadoubletaxagreementwithChinawhich allocatestaxingrightsbetweenthetwostatessoastoeliminate double taxation of persons/entities involved in cross border trade and investment. Malta also has several non-fscal Memoranda of Understand-ing with Chinese authorities such as the Trade Promotion Council and the China Banking and Securities Regulatory Commissions. Section 5: Forex controls and local operationsa. What foreign currency or exchange restrictions should foreign investors be aware of? MaltascurrencyistheEuro.Maltadoesntimposeanyforeign exchange restrictions.b. Are there any legal restrictions on bringing in foreign workers and how difcult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice? Generally,anemploymentlicence(workpermit)isrequired fornon-EEANationalstoexerciseanyemploymentinMalta. Employmentlicencesandresidencepermitsareavailableand canbeobtainedbyshareholders,seniormanagersandotherkey personnelwhenjustifableintermsofthesizeofthebusiness and the relevant experience which they have in terms of working within the business/sector/relevant market. Employment licences andresidencepermitsmayalsobeobtainedforworkers(more juniorstaf),howevertheapplicationofthelabourmarketcon-siderations test (that is, whether a suitable person already present within the European Union can be found to carry out the proposed employment), means that this needs to be appropriately justifed. Maltaofersanattractivetaxenvironmentforpersonswho areresidentbutnotdomiciledinMalta.Suchpersonsareonly taxableinMaltaonMaltesesourcedincome,suchasemploy-mentincomeforworkperformedinMaltaandcertaincapital gains arising in Malta. Foreign sourced income is only taxable in Malta to the extent that it is received in or remitted to Malta. No taxation arises on foreign sourced capital gains. Inadditiontotheaforementionedbasisoftaxationwhichis usually highly benefcial for internationally mobile expat workers, Maltaofersavarietyofspecialtaxstatuseswhichmaybe availed of (subject to the fulflment of certain conditions) which enable qualifying persons to claim a fat rate of tax of 15% upon non-Malta source income which is received in Malta or a fat rate oftaxof15%uponqualifyingincomearisinginMaltaderived fromcertainspecifedemployments,cappedatamaximumof 5 million (Rmb43.1 million), for a determined number of years (should the qualifying income exceed this maximum, the excess would be exempt from Maltese tax). Inadditiontotheabove,theMalteseGovernmenthasalso justlaunchedanIndividualInvestorProgrammeallowingindi-vidualswhosatisfyathoroughduediligenceprocessandmake asignifcantcontributiontothesocialandeconomicdevelop-mentofMaltatoacquireMalteseCitizenshipbynaturalisation. Maltese citizens are subject to and beneft from EU Law and also beneftfromvisafreetravelarrangementstosome160destina-tions worldwide. Section 6: Dispute resolutiona. Does your jurisdiction have a bilateral investment protec-tion treaty with China or other jurisdictions commonly used for investing into the country? Maltahasenteredintosome20bilateralinvestmentprotection treaties with various jurisdictions.b. How efcient are local courts enforcement and dispute resolution proceedings, and are there any procedural idio-syncrasies foreign investors must be aware of? Tereisadrivetoensurethatthecourtsystemmaintainsand increasesefciency.Alternatively,uponagreementbetweenthe Andr ZarbAndr heads the tax function of KPMG in Malta, a position he has held since becoming a partner in 1994. Andr has advised several local businesses on the taxation issues relating to mergers, de-mergers, reconstructions and acquisitions as well as on various other taxation matters. He also advises international clients on international tax issues, including investments undertaken by such companies in both Malta and in other countries through corporate structures in Malta.In the past several years, Andr has assisted the government on a number of signicant tax legislation changes. He was part of the KPMG team that advised the government of Malta on the major changes in tax legislation, which were passed in 1994. Since 2000, Andr has advised the government on the amendments required so that the incentives provided by Malta are compliant with the EU guidelines on the provision of State Aid, and has subsequently assisted in the drafting of the relevant legislation. Post-accession, Andr assisted the government in negotiations with the Tax Policy Group and the Code of Conduct for Business Taxation. He also assisted in drafting the legislative income tax amendments following the agreement reached with the EU.Simon Xuereb Simon is a senior manager in the tax and immigration function of KPMG in Malta. Simon joined KPMG in 2009 after graduating with a Doctor of Laws (LL.D.) from the University of Malta. He then proceeded to specialise in international and EU taxation at the International Tax Centre of Leiden University in the Netherlands, where he successfully obtained a Masters of Advanced Studies in International Tax Law. On a daily basis, he provides advice on the implementation of international tax solutions to a broad range of international clients across various industries.He regularly delivers presentations on current tax issues at both local and international conferences and seminars, has acted as a regular lecturer on the advanced tax paper for ACCA and continues to act as a regular lecturer on the course leading to the Advanced Diploma in International Taxation. He has also had his work published in European Taxation.AUTHOR BIOGRAPHIESMALTA22231./2.1.SICAV2. ()1,16510,000 1.()MFSAMFSA2./() ()3.()20024.5. 1.35%35%6/730%Andr Zarb Simon Xuereb242515%5004,3101601.202.3. 4. /Homburger provides high quality legal advice andrepresentation both domestically and internationallyin signifcant transactions, disputes and complexlegal matters to businesses and entrepreneurs.Corporate | M&A Financial ServicesLitigation | ArbitrationIP | ITCompetitionTaxEmployment LawPrivate ClientsRestructuring | Insolvency White Collar | InvestigationsInsuranceHomburger AGPrime TowerHardstrasse 201 | CH-8005 ZurichP.O. Box 314 | CH-8037 ZurichT+41 43 222 10 00F+41 43 222 15 00www.homburger.chlawyers@homburger.chTransactions,Disputes, AdviceHomburger_Imageinserat_210x285mm_001_CLP.indd 1 14.02.13 17:59SWITZERLANDwww.chinal awandpracti ce.com CHI NA OUTBOUND I NVESTMENT GUI DE 2014 >>271. Why should Chinese businesses be interested in Switzerland? Switzerland was among the frst non-communist countries to recognise the Peoples Republic of China in early 1950. Swiss companieshavebeenamongthefrsttoinvestinChina.In 2013, the two countries signed a Free Trade Agreement (FTA) which is expected to enter into force in 2014. Internal stability, external neutrality and tradition of govern-ment non-interference.Independence (not part of the European Union), open market and own currency (Swiss Franc). Traditionofsuccessfulcompaniesandentrepreneurship combinedwithinnovation,top-notchtechnologyand developed fnancial services. Business friendly and reliable civil law system with economic freedom and freedom of contract. Chinese civil law has partly been based on German and Swiss law. Swisslawisofenusedasaneutral,predictableandfexible law for international contracts with or without a Swiss angle. It is the number one substantive law in ICC arbitrations. Transparentlegislationwithnooverregulationofbusiness and markets. Cooperative authorities and no corruption. Reasonable tax rates.Excellent education and fexible labour market. Highly-developed place of arbitration and litigation. Numerous small and large companies from all over the world, including China, the US, the EU, Japan, Russia, India, Middle East,LatinAmericaandAfricainvestorlistinSwitzerland, acquireSwisscompanies,useSwisslawforinternational agreements or choose Switzerland as a hub for their interna-tional activities or for dispute resolution. 