In an uncertain environment, what will happen to different markets?
Editor’s note: This article from the public micro-channel number ” rich way comfortable “(ID: futu-ie) , author: Peter Chou Liao Yayun.
Image source: Futu Anyi
Since 2020, the epidemic has affected the whole world. Chinese companies have encountered a crisis of confidence in the US market. Under such an environment full of uncertainty, what changes will occur in different markets is a problem that every founder is concerned about.
In this issue of the “Futu Anyi Expert Sharing” column, KPMG’s audit and tax experts are invited to answer the 6 questions that have received much attention due to recent market changes.
Shared guests in this issue:
Zhou Yongming, KPMG China audit partner
Liao Yayun, KPMG China Tax Partner
Key points to share in this issue:
Q1: What will be the impact of the global epidemic + trust crisis in the Chinese stock market?
Q2: Under the crisis of trust, how can listed Chinese companies respond? How should unlisted companies respond?
Q3: What is the impact of the introduction of the GEM registration system on the capital markets of Hong Kong, America and A?
Q4: Under the conditions of the new policy, how do the listed companies choose to land in the capital market?
Q5: What are the tax suggestions for companies planning overseas listing?
Q6: What is the current tax environment? How to view the future tax direction?
Image source: pixabay
Q1: The global epidemic + the crisis of trust in the Chinese stock market, what impact will it have?
In the history, there has been a crisis in the Chinese stock market. In 2011, due to a series of financial fraud scandals, the only Tudou website that opened in the US market in the second half of the year was opened. Breaking through, Thunder and Handlenet all canceled their IPO plans to go to the US. Similar to the trust crisis in 2011, this crisis started with the short report of Ruixing Coffee, which will cause doubts about the Chinese stock market in the short term.
But the difference is that the 2011 crisis was a continuous exposure of financial fraud by many companies, and this crisis of trust has not fully affected Chinese companies to the US capital market Going public, Jinshan Cloud, which has received much attention recently, landed on Nasdaq. The transcripts handed over have a certain boost to the confidence of the Chinese stock market.
Overall, the current US market is experiencing volatility, coupled with the impact of the global epidemic. In the future, US capital market regulators may pay more attention to the authenticity of corporate profits and the ability to respond to emergencies. Therefore, when preparing to go public, companies need to set aside sufficient time to deal with changes in the market or regulatory environment.
Q2: Under the crisis of trust, how can listed Chinese companies respond? How should unlisted companies respond?
This crisis will attract more attention in the near future. For Chinese companies already listed on the US capital market, the first step is to strengthen internal control related to financial compliance and improve financial reporting and management. If you encounter doubts from short sellers, you should respond quickly and adopt an open attitude, and take the initiative to maintain timely and smooth communication with investors.
For planning to come to the USFor companies listed on the capital market, in the short term, Chinese companies, especially retail and consumer companies, will be greatly affected by the process of listing in the US capital market. The market valuation will be subject to downward pressure and may even result in partial listing The project was discontinued, but at present most industries have not been significantly affected, such as TMT, high-end manufacturing, etc.
Under the current circumstances, companies intending to be listed should pay more attention to sorting out and collecting business-related information, including communication certificates of both parties to the transaction, video surveillance records of retail transactions, online banking receipts and payments, and logistics documents, etc., to fully cooperate More detailed regulatory inquiries during the listing process and the need to adjust as much as possible. The enterprises to be listed should also fully explain the rationality of future production and operation plans in the current market environment and the safety of future profits, so as to increase investor confidence.
Image source: pixabay
Q3: What is the impact of the establishment of the GEM registration system on the capital markets of Hong Kong, the United States and A?
With the introduction of the GEM registration system, the two major stock exchanges in China ’s A-share market will pilot the implementation of the registration system. For enterprises, it is an opportunity. At the same time, the China Securities Regulatory Commission also issued announcements on the arrangements for the listing of red-chip companies in China, reducing the market value requirements for overseas-listed red-chip companies to return to A shares.
Registration system reforms have made innovative attempts in terms of transparency in the review process, investor stratification, and improvement of the delisting system. Compared with the Science and Technology Innovation Board that has been in operation for nearly a year, the solicitation draft for the reform of the GEM registration system positioned and supported the “four new” enterprises, and showed wider inclusiveness to the enterprises to be listed through the negative list system.
