Tax Challenges for German Industry in the People's Republic of China

For many German companies, China is one of the most important markets worldwide. Conversely, Germany is China’s biggest trading partner in Europe. After years of collaboration, the two economies have become closely intertwined. Along with end products, Germany also imports many of its commodities, intermediates and tools from China. These imports help German industry to produce competitively. However, China is not only an import market but also an export market for German companies. The demand for innovative and high-quality products and services from Germany remains high. Today, approximately 5,200 German companies with more than one million employees operate in China. Consequently, German companies are subject to Chinese regulation and taxation. While the Chinese administration undertook significant efforts to improve the tax collection and administration environment in China, a development which is highly welcomed, certain taxation matters continue to pose challenges to German companies operating in China. Therefore, the Berlin visit of the delegation of the State Taxation Administration of the People’s Republic of China in June 2019 was highly appreciated. We perceived the discussion as an outstanding opportunity to exchange views on certain taxation issues. Driven by the desire to further deepen the cooperation and economic ties between China and Germany, we kindly invite you to take note of the tax challenges which faces the German industry operating in China.