2.Towhatextentisforeigninvolvementin M&AtransactionsinSwitzerlandregulatedor restricted?Tere are no general restrictions on capital transactions between Switzerlandandforeigninvestorsthatwouldallowgovernmen-talagenciestoinfuenceorrestrictthecompletionofbusiness combinationsorotherM&Atransactions.However,thereare industry-specifcregulationsandapprovalrequirements(see question 8). Considering real estate, the Federal Act on the Acqui-sitionofRealEstatebyPersonsAbroadrestrictstheacquisition byaforeignpersonoraforeign-controlledcompanyofnon-commercial real estate in Switzerland. Te acquisition of shares in a company whose statutory or factual business purpose is trading innon-commercialrealestateisalsosubjecttoapproval,except for listed companies. 3.Whatinvestmentoptionsareavailableto prospectiveforeigninvestorsandacquirersof companies in Switzerland? ChineseinvestorscaninvestinorthroughaSwissoraforeign companywithoutanyparticularrestrictions.IntermsofSwiss legalentities,themostcommonSwisslegalformsaretheAG (Aktiengesellschaf:stockcorporation)andtheGmbH(Gesell-schafmitbeschrnkterHafung:limitedliabilitycompany).No governmentapprovalisrequiredfortheformationofaSwiss company. Testockcorporationisalegalentitywithoneormore shareholders(physicalpersons,partnershipsorlegalentities), andaminimumsharecapitalofCHF100,000,ofwhichatleast CHF50,000 must be paid up. It must be registered in the commer-cialregisterofitsdomicile,whichdoesnotlisttheshareholders of the corporation or their respective holdings in the corporation. Fundamentaldecisionsrequireapprovalbytheshareholders meeting.Managementiscarriedoutbytheboardofdirectors ormanagement.Terearenocitizenshiprequirementsfor shareholdersortheboardormanagement.Atleastoneperson withresidenceinSwitzerlandmusthavethepowertobindingly represent the corporation. Te limited liability company is a legal entity with one or more members (physical persons, partnerships or legal entities), and a minimum nominal capital of CHF20,000. It must be registered in the commercial register of its domicile, which lists the members andtheirquotainthecompany.Tecompanyactsthroughthe members meeting, which can delegate management to managers. At least one person with residence in Switzerland must have the power to bindingly represent the company. Acquisitions:ProspectiveChineseacquirersmayacquire aSwissbusinessorpartsthereofbypurchasingthesharesofa company(sharedeal),bypurchasingallorspecifcassets(asset deal), by a statutory merger, or, in the case of listed companies, by a public ofer for the shares (public takeover). Co-investments:Incaseofventurecapitalandotherdirect investmenttransactions,ofen,severalinvestorsmayjoinforces for the investment and to govern the company. For this purpose, thearticlesofincorporationandashareholdersagreement provideforboardrepresentation,preferencerights,vetorights, SwitzerlandDieter Gericke, Felix Dasser, Marcel Dietrich, Reto Heuberger and Martin GrodHomburgerSWITZERLAND2829alreadyownedbythebidder.Typicalthresholdsare67%in solicited ofers and 51% in unsolicited ofers. In practice, most ofers reach acceptance levels of over 95%, thereby permitting a squeeze-out of minority shareholders (starting at 90%). Merger control, regulatory (including regarding listing or reg-istration of shares ofered in exchange for the targets shares) or shareholder approval. Materialadverseefect(MAC)conditions.Tetypically acceptedthresholdsare10%ofEBITDA,5%ofturnoveror 10% of the targets net asset value. Abidderrequiredtosubmitamandatoryofercannotmake thatofersubjecttoconditions,otherthanconditionsrequiredto complywithregulations,aimingatregistrationwithvotingrights or protecting the economic substance (crown jewels) of the target. Funding commitments: Funding must be in place before the ofer is announced. Te bidder can make a formal pre-announce-ment of the ofer before it has committed funding. Te actual ofer must contain details of the sources of fnancing and confrmation bytheindependentreviewbodythatfnancingisavailable.Te certainfundsrequirementimposesrestrictionsonpermitted conditions of the fnancing commitment. 7.Towhatextenthavematerialadversechange (MAC)clausesbecomemoreimportantinlight of the current economic climate? TeSwisseconomyandSwisscompanieshavenotbeenas severelyafectedbythefnancialcrisisasotherWesternjuris-dictions.Rather,businessesheadquarteredinSwitzerlanddo, anddidthroughoutthecrisis,fairlywell.SinceSwitzerlandhas, withtheSwissFranc,itsown,traditionallystablecurrency,the Euro crisis had limited efects on the economic climate for Swiss companies, except that exports are afected by weak foreign cur-rencies. Companies typically hedge against exchange rate risks. In addition, the Swiss National Bank starts to support the Euro if the exchange rate would otherwise drop below CHF 1.20 for 1 EUR. Nevertheless,thefnancialcrisishasledtomorecarve-outs fromMACconditionsforadverseefectsthataretheresultof generalmarketconditionsandthefnancingenvironment.In addition,commitmentlettersthatsecurethefnancingofan acquisitionhavebecomecommonalsoinprivateacquisitions and more ofen allow the seller to rely on such commitment. 8.Whichregulatednancialindustrieshave maximum foreign ownership thresholds? Tereisnolimitationonforeignownershipinthefnancial industry.However,ownersoracquirersofimportantstakesin fnancialinstitutionsaresubjecttoscrutinyastoreputation, complianceandsoundbusinessconduct,andfnancialinstitu-tions under foreign control may require a special licence. Banks and securities dealers: All banks or securities dealers incorporatedorhavingaplaceofbusinessinSwitzerlandmust haveaFINMAlicencebeforestartingoperations.Qualifying shareholders,likepersonsorentitiesowningdirectlyorindi-rectly10%ormoreofthebanksorsecuritiesdealerscapitalor votingrightsorotherwiseexertingasignifcantinfuence,are also subject to scrutiny by FINMA. Shareholders who acquire or sellaqualifyingshareholding,orwhoincreaseordecreasetheir shareholdingbeyond20,33or50%,mustnotifyFINMAbefore completing the transaction. An additional licence is required for a Swiss bank or securities dealer under foreign control or in case of changes in the foreign control. Insurancecompanies:Ifapersonintendsto,directlyor indirectly,acquireaparticipationina(re-)insurancecompany domiciledinSwitzerland,itmustnotifyFINMAif,asaresult, itreachesorexceedsthethresholdsof10,20,33or50%ofthe capital or voting rights of the Swiss (re-)insurance company. Investmentfundmanagers:Qualifyingshareholders,i.e. personsorentitiesowningdirectlyorindirectly10%ormore ofthecapitalorvotingrightsofthefundmanagerorotherwise exerting a signifcant infuence on the fund manager, are subject to scrutiny by FINMA. 