In addition, the consultation draft for the reform of the GEM registration system also added provisions for refinancing, clarifying the time for acceptance, the time for issuing the first round of inquiries and the time limit for review and other requirements. And emphasized the profitability requirements of enterprises, which formed a trend of differentiated development with the science and technology board. The pilot reform to expand the registration system will provide Chinese companies with more efficient financing channels for listing.
But it needs business attentionYes, with the promulgation and implementation of the new securities law, the future A-share market will tend to be strictly regulated. On the one hand, enterprises must seize the opportunities brought about by the reform of the registration system, on the other hand, they also need to strictly observe the market discipline of operating in good faith according to law.
The registration system reform and the requirements for the return of red-chip companies have been relaxed. In the near future, many domestic companies will consider choosing to list on the A-share market or return to the A-share market from overseas capital markets. However, companies also need to consider the situation of their own industry, including brand influence in overseas markets, the concentration of comparable companies, etc., and then choose the most suitable overseas capital market to land.
But in the short term, due to the trust crisis in Chinese stocks and the political wrestling between China and the United States, the US Securities and Exchange Commission ’s attitude toward Chinese companies ’U.S. listings has become more conservative, and Chinese companies may use the Hong Kong capital market as their first choice for overseas listing .
Q4: Under the new policy conditions, how can the listed company choose to land on the capital market?
From a business perspective, if you have a broader overseas business, or if you plan to expand your overseas brand, it would be more logical to choose to list on overseas capital markets. If some retail consumer companies are affected in the US listing process, they may have the opportunity to consider Hong Kong listing because investors in the Hong Kong capital market have traditionally favored retail companies. For companies with hard-core technology or technological innovation, after the registration system is introduced, the channel for listing on the A-share market may be smoother.
From a market perspective, a company ’s listing primarily considers factors such as the company ’s market valuation, market liquidity, and company ’s legal structure.
After the registration system reform, it can be expected that the domestic A-share primary market pricing will be more market-oriented. Compared with overseas capital markets, the valuation of the A-share market is relatively more high. However, the A-share market usually uses static price-earnings ratios to value companies. The relatively mature US capital market generally accepts the use of different valuation parameters for companies at different stages of development, such as the market-to-sales ratio. The valuation and competitiveness shown are different, and companies need to consider it.
In terms of market liquidity, investors in Hong Kong ’s capital market have traditionally favored blue chip stocks and the financial and real estate industries. Small-cap stocks in other industries usually trade Low. After the launch of Hong Kong Stock Connect, companies in the high-tech and consumer goods industries are gradually becoming a new hot spot for Hong Kong stocks. Domestic A-shares and US capital markets, as countries are likely to continue to increase in the futureThe money supply will maintain a relatively high transaction volume, which is conducive to enhancing the market valuation level of enterprises.
In terms of the company ’s legal structure, in recent years, the acceleration of domestic capital market reforms and policy adjustments have attracted more Chinese stocks to return to the domestic capital market. Coupled with changes in the international environment, it is expected that in the future, more companies will try to list overseas or domestically.
Image source: pixabay
Q5: What are the tax suggestions for companies planning overseas listing?
Taxation has always been a matter of great concern to companies, especially when going overseas for listing, different architectures and design logic have different tax implications. On this issue, there are suggestions from two perspectives: one is compliance and the other is optimization.
▎Compliance aspects
When many companies are preparing for overseas listing, the tax issues left over from history will be dug up. Clearing up these tax issues in a timely manner means that companies may need to make up a large amount of tax in a short period of time, affecting their cash flow.
If it is not cleaned up, the tax provision before listing will also affect the performance of the company ’s performance period, and the regulatory agency may also question the tax provision and thus affect the listing process. The historical tax problems of enterprises are mainly reflected in the irregular tax treatment, the non-compliance of enjoying preferential tax treatment, the failure to pay taxes due to corporate restructuring, and the unfair pricing of connected transactions.
Among them, the non-standard tax treatment is a common problem for companies to be listed, such as deduction of pre-tax costs and legal documents, pre-tax deductions based on management ’s personal consumption, undistributed profits and surplus reserves to capital reserves Not paying personal income tax, etc.
Some companies that plan to list have once deducted a large amount of sales expenses before accepting false VAT invoices, or because of the personal income tax problems of natural person shareholders, which led the tax bureau to lower the tax rate of the enterprise and refused to issue a tax payment certificate. This will not only have a huge impact on the production and operation of the enterprise, but also become the biggest obstacle to the listing of the enterprise.
