Tax and Finance in approaching the Chinese market

Abstract

In an ever-changing international environment, companies, driven by the desire to maximize their profit margins, look at the most suitable place to expand their business, both in terms of labor costs and availability of resources. However, another key element that should be considered when dealing with the process of internationalization of a firm is taxation. Through a careful tax planning activity, in fact, enterprises have the opportunity to minimize their tax burden, thus increasing their after-tax return. For this reason, the purpose of this thesis is to investigate how national tax systems influence companies’ investment decisions with regard to localization choices and firm’s overall structure. In particular, the analysis will focus on two countries whose economic relations are more and more frequent: China, the global magnet for foreign investments, and Italy, whose investors are lately taking advantage of the wide range of opportunities the Chinese market can offer. By stressing the differences in their current national tax regulations and by discussing the main points of their Bilateral Tax Treaty, eventually, we will be able to quantitively demonstrate the convenience of the investments in the two countries. This comparison, in fact, is a matter of particular relevance in view of the assessment of the profitability margins of the three different investment choices we will present in the last chapter.