9.WhatpoliciesareinplaceforChinese companieswishingtolistoncapitalmarketsin Switzerland?Switzerlandsregulatedsecuritiesmarketconsistsmainlyofthe SIX Swiss Exchange (SIX). SIX is a regulated securities exchange market in Zurich and the reference market for more than 40,000 securities, connecting investors, issuers and participants from all over the world. Within SIX, the Regulatory Board decides on the admissiontolistingandensuresthatissuersfulfltheirobliga-tions during listing. Typically, admission is granted based on a prospectus in line withinternationalstandards.Prospectusreviewbythelisting authoritiesisaformalone(mainlycompleteness)anddoesnot extend to verifcation of the content. However, wrong or mislead-ing information in the prospectus may trigger prospectus liability of those responsible for such misinformation. Fortheprimarylisting,non-Swississuershavetocomply with the same listing requirements as domestic issuers. Require-ments include that: at least 25% of the issuers shares will be free-foating; the free-foat has an expected market capitalisation of at least CHF25 million; andtheissuersreportedequitycapitalmustbeatleastCHF25 million. Dieter Gericke Dieter Gericke is a Partner in the Corporate | M&A practice team and Head of Homburgers China Group. His practice focuses on public and private mergers & acquisitions, private equity, capital markets (including IPOs) and nance. He advises in matters of corporate law and securities regulations.AUTHOR BIOGRAPHYSWITZERLAND3031On May 17 2013, the Swiss Federal Council and the European Commissionsignedabilateralagreementconcerningcoopera-tion in the application of their competition laws. Before entering into force, the agreement must be ratifed by the Swiss Parliament and the EU Parliament. Te agreement aims, amongst others, to regulate cooperation between the Swiss and the EU competition authorities. However, the agreement remains a purely procedural agreementanddoesnotprovideanysubstantiveharmonisation of competition laws. 12. What tax treaties has Switzerland signed that would benet Chinese investors? Switzerlandhasconcludedover90doubletaxationtreaties, includingtreatieswithChina,HongKongandSingapore.In addition, it has concluded an agreement with the EU that grants fullrelieffromwithholdingtaxonintra-grouppaymentsof dividends, interest and royalties. TecurrenttreatywithChinaprovidesformaximumwith-holding tax rates of 10% on dividends, 10% on interest and 10% on royalties.OnSeptember252013,ChinaandSwitzerlandsigned arevisedtreaty.Tisnewtreatywillenterintoforceaferthe approvaloftheparliamentsofbothcountrieswhichisexpected to happen in 2014. Te new treaty provides for maximum with-holding tax rates of 5% on intragroup dividends, 10% on interest and 9% on royalties. TetreatywithHongKong,whichenteredintoforceon January12013,providesformaximumwithholdingtaxrates of0%onintra-groupdividends,0%oninterestand3%on royalties. TerevisedtreatywithSingaporeappliedsinceJanuary 12013,providesformaximumwithholdingtaxratesof5%on intra-group dividends, 5% on interest and 5% on royalties. WithrespecttoSwisstaxes,thesetreatyratesapplytothe extentthattheSwisstaxesarenotlower.Inparticular,theydo notapplytoroyaltiessinceSwitzerlanddoesnotlevyanywith-holdingtaxesonroyalties.Further,Switzerlanddoesnotlevy anywithholdingtaxesoncertaintypesofinterest,inparticular, interestonintra-grouploansoronloansthatdonotqualifyas bonds or notes. 13.WhattaxadvantagesdoesSwitzerlandoffer for Chinese investors? Switzerlandofersingeneralrelativelymoderatecorporate incometaxrates(dependingontheregion,i.e.state,between 12%and24%)andvalueaddedtaxrate(8%).Interestexpenses onloansfromrelatedpartiesaredeductibleprovidedthatthey are in line with the thin capitalisation rules and the arms length rules for related party loans. Switzerland unilaterally, irrespective of the application of any double taxation treaty, exempts all the proft attributed to foreign permanent establishments and foreign real estate from the Swiss tax base. In addition, the Swiss participation exemption regime applies atfederalandregionalleveltoallSwissresidentcompaniesand Swisspermanentestablishmentsofforeigncompaniesthatown aqualifyingparticipationinasubsidiary.Teparticipation exemption is granted irrespective of whether there is any taxation at the level of the subsidiary or whether any double taxation treaty applies.SwitzerlandhasnotintroducedanyControlledForeign Corporation (CFC) rules. A qualifying participation has diferent thresholdsdependingonwhethertheexemptionisgrantedfor dividendsorforcapitalgainsfromthedisposalofshares.Te thresholds are: for dividend income: an equity investment of at least 10% or with a value of at least CHF1 million; andfor capital gains from the disposal of shares: an equity invest-ment of at least 10% that has been held for at least one year. Severalfurtherspecialregimesandreliefsarebenefcialfor investments: Regional holding company regime: Not only the income from participations but all the income is exempt from regional and communal corporation tax, if a company qualifes as a holding company. At the federal level, on the other hand, a holding company is an ordinary taxpayer at standardratesof8.5%(7.8%beforetaxes),butthe participationexemptionregimedescribedabove appliestoincomefromparticipations.Holding companystatusisgrantedifthefollowingrequire-ments are met: the main purpose of the company is the holding and management of long-term fnancial participa-tions in the subsidiary companies; at least two-thirds of either theassetsortheincomeiscomposedoforderivedfrompar-ticipations; and the company is not engaged in any commercial activityinSwitzerland.Terearecertaindiferencesinwhich activities are accepted by the regions. In general, management and administration of the company itself is tolerated. Mixedcompanies(trading,IP,etc.):ASwisscompanyora branchofaforeigncompanyqualifesforthetaxprivilegeofa mixedcompanyattheregionalandcommunallevelifitdoes notengageinanycommercialactivitywithinSwitzerlandorif itengagesinsuchactivitiestoonlyasmallextent.Ingeneral, at least 80% of the income must be derived from abroad and at least 80 % of the expenses have to be foreign expenses. Terefore, mixedcompaniesareofenusedforinternationaltrading, licensing and franchising activities. Swiss source income is taxed at standard rates, whereas foreign source income is only partially included in the Swiss tax base. Tus, depending on the specifc regionalrequirements,thespecifcregionaltaxratesandthe amountofSwisssourceincome,theoveralltaxratesofmixed companiesinSwitzerlandforfederal,regionalandcommunal tax purposes vary between 8% and 11%. On September 25 2013, China and Switzerland signed a revised treaty. This new treaty will enter into force after the approval of the parliaments of both countries which is expected to happen in 2014SWITZERLAND3233UnfairCompetition(UCA).TeUCAmakesitciviltortto enticeworkers,agentsorancillarypersonstodiscloseor uncover trade secrets of their employer or principal. Further, anyonewhoexploitsresultsofworkentrustedtohim(for example,tenders,calculationsandplans)withoutautho-risationcommitsanactofunfaircompetition.Finally,the exploitation or disclosure of