We recommend that companies discover and sort out historical tax compliance issues in advance, and advance this work will make it easierOtherwise, it may cost a lot of money in exchange for the preparation for listing, or delay the listing plan to avoid tax costs.
▎Optimization aspects
Because the company ’s performance is good and the tax payment is large, companies will also actively explore tax planning opportunities. Many companies ask if there is a good tax avoidance method. They may equalize tax avoidance and planning. In my opinion, tax avoidance lacks commercial rationality in most cases, or it is a loophole in laws and regulations. The planning needs to give priority to business needs, on this basis to properly improve tax efficiency, in order to achieve a multiplier effect.
We do not recommend that companies plan for purely tax purposes, and have seen many cases that have made business arrangements unsmooth, self-defeating, and even brought tax risks to companies, especially when companies are planning to list and need to face investment in the future And regulators, this may outweigh the gains.
For example, A company in a group has a core technology and is subject to a high-tech enterprise tax rate of 15%. Other domestic companies in the group have a tax rate of 25%. The Group used the tax gap existing between Enterprise A and other companies to conduct more aggressive planning on the related party transaction pricing between Enterprise A and other domestic companies, and without professional transfer pricing analysis, most of the profits were unreasonable. Transferred to company A. Later, the tax authority where the related party is located questioned the rationality of the pricing of the related party transaction, and the enterprise paid its own taxes to adjust and make up for the large amount of tax and interest.
Another example, some companies heard on hearing that the tax paid locally in a certain area can be refunded financially, and they simply transferred the employment relationship of the person without the substance of business and business, and were later transferred to Doubt that the entire arrangement has no reasonable business purpose, just to obtain improper tax benefits.
Aside from business, it is meaningless to talk about tax planning. A good and successful tax planning should be business first. After all, we should use financial and tax preferential policies in a reasonable and compliant manner. , Executives and other multiple needs.
Image source: pixabay
Q6: What is the current tax environment? How to view the future tax direction?
In recent years, the state has continuously released tax dividends, optimized the business environment, and promoted the development of enterprises. These include deepening VAT reform, strengthening inclusive support for small and micro enterprises, optimizing regional development patterns, and formulating regional tax policies. For example, increasing the proportion of R & D plus deductions for enterprises, and implementing the end-of-period value-added tax rebate policy for some advanced manufacturing industries. A series of preferential tax policies issued by enterprises have greatly reduced taxes and burdens for enterprises.
When enjoying national tax dividends, enterprises should apply for qualified tax incentives according to the actual situation, and should not blindly cause tax compliance risks and incur additional compliance costs in pursuit of tax reduction, and even affect the tax payment of the enterprise. Credit, which in turn affects the listing process.
In terms of tax management and control, tax authorities have begun to extensively use cutting-edge technologies such as the Internet, cloud computing, and big data to obtain, analyze, and process corporate tax information, which has greatly changed the previous asymmetry of tax information. Therefore, while fully enjoying tax dividends, enterprises should also move the risk management port forward, pay more attention to prevention and control before and during the event, and avoid tax risks from the source.
The current domestic and international tax environment is undergoing changes. For companies preparing for listing or planning to connect with the capital market, it is recommended to pay attention to daily tax compliance management and need to introduce internal / external tax teams to check on special transaction matters. (For example, equity changes, introduction of strategic investors, financing, listing structure, mergers and acquisitions, etc.).
Introduction to the organization
KPMG China became the first international accounting firm to be allowed to open a joint venture in mainland China in 1992. On August 1, 2012, KPMG became the first of the Big Four accounting firms to change from a Chinese-foreign cooperative system to a special general partnership. KPMG has 23 offices in 21 cities, with approximately 12,000 partners and employees. Under the close cooperation of these offices, KPMG China can efficiently and quickly mobilize all aspects of resources to provide customers with high quality Service.
Taxation has always been a matter of great concern to companies, especially when going overseas for listing, different architectures and design logic have different tax implications. On this issue, there are suggestions from two perspectives: one is compliance and the other is optimization.
▎Compliance aspects
When many companies are preparing for overseas listing, the tax issues left over from history will be dug up. Clearing up these tax issues in a timely manner means that companies may need to make up a large amount of tax in a short period of time, affecting their cash flow.
