Is the Fund or any PRC resident member subject to tax in the PRC on contributions made to the Fund?
The Fund will not be subject to PRC tax, nor will its members, with respect to contributions to the Fund.  Because the Fund is offshore, however, PRC nationals who do not have funding offshore to contribute to the Fund will need to obtain exchange control approval in order to remit contributions to the Fund, which could be difficult. 

Can a PRC resident member deduct his/her contributions to the Fund for PRC tax purposes?
The answer is no.

Is a PRC resident member subject to tax in the PRC on the earnings of the Fund?
The answer is no, so long as such earnings are not distributed to the member.

Is the Fund subject to PRC taxation?
The Fund will not be subject to PRC tax except with respect to income that is sourced in the PRC.

Can a member retain accumulated entitlements within the Fund after retirement?
A member can take advantage of an option given by the Fund upon retiring from employment to retain his or her accumulated entitlements within the Fund.  Any earnings accumulated within the Fund will be taxed only upon payment to the member, and only if the member is at that time a PRC tax resident.

Are benefits paid from the Fund subject to tax in the PRC to a member who is resident in the PRC?
A lump sum and other benefits withdrawn from the Fund by a PRC resident member will be taxable in the PRC, provided that the member is a PRC tax resident at the time of the payment.  However, the benefits will be taxed only at the rate of 20%, which compares favourably to the maximum marginal individual income tax rate in the PRC which is 45%.

This advice is provided by Baker & McKenzie (Hong Kong) in connection with the specific issues raised in connection with the People's Republic of China taxation.  This advice is of no further application and does not represent a general explanation of the issues or a full review of the subjects covered.  This advice should not be relied upon in any other context by any person.  Professional advice should always be sought before any action is considered based on the above and no liability is accepted by Baker & McKenzie or any of its providers, partners consultants or employees in respect of any action which might be taken or refrained from being taken by any person as a result of the contents hereof.  No reproduction of the whole or any part of the contents of the advices is permitted without the prior written consent of Baker & McKenzie.