manufacturing or trade secrets is deemed to be an act of unfair competition and, thus, unlawful ifsuchsecretshavebeenobtainedinanunfairorotherwise unlawful way. Apart from the legislation against unfair com-petition, other civil law provisions also address the protection of trade secrets such as the statutory employment law, which stipulatesconfdentialityobligations.Fromacriminallaw perspective,theviolationofcertainprovisionsoftheUCA related to trade secrets qualifes as a criminal ofense. Besides, theSwissPenalCode(PC)penalisesthebetrayalofatrade ormanufacturingsecretaswellastheexploitationofsuch betrayal.Furthermore,industrialespionageispenalised under the PC. MovingintellectualpropertytoSwitzerlandmaybeben-efcial from various points of view. First, Swiss tax laws ofer anumberofattractiveopportunities,suchastheholding companyregime,andspecialtaxationofincomegenerated byintellectualpropertyrightsandnowithholdingtaxon royalties(seequestions12and13).Second,Swisscontract lawallowsthepartiesamaximumoffreedomtoagreeon tailor-made agreements, such as licensing agreements. Tird, thecourts(includingtheFederalPatentCourt)providefor anefcientandimpartialenforcementagainstinfringe-mentsofintellectualpropertyrightsofforeignintellectual propertyowners.Generally,Switzerlandhasalongtradition ofvaluatingandprotectinginnovationsandintellectual propertyandofcreatingastableandmoderatetaxenviron-ment for their exploitation. 16.Whatdisputeresolutionproceduresare availableandhowpopulararetheywithforeign investors? Switzerland is one of the leading arbitration venues of the world. Based on the latest statistics available, Switzerland takes the frst placeintheInternationalChamberofCommercesstatisticof venues.Intheyear2012,Switzerlandsaw122newICCcases, versus 101 for France, 71 for the UK, 41 for USA, 36 for Singapore and 19 for Germany. Switzerland is also the home of the Court of ArbitrationforSportsandthusthevenueofmostmajorsports disputes, including those in relation to the Olympics Games and FIFA. Te popularity of the use of Swiss substantive law to govern international contracts is evidenced by its second position in ICC disputes (17 % UK law, 13.4% Swiss law, 9.8 % US law, according to the latest statistics). ArbitrationinSwitzerlandmaybebasedonanysetofrules thatthepartiesmaychoose.ApartfromICCrules,theSwiss ChambersSwissRulesforInternationalArbitrationthatare basedontheUNCITRALArbitrationRulesareverypopular. MorethantwothirdsofthepartiesarbitratingundertheSwiss Rules are non-Swiss, in line with the average percentage of foreign parties in all international proceedings in Switzerland. Switzerlandhasalongtraditionofsolvinginternational disputes in an efcient, neutral and professional manner, catering totheneedsofinternationalbusinesspeople,governmentsand athletes alike. Te arbitration law is attuned to the needs of inter-nationalarbitration.AuniquefeatureofSwissarbitrationlawis the direct and only recourse to the Swiss Supreme Court for any challenges against an arbitral award. Tis setting-aside procedure typicallytakeslessthansixmonths,withlessthan7%ofall awards being vacated. Whatifarbitrationisnotpossible?Unlikecourtsinother jurisdictions,theSwisscommercialcourtswillinglyassistthe partiesinfndingareasonablesolutiontotheirdisputeearlyon intheproceedingsandbasedonprima-facieassessmentofthe strengths and weaknesses of the case by the court itself. Further, thepartiesneednotfearexpensiveanddisruptivedocument production proceedings that are known from common law juris-dictions (no discovery). 17.WhatbilateralagreementshasSwitzerland signed that would benet Chinese investors? OnJuly62013,SwitzerlandasthefrstcontinentalEuropean countrysignedanFTAwithChinawhichisexpectedtoenter intoforcein2014.TeFTAdoesnotonlyimprovemutual marketaccessforgoodsandservicesbutalsoenhanceslegal certaintyconcerningtheprotectionofintellectualpropertyand thebilateraleconomicrelationsingeneral.Inparallelwiththe FTA,anagreementoncooperationonlabourandemployment issues was concluded on the same day which is linked to the FTA by a reference. Te FTA aims to dismantle tarifs fully or partially, sometimes subjecttoatransitionperiod,forthevastmajorityofbilateral trade. At the entry into force of the FTA, Switzerland will abolish theremainingtarifsonChineseindustrialproducts.Likewise, ChinawillfullyorpartiallydismantleitstarifsonSwitzerlands industrial exports, either from the entry into force of the FTA or within periods of 5 to10 (in a few cases 12 or 15) years. Te dis-mantlingperiodisapplicabletoproductsforwhichChinahas expressedtohaveaspecifcneedforadjustment(e.g.selected products in the watchmaking, machinery and chemical-pharma-ceuticalsectors).Regardingagricultureproducts,theFTAwill enableSwissproductstobeimportedtarif-freeoratreduced tarifs into China. Conversely, Switzerland will grant preferential tarif treatment for selected products to be imported from China. Based on the Customs Union between Switzerland and Liechten-stein,theFTAalsoappliesfortradeingoodstothePrincipality of Liechtenstein. Regardingtradeinservices,theFTAisbasedonthe GeneralAgreementonTradeinServices(GATS)oftheWorld TradeOrganisation(WTO)butincludesadditionalandmore detailedrules.AsinGATS,trafcrightsinairtransportarenot coveredbytheFTA.ComparedtotheGATS,Chinascommit-mentintheFTAcontainsadditionalsectorsandimprovements suchasfnancialservices,environmentalservices,airtransport SWITZERLAND34351) 1950201320142) 83)AGAktiengesellschafGmbHGesellschaf mitbeschrnkter Hafung10524) 3%5%10%15%20%25%331%50%662%5%3%5) TOBFIN-MATOBDieter Gericke, Felix Dasser, Marcel Dietrich, Reto Heuberger Martin GrodHomburger363725%25002500SIXSIX10) ComCo2051ComCo ComCoComCoComCo11) 20115ComCoComCo2012222201351712) 9010%201392520145%10%9%201392520143839557050UCAUCAUCAPCPC121316)20121221017141361917%13.4%9.8%UNCITRAL 67%17)201376201451012152006TURKEY4041Section 3: Investment approvala. For foreign investment approval (including any national security review) explain the approval process and timing. Asindicatedabove,theFDILawdiminishedanypriorapproval requirement for FDIs. However, if investing into a Turkish entity, theforeignermustnotifytheMinistryofEconomysothatthe infow of FDIs in Turkey can be tracked. Tenotifcationcarriesmoreofastatisticalpurposeand therefore requires basic information in relation to the investment such as where the foreign investment infow is from, the purpose oftheentity,thenamesoftherelevantentities/personsmaking the investment and the amount of the investment.b. Briey explain the investment restrictions for any specially regulated/restricted sectors (natural resources, nancial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors. As indicated above, the FDI Law diminished any need to obtain anapprovalforforeignerstomakeinvestmentsinTurkey. However, there are still certain regulated markets which foreign-ers have limited access to due to certain specifc legislations. For companies operating in the maritime and civil aviation markets, foreign shareholding is limited to 49% and the maximum foreign shareholding allowed for a broadcasting entity is 50%. Inrelationtootherregulatedmarketssuchaselectric-ity,mining,petroleum,banking,telecommunicationsandcivil aviation,priorapprovaloftherelevantregulatorygovernment