If it is not cleaned up, the tax provision before listing will also affect the performance of the company ’s performance period, and the regulatory agency may also question the tax provision and thus affect the listing process. The historical tax problems of enterprises are mainly reflected in the irregular tax treatment, the non-compliance of enjoying preferential tax treatment, the failure to pay taxes due to corporate restructuring, and the unfair pricing of connected transactions.
Among them, the non-standard tax treatment is a common problem for companies to be listed, such as deduction of pre-tax costs and legal documents, pre-tax deductions based on management ’s personal consumption, undistributed profits and surplus reserves to capital reserves Not paying personal income tax, etc.
Some companies that plan to list have once deducted a large amount of sales expenses before accepting false VAT invoices, or because of the personal income tax problems of natural person shareholders, which led the tax bureau to lower the tax rate of the enterprise and refused to issue a tax payment certificate. This will not only have a huge impact on the production and operation of the enterprise, but also become the biggest obstacle to the listing of the enterprise.
We recommend that companies discover and sort out historical tax compliance issues in advance, and advance this work will make it easierOtherwise, it may cost a lot of money in exchange for the preparation for listing, or delay the listing plan to avoid tax costs.
▎Optimization aspects
Because the company ’s performance is good and the tax payment is large, companies will also actively explore tax planning opportunities. Many companies ask if there is a good tax avoidance method. They may equalize tax avoidance and planning. In my opinion, tax avoidance lacks commercial rationality in most cases, or it is a loophole in laws and regulations. The planning needs to give priority to business needs, on this basis to properly improve tax efficiency, in order to achieve a multiplier effect.
We do not recommend that companies plan for purely tax purposes, and have seen many cases that have made business arrangements unsmooth, self-defeating, and even brought tax risks to companies, especially when companies are planning to list and need to face investment in the future And regulators, this may outweigh the gains.
For example, A company in a group has a core technology and is subject to a high-tech enterprise tax rate of 15%. Other domestic companies in the group have a tax rate of 25%. The Group used the tax gap existing between Enterprise A and other companies to conduct more aggressive planning on the related party transaction pricing between Enterprise A and other domestic companies, and without professional transfer pricing analysis, most of the profits were unreasonable. Transferred to company A. Later, the tax authority where the related party is located questioned the rationality of the pricing of the related party transaction, and the enterprise paid its own taxes to adjust and make up for the large amount of tax and interest.
Another example, some companies heard on hearing that the tax paid locally in a certain area can be refunded financially, and they simply transferred the employment relationship of the person without the substance of business and business, and were later transferred to Doubt that the entire arrangement has no reasonable business purpose, just to obtain improper tax benefits.
Aside from business, it is meaningless to talk about tax planning. A good and successful tax planning should be business first. After all, we should use financial and tax preferential policies in a reasonable and compliant manner. , Executives and other multiple needs.
Image source: pixabay
Q6: What is the current tax environment? How to view the future tax direction?
When enjoying national tax dividends, enterprises should apply for qualified tax incentives according to the actual situation, and should not blindly cause tax compliance risks and incur additional compliance costs in pursuit of tax reduction, and even affect the tax payment of the enterprise. Credit, which in turn affects the listing process.
In terms of tax management and control, tax authorities have begun to extensively use cutting-edge technologies such as the Internet, cloud computing, and big data to obtain, analyze, and process corporate tax information, which has greatly changed the previous asymmetry of tax information. Therefore, while fully enjoying tax dividends, enterprises should also move the risk management port forward, pay more attention to prevention and control before and during the event, and avoid tax risks from the source.
The current domestic and international tax environment is undergoing changes. For companies preparing for listing or planning to connect with the capital market, it is recommended to pay attention to daily tax compliance management and need to introduce internal / external tax teams to check on special transaction matters. (For example, equity changes, introduction of strategic investors, financing, listing structure, mergers and acquisitions, etc.).
Introduction to the organization
KPMG China became the first international accounting firm to be allowed to open a joint venture in mainland China in 1992. On August 1, 2012, KPMG became the first of the Big Four accounting firms to change from a Chinese-foreign cooperative system to a special general partnership. KPMG has 23 offices in 21 cities, with approximately 12,000 partners and employees. Under the close cooperation of these offices, KPMG China can efficiently and quickly mobilize all aspects of resources to provide customers with high quality Service.