agenciesisrequiredinordertoefectuateasharetransferwith respect to the companies which operate in such markets.Aside from the limitations provided above, acquisition of real estate by foreigners is also subject to certain limitations which are worthmentioning.Accordingly,thetotalareaoftherealestate and limited rights in rem which a foreign real person can acquire inTurkeycannotexceed30hectaresor10%ofthelandofthe relevant municipality subject to private ownership. Onlyforeignlegalentitieswhichfallwithinthescopeof aspecifclegislationsuchastheTourismEncouragementLaw numbered 2634, the Petroleum Law 6491 or Industrial Zones Law numbered 4737 can acquire real estate in Turkey.Turkish companies controlled by foreign investors can acquire real estate in Turkey provided that the acquisition falls within the scope of activities provided in their constitutional documents.Depending on the location, the acquisition of real estate by a foreign real person, a foreign legal entity or a Turkish legal entity controlledbyforeignshareholdersissubjecttotheapprovalof the commanderships which is authorised by the Turkish General Staf or the relevant Governorship.c. Which authority oversees competition clearance, when is notication mandatory, and what is the merger clearance process (including whether pre- or post-closing)?TeTurkishCompetitionAuthority(TCA)isthegovernmental body which ensures the formation and development of markets for goods and services in a free and sound competitive environment in Turkey. In order to achieve this goal, the TCA carries out antitrust reviews of transactions prior to their consummation if (a) the total turnovers of the transaction parties in Turkey exceed TL100 million (Rmb293 million), and turnovers of at least two of the transaction partiesinTurkeyeachexceedTL30million(Rmb88million);or (b)theturnoverinTurkeyfortheacquiredassetoroperationin acquisition transactions or for at least one of the transaction parties in merger transactions exceeds TL30 million (Rmb88 million), and atleastoneoftheothertransactionpartieshasaglobalturnover exceeding TL500 million (Rmb1.47 billion). Oncethefundamentaltermsofthetransactionareclear andtheconditionsaremet,thepartiesofthetransactionapply bycompletingaform.Followingthesubmissionoftheapplica-tion to the TCA, the TCA is required to respond to the clearance application within 30 days. In the event the TCA fails to respond within the said timeframe, the transaction will be deemed to have cleared. d. Are there any unique processes that potentially could block a foreign investment, e.g. consent from labour unions? Asidefromthelimitationsandapprovalsprovidedabove,there arenouniqueprocesseswhichcouldpotentiallyblockaforeign investment.e. Are there approval requirements when a foreign investor increases or exits its investments?Exceptforregulatedmarketswheresharetransfersrequirethe approval of a specifc regulator and the notifcation requirement totheMinistryofEconomyinrelationtotheFDI,thereareno approval requirements when a foreign investor increases or exits its investments.Section 4: Tax and grantsa. Are there tax structures and/or favourable intermediary tax jurisdictions that are particularly useful for FDI into the country? Promoting growth and attracting FDI has played and continues to play a pivotal role in shaping policies in Turkey. For this purpose, various regional and sector-specifc incentive schemes have been introduced and various double tax treaties have been put in place over the years.While these generally are not FDI specifc, they are useful for FDIsinreducingthetaxexposureoftheirinvestments,thereby giving FDIs more room for investment return.Incentive schemeTeCouncilofMinistersDecisionnumbered2012/3305and dated June 19 2012 introduced an incentive scheme with various advantages for both local and foreign investors. Teincentivessystemrecognisesfourtypesofincentive implementations (i.e. general incentive implementation, regional incentiveimplementation,implementationforlarge-scale TURKEY4243capitalofTL100,000(Rmb293,000)oraturnoverorexport revenue in excess of the applicable threshold, which is TL800,000 (Rmb2.35million)forturnoverandUS$250,000(Rmb1.56 million)forexportrevenue,andtheneedtomaintainaratioof foreign to Turkish workers of 1:5.Providedtheapplicantmeetstheapplicablecriteria,the process is relatively straightforward with permits being issued on average within four to six weeks of application.Section 6: Dispute resolutiona. Does your jurisdiction have a bilateral investment protec-tion treaty with China or other jurisdictions commonly used for investing into the country? TurkeyandChinahavesignedabilateralinvestmentprotection treaty on November 13 1990 which came into force on August 1 1994. Certainprotectionsareoferedtoqualifyinginvestments underthistreaty,suchastheso-calledmostfavourednation clause,whichprovidesthatthecontractingstateswouldoferto each other not less than they ofer to other investors under similar circumstances.Turkeyispartytovariousothersinvestmentprotection treaties (including the CIS and European countries).b. How efcient are local courts enforcement and dispute resolution proceedings, and are there any procedural idio-syncrasies foreign investors must be aware of? Turkeyisacivillawcountrywithitscivilandcommerciallaws modelledontheSwissandGermanlawsystemsandwithother laws largely following European Union (EU) guidelines as part of the EU compliance efort over the last decade.Te Turkish court system is generally criticised for being inef-fcient in terms of timing with an average claim taking over one year to be fnalised. It is common practice for foreign investors to opt for international or domestic arbitration.c. Do local courts respect foreign judgments and are inter-national arbitration awards enforceable? TurkeyispartytotheNewYorkConventionontheRecogni-tionandEnforcementofForeignArbitralAwards.Accordingly, foreign arbitral awards will be recognised and enforced in Turkey unless it falls within the exceptions in Article 5.ForeigncourtjudgementswillbeenforceableinTurkey pursuanttothePrivateInternationalandProceduralCodeof Turkey (Law No. 5718) except where there is no (contractual or de facto)reciprocitybetweenthejurisdictionwherethejudgement has been awarded and Turkey, the judgement relates to a matter whichfallsexclusivelywithinthejurisdictionoftheTurkish courts,thepartyenforcementissoughtagainsthasobjectedto the award before Turkish courts on the basis that he has not been properlysummonedorservedinconnectionwiththeproceed-ings or the judgment is against the public order of Turkey.d. Are local judgments and arbitration awards from your jurisdiction generally enforceable in other jurisdictions?Tis depends on the rules of the jurisdiction where enforcement is sought. In general and as explained above, Turkey is a civil law country with civil and commercial laws very similar to European countries.Yesim BezenYesim Bezen is a founding partner of Bezen & Partners. She assists international clients in a wide variety of transactions, most notably in banking, fnance, asset and project fnance transactions. Yesim Bezen is a qualifed solicitor (England & Wales). She completed her trainingwith and was employed by a magic circle law frms London offce from 2001 to 2007. Zekican SamlZekican Saml is an attorney registered with the Istanbul Bar. He joined the Bezen & Partners team in August 2009 following his graduation from Ankara University Faculty of Law. Zekican advises both domestic and international clients on any matters related to regulatory and realestate issues.Uur SebzeciUur Sebzeci is an attorney registered with the Istanbul Bar. He joined the Bezen & Partners team in September 2009 following his graduation from Ankara University, Faculty of Law. Uur advises both domestic and international clients on any matters related to commercial law, commercial disputes, mergers and acquisitions and employment.Can zilhanCan zilhan is an attorney registered with the Istanbul Bar. He joined the Bezen & Partners team in June 2010 following his graduation from Marmara University Faculty of Law. Can advises both domestic and international clients on fnance and corporate matters.Onur OkanOnur Oksan is an attorney registered with the Istanbul Bar. He joined the Bezen & Partners team in July 2011 following his graduation from Galatasaray University Faculty of Law. Onur advises both domestic and international clients on regulatory and real estate matters.AUTHOR BIOGRAPHIES44453.()TCATCA(a)2.938,800(b)8,80014.7TCATCA30TCA4.5. 1.20126192012/3305(destekunsurlari)*3218*4691*4562* (http://www.invest.gov.tr/en-US/infocenter/publications/Documents/SPE-CIAL-INVESTMENT-ZONES-TURKEY.pdf).2. 20%15%3. 4.1 4647Overthepastdecade,Turkeyhasbecomeafocusdesti-nationforforeigninvestors.Teafermathofthe2008 global fnancial crisis has especially propelled Turkey to becoming a hub for European investors with its strategic location, stable economy and rapid growth rate.WhileTurkeyprovidesasuitablegroundforforeigninvest-ment,italsoaimstoincreaseitsindustrialcapacitywithout overlookingfactorsoftheenvironment,urbanisationandtrans-portation. In order to do so, Turkey promoted the establishment of Organised Industrial Zones (OIZ) throughout the country.Te frst OIZ in Turkey was established back in 1962 in Bursa, oneofthenationsmostindustrialisedcities.Asoftoday,there are a total of 276 OIZs in Turkey. Te largest OIZ, located in the south-easternindustry and trade city of Gaziantep, is established on a land of 11 million m2.Specications of OIZsLand allocation procedureDuetotheirnature,OIZsaresubjecttospecifcrulesand regulations.Firstandforemost,acquisitionoflandwithintheOIZsis subjecttoaspecifcprocedurediferentthanthatofordinary land.AccordingtotheLawonOrganisedIndustrialZones(4562) (LawonOIZ)andpublishedintheOfcialGazette(24021)on April152000,theallocationofOIZswillbegovernedbyregu-lationsissuedbytheMinistry.Accordingly,theApplication RegulationonOIZ(27327)(OIZRegulation),publishedinthe Ofcial Gazette on August 22 2009, sets out provisions governing the allocation of OIZ land. As per Article 103 of the OIZ Regulation, real or legal persons applying for land allocation are required to apply to the relevant OIZ,ofwhichitsboardwillreviewtheapplication.Iftheappli-cationisapproved,theOIZwillissueanoticeinwritingtothe applicant.Teapprovalnoticeisnotsufcientforthelandallocation andismerelyanotifcation.Article104oftheOIZRegulation providesthattheOIZandtheapplicantcompanyarerequired tosignalandallocationagreementaswellasaninvestment undertakingpreparedbytheMinistrylayingoutthetermsof landallocationandanylegalpenaltiesinordertoguaranteethe completionoftherelatedinvestments.Generally,alandalloca-tion agreement and an investment undertaking include penalties in relation to the completion of the investment and the payment oftheinstalmentsofthetotalpriceoftheallocatedlandetseq. Other conditions as dictated by the OIZ Regulation would need to be assessed depending on the specifcs of the land.Asopposedtowithotherordinaryland,thecompanydoes not obtain the title of the related property at the end of the OIZ applicationprocess.Followingtheexecutionofalandalloca-tionagreementandaninvestmentundertaking,thedeclaration andtheannotationcolumnonthetitledeedsoftherelevant land registry for the related property will refect that the sale or assignment of the immovable is forbidden according to Article 18 of the Organised Industrial Zone Law.In this respect, the applicant company will not be entitled to sell the land until it fulfls all of its payment obligations in relation tothelandallocation.Itwillthereforehaveongoingpayment obligationstotherelevantOIZasprovidedbyArticle18ofthe Law on OIZ.Aferthefulflmentofallobligationsinthelandallocation agreement and investment undertaking, a deed will be issued in thenameoftheapplicantcompany,whichwillthenobtainthe title to the related property. In this case, a second annotation will beincludedinthefrstdeclarationandannotationcolumnon thetitledeedsoftherelevantlandregistrybyreplacingthefrst andstatingasfollows:It[i.e.thelandlord]isobligedtoobtain thepositivedecisionoftheorganisedindustrialzoneincasethe immovableistransferredtothirdpersonsincludingthesaleofthe immovable through an execution procedure where the pre-emption rightoftheorganisedindustrialzoneisreleasedandregisteredat Opportunities in Turkeys specialinvestment zonesYeim Bezen, Zekican Saml, Uur Sebzeci, Can zilhan and Onur OkanBezen & PartnersThe main advantages of OIZsTheMinistryofScience,IndustryandTechnology(Ministry) supportsthedevelopmentsoftheOIZsandprovidesloansto OIZmanagementsinordertoacquirenewlandandimplement infrastructureprojects.Investorscanthereforeimplementtheir facilities in suitable parcels with adequate infrastructure.There are certain incentives provided to OIZs, including tax credits fordirectinvestments.OIZmanagementscanalsoobtainloans with advantageous terms that are provided to companies located within these zones.Companiesareallowedtousewater,electricityandfuelatdis-counted prices.Exporting companies are provided with tax returns.Due to such incentives, since 1995, 86% of foreign investment in industrial sectors has been made in OIZs.TURKEY48492008OIZOIZ1962276OIZOIZ1,100OIZa) OIZOIZ2000415240214562OIZOIZ2009822OIZ27327OIZOIZOIZ103OIZOIZOIZ104OIZOIZ18OIZ18OIZ[] OIZb) OIZOIZOIZOIZ41OIZOIZ7475OIZOIZ84OIZc) OIZOIZ85d) OIZOIZe) 20126192012/3305OIZOIZYeim Bezen, Zekican Saml, Uur Sebzeci, Can zilhan Onur OkanBezen & PartnersOIZOIZOIZOIZOIZ199586%OIZ5051Section 1: China outbound investmenta. What are the key sectors in your jurisdiction that attract, or to which the government is seeking to attract, China outbound investment (COI)?Te UK government, through the department UK Trade & Invest-ment, has detailed a wide range of sectors in which it is seeking to attract COI including aerospace, automotive, energy, information andcommunicationtechnologiesandlifesciences.RecentCOI in the UK include:(a)oilandgas,e.g.PetroChinasoilrefningandtradingjoint venture with INEOS;(b) infrastructure,e.g.ChinaInvestmentCorporationsacquisi-tion of a 10% stake in Heathrow Airport Holdings; and(c) real estate, e.g. Dalian Wandas acquisition of a development site on Londons South Bank.b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?TeUKgovernmentexpresslywelcomesChineseinvestors.At aspeechtostudentsatPekingUniversity,GeorgeOsborne(the UKsChancelloroftheExchequer)stated,oneofmyprincipal goals this week is not just to increase British investment in China. ButtoincreaseChineseinvestmentinBritain...IndeedIwould go as far as to say that there is no country in the west that is more open to investment especially from China. UKTrade&Investment(agovernmentbody)hasthemain responsibilityfordrivingforeigndirectinvestment(FDI)in theUK.ForCOIspecifcally,theyworkwiththeChina-Britain Business Council, which has a presence in 13 cities across China.Section 2: Investment vehiclesa. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?Foreigninvestorswillgenerallyusealegalentitythatmost suitstheircorporateandtaxstructuringgoals(anditcould beincorporatedoutsidetheUK,althoughUKregulators canoccasionallybewaryoftheuseofacquisitionentities incorporatedinjurisdictionsperceivedasofshoretaxhavens). Te most common UK legal entity is a limited liability company (which could be private or public, with the key distinction being thatonlypubliclimitedcompaniesmayofersharestothe public).Otherbusinessvehiclesincludepartnerships,limited liabilitypartnershipsandbranchesofoverseascompanies.All oftheseentitiesandvehiclesmaybeestablishedandbecome operational within a short period of time.b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?Chineseinvestorsmayestablishandoperateanyofthese vehicles in the same manner as local investors and no regulatory approvalsarerequiredtosetupthesevehiclesintheUK.Tere arenoresidencyrequirementsfordirectorsofaUKcompany, although there may be tax residency considerations which afect the location of management.Section 3: Investment approvala. For foreign investment approval (including any national security review) explain the approval process and timing. Unlike in many other European jurisdictions, there are currently nogeneralrestrictionsonforeigninvestmentintheUK, althoughtheremaybearequirementforsector-specifcregula-tory approvals or competition approvals (see responses 3b and 3c below).TerecentfailedbidbyPfzerforAstraZeneca(inMay 2014)triggeredheatedpoliticaldebateaboutwhetherapublic interestrequirementshouldbeintroducedintheUK,and whetherornotthisleadstoanynewregulationitservesasa reminder of some of the broader issues that may need to be dealt withonhighprofleacquisitions.NotealsothatUKbusinesses ofen have interests or customers abroad, which could mean that aUKinvestmenttriggersforeigninvestmentapprovalrequire-ments in other jurisdictions.b. Briey explain the investment restrictions for any specially regulated/restricted sectors (natural resources, nancial services, telecoms and infrastructure, etc), including whether the government is entitled to any special rights (e.g. golden share) in those sectors.While there are no general restrictions on investment, in certain cases investors may need sector-specifc approval or the UK gov-ernmentmayhavethepowertorestrictinvestmentsorchanges of control, for example:United KingdomSimon WellerFreshelds Bruckhaus DeringerUNITED KI NGDOM5253forholdingcompaniesandgivingahighdegreeoffexibilityin structuring FDI transactions.Te UK has relatively generous rules permitting tax relief for interest, including on loans to fund equity purchases and on share-holder debt. Investments into the UK will therefore generally be structuredtomaximiseUKinterestrelief(i.e.investingthrough amixtureofdebtandequity,havingregardtotransferpricing issuesandotheranti-avoidancerules).UKwithholdingtaxon interestthenneedstobeconsidered;wherewithholdingwould otherwise apply it may be possible to mitigate it under an appli-cable double tax treaty.b. What are the applicable rates of corporate tax and with-holding tax on dividends?Te UK Government has recently committed itself to making the UK the most competitive tax regime in the G20. In line with that ambition, the full rate of UK corporation tax chargeable in respect oftheproftsofaUK-residentcompanyhasbeenprogressively lowered over recent years, and as of April 1 2014 stands at 21%. Te rate is scheduled to fall to 20% on April 1 2015.TeUKdoesnotgenerallyimposewithholdingtaxon dividendsorotherdistributions,irrespectiveofthelocation oftherecipient.Withholdingatarateof20%mayinsomecir-cumstances apply to distributions by certain types of investment fund (including real estate investment trusts, property authorised investmentfundsandinvestmenttrusts)butmaybecapableof being mitigated under an applicable double tax treaty.c. Does the government have any FDI tax incentive schemes in place?AlthoughtheUKgovernmentdoesnothaveanytaxincentive schemesinplacethatarespecifcallyapplicabletoFDI,theUK governmentiscommittedtomakingtheUKattractivetointer-nationalbusiness,includingbymaintainingacompetitivetax regime. TeUKrevenueauthorityalsohasaspecifcteamdevoted to supporting inward investment by providing written rulings to clarify the UK tax consequences of signifcant investments in the UK. Te UK has a number of incentive regimes that are applicable to all taxpayers, including a system of tax relief for expenditure on research and development and a patent box regime which applies a reduced rate of tax to profts that are attributable to qualifying patents and certain other intellectual property rights.d. Other than through the tax system, does the government provide any other nancial support to FDI investors? If so, please provide an overview.Although the UK government does not ofer any grants or other non-tax incentives that are specifcally applicable to FDI investors, there are various forms of grants that might be available for FDI, including:EnterpriseZones;RegionalGrowthFund;andthe Grant for Business Investment schemee. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors?Tere is a double taxation agreement in force between China and theUK.Itwassubstantiallyrenegotiatedin2011andislargely consistentwiththemodeldoubletaxconventionproducedby theOfceforEconomicCo-ordinationandDevelopment(the OECD).Tereisalsoadoubletaxationagreementinforcebetween HongKongandtheUK,datingfrom2010.Again,thislargely follows the OECDs model treaty.Bothtreatiesprovideformitigationofwithholdingtaxon interestpayments.UndertheChina-UKtreatytherateofwith-holdingonUKsourceinterestpaidtoaresidentofChinamay bereducedfrom20%to10%(or,inthecaseofcertaingovern-mentbodies,eliminatedentirely).UndertheHongKong-UK treaty,UKwithholdingoninterestwillgenerallybeeliminated for payments to a Hong Kong resident.Section 5: Forex controls and local operationsa. What foreign currency or exchange restrictions should foreign investors be aware of?Terearenoforeigncurrencyorexchangerestrictionsinthe UK. It should be noted that the UK does have sophisticated anti-money laundering and anti-bribery regimes, which apply equally tobothforeignanddomesticinvestorsandassistinincreasing transparency for investors and reducing corruption.b. Are there any legal restrictions on bringing in foreign workers and how difcult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice?InhisspeechlastyearatPekingUniversity(seeresponse1b above),GeorgeOsbornemadeclearthattherewasnolimiton the number of Chinese tourists who can visit the UK, no limit on theamountofbusinessChinacandowiththeUKandnolimit on the number of Chinese people who can live as students in the UK.Onthesametradetrip,theChancelloralsoannounceda relaxationoftherulesforvisaapplicationsforChinesevisitors to the UK.Simon WellerSimon Weller is a corporate partner in the Hong Kong ofce of Freshelds. His practice focuses on domestic and cross-border public and private M&A, joint ventures and private equity.Simon graduated with a law degree from Clare College, Cambridge University, and joined Freshelds in London as a trainee in 1997. He became a partner in the rms London private equity practice in 2008 and relocated to Hong Kong in 2011.Simons recent M&A experience includes advising Dalian Wanda Group on its acquisition of Sunseeker International, Cheung Kong Infrastructure on its takeover of Northumbrian Water Group, Tesco on the establishment of a joint venture with China Resources Enterprise, and Hutchison Whampoa on its US$5.6bn strategic alliance between AS Watson and Temasek.AUTHOR BIOGRAPHYUNITED KI NGDOM54551.(1)INEOS(2)10%(3)2.......131.2. () 1.()23(20145)2./() ()(1)(2)CMA(3)(4)10%(5)3.()Simon Weller5657201020%10%1.2.21.(1)(2)(3)(4)(5)2.3. 1504. @CLP_editorialAccess thelegal professions most trusted guide to ChinanFull translations of PRC laws with English andChinese side-by-sidenOnline database contains 26 years of translations,in-depth articles and opinionnExpert analysis of legal developments and trendsnLatest news affecting businesses in ChinanSectors covered: Anti-monopoly, Banking & Finance, Capital Markets, Dispute Resolution, FDI, IP, Labour & Employment, M&A, Real Estate and Tax CLP e-alerts:nWeekly e-mail including in-depth analysis, latest translations and legislation roundup nMonthly roundup of all translations and analysis articles that have been uploaded Visit chinalawandpractice.com today for moreinformation and to start your FREE TRIALEnquiries: vishal.mahtani@euromoneyasia.com+852 2842 6929 UNITED STATESwww.chinal awandpracti ce.com CHI NA OUTBOUND I NVESTMENT GUI DE 2014 >>59Section 1: China outbound investment (COI) a. What are the key sectors in your jurisdiction that attract, or to which the government is seeking to attract, China outbound investment (COI)?TeUShasafundamentallyopeneconomywithlowbarriersof entryfornon-USinvestors.AstheUSisadevelopednation pursuanttotheWTO,itdoesnotrestrictinvestmentbysector, and there is no equivalent to Chinas Foreign Investment Industrial Guidance Catalogue (), which categorises investment into sectors as either encouraged, permitted, restricted or prohibited to foreign investment. In mid-2012 the US Depart-mentofCommercelaunchedSelectUSA,afederalprogram designedtoattract,retainandexpandforeigninvestmentinthe US. Te program targets six key sectors in which the US aims to attract investment: aerospace, education, energy, media and enter-tainment,pharmaceuticals,travel,tourismandhospitality.Te US is very supportive of Greenfeld investments, where a foreign investor constructs new operational facilities from the ground up, creating new long-term jobs in the US.b. Is the government generally supportive of COI? Which government, and regional, bodies are responsible for driving COI in your jurisdiction?TeUSupholdsalongstandingopeninvestmentpolicy,and continues to be the largest recipient of foreign investment in the world. Te government system is broken down into federal, state and local county levels, so Chinese investors can expect potential regulatoryprocessesateachlevel.Currently,theSelectUSA federalprogramisthelargestdrivingforceresponsiblefor ChineseoutboundinvestmentintotheUS.However,manycity andstategovernmentofcialshavetakentheleadinattracting Chinese investment as well by creating independent state-funded programs.Section 2: Investment vehiclesa. What are the most common legal entities and vehicles used for COI in your jurisdiction? How long do they take to become operational?How a Chinese investor structures its legal entities and long-term operations in the US efectively defnes how it will be taxed, and thus the decision can have a signifcant impact on proftability. US regulations generally allow businesses to choose a classifcation as acorporation,partnershiporfow-throughentities,unincorpo-rated branches, and limited liability companies (LLCs).Chinese investment into the US is typically structured through the use of a special purpose vehicle (SPV), which is ofen domiciled ofshoreinatax-friendlyintermediaryjurisdiction.Astandard SPVsetupmayonlytaketwotothreeweeks;however,beforea Chinesecompanyispermittedtoconductoutboundinvestment, it may need to obtain approvals from Chinese government regula-tory bodies, such as the State Administration of Foreign Exchange (SAFE)and/ortheNationalDevelopmentandReformCom-mission(NDRC),aswellasatprovinciallevels,whichcantake anywhere from two to eight months, depending on the companys industry,sizeandnatureoftheoutboundinvestmentandother conditions.NotallChinesecompaniesrequireapprovalfrom these Chinese regulators to conduct outbound investment. Assumingtherearenoregulatoryhold-upsintheUS,the establishmentofanLLC,whichistypicallytheentityofchoice, cantakeonetotwomonths,aferwhichabusinesscanbecome operationalwithafunctionalbankaccountandafederaland state tax identifcation number.b. What are the key requirements for establishment and operation of these vehicles which are relevant to COI (e.g. is there a requirement for local directors)?Investors must complete basic establishment requirements in the selectedSPVsjurisdictionandcomplywithcharterdocuments suchasthecompanysmemorandumofassociation,articlesof association,appointmentofdirectors,andcapitalinvestment amount.Mostimportantlyandofentimesdifcult,however,is theopeningofabankaccountfortheSPV.Requirementssuch asAnti-MoneyLaundering(AML)complianceandKnowYour Customer (KYC) analysis to ensure anti-bribery compliance can slowacompanydownfromopeningabankaccount,andthus establishinganSPV.Globalbankingishighlyregulated,espe-cially for Chinese-sourced money. Section 3: Investment approvala. For foreign investment approval (including any national security review) explain the approval process and timing. WheninvestinginoracquiringbusinessassetsintheUS,a Chineseinvestorshouldbeawareoftwomajorapprovalsthat United StatesRocky T. LeeCadwalader, Wickersham & Taft LLPUNITED STATES6061e. Are there any reciprocal tax arrangements between your jurisdiction and China? If so, how can they aid investors? Terearenomeaningfulreciprocaltaxarrangementsbetween theUSandChinafromaforeigninvestmentperspective,thus Chineseinvestorsareadvisedtoestablishcross-borderentity structures that take advantage of alternative tax-friendly jurisdic-tions (see 2ab).Section 5: Forex controls and local operationsa. What foreign currency or exchange restrictions should foreign investors be aware of? TeUSdoesnotimposeanyforeigncurrencyorexchange restrictions. Te US has rigorous banking rules that impose with-holdingobligationsfromtimetotimeandallChineseinvestors must at all times comply with anti-money laundering rules.b. Are there any legal restrictions on bringing in foreign workers and how difcult is it for foreign investors to secure expatriate visas for shareholder representatives, senior managers and workers in practice? VisitorsandworkersfromChinamustapplyforavisato entertheUS.Visasarenotdifculttoobtainaslongasproper procedures are followed. Applicants must show that they qualify underprovisionsoftheImmigrationandNationalityA