In the news: VAT reform expands to all industries, McDonald's plans to open 1,000 more China outlets and Ali Health receives Tmall's nutrition business

McDonald's to add 1,000 outlets in China

McDonald's Corp plans to add more than 1,000 restaurants in China over the next five years, which would make it the company's second-largest market after the U.S. It said it will open 250 restaurants per year in China, where it currently operates more than 2,500 outlets. It is also adding another 250 stores in Hong Kong and South Korea over the same period and seeking franchise partners in all three markets. McDonald's and its rival Yum Brands Inc, owner of KFC and Pizza Hut, have been facing rising competition from cheaper local brands, particularly in China where they are trying to recover from food safety scares. Reports say McDonald's has been rebounding from the food scandal more quickly than Yum has, and their supplier was recently fined by a Shanghai court. Both fast food chains have had to enforce heavier compliance standards, and with so many franchises it plans to open in China, McDonald's will really need to scrutinize all its local partners and operations as the authorities crack down increasingly harder on violations involving consumer protection, hygiene and quality standards.

Alibaba contemplates injecting business into Ali Health

Alibaba Group Holding is discussing injecting a health foods, supplements and nutrition business, operated by its Tmall e-commerce platform, into its publicly traded health arm after the two companies abandoned plans to exchange an online pharmacy operation in a $2.5 billion deal. Alibaba Health Information Technology (Ali Health) dropped the deal announced last year to acquire from another unit a sales platform for online pharmacies due to ongoing regulatory uncertainties. It instead entered into a new agreement to operate Tmall's platform for a service fee amounting to 21.5% of payments made by online pharmacies. This follows as the CFDA decided to drop Ali Health as its exclusive partner for its online drug authenticity monitoring system in February. The regulatory environment surrounding e-health, which some investors speculate will be very lucrative, is still ambiguous and all the players are treading carefully. It isn't even clear yet under which regulators' jurisdiction (CFDA, MIIT, SAIC…) it will fall.

China fully expands VAT reform to all industries

China has expanded its value-added tax (VAT) reform pilot program to all industries including construction, real estate, finance and consumer services. The Ministry of Finance and the State Administration of Taxation (SAT) said that from May 1, 11% VAT will be levied on construction and real estate companies, while 6% will be imposed on finance and consumer services. Tangible goods have been under the VAT regime for some time, whereas services have been subject to business tax, which is based on the value of a firm's sales. This system results in a tax on tax. VAT avoids this by being applied to the value added at each link in the production chain. The State Council estimated that this will ease more than Rmb500 billion ($76.9 billion) in tax bills this year. The SAT first launched the VAT pilot program in Shanghai at the beginning of 2012. It then clarified in February 2013 certain complications that arose surrounding withholding tax and cross-border royalties. And it has since released various rules regarding licensing, indirect transfers and other aspects that impact Enterprise Income Tax payments. Each step was met with some controversy or confusion, but the SAT's moves over the past few years show that China is taking a cautious and gradual approach to streamlining its taxation regime.

McDonald's to add 1,000 outlets in China

McDonald's Corp plans to add more than 1,000 restaurants in China over the next five years, which would make it the company's second-largest market after the U.S. It said it will open 250 restaurants per year in China, where it currently operates more than 2,500 outlets. It is also adding another 250 stores in Hong Kong and South Korea over the same period and seeking franchise partners in all three markets. McDonald's and its rival Yum Brands Inc, owner of KFC and Pizza Hut, have been facing rising competition from cheaper local brands, particularly in China where they are trying to recover from food safety scares. Reports say McDonald's has been rebounding from the food scandal more quickly than Yum has, and their supplier was recently fined by a Shanghai court. Both fast food chains have had to enforce heavier compliance standards, and with so many franchises it plans to open in China, McDonald's will really need to scrutinize all its local partners and operations as the authorities crack down increasingly harder on violations involving consumer protection, hygiene and quality standards.

Alibaba contemplates injecting business into Ali Health

Alibaba Group Holding is discussing injecting a health foods, supplements and nutrition business, operated by its Tmall e-commerce platform, into its publicly traded health arm after the two companies abandoned plans to exchange an online pharmacy operation in a $2.5 billion deal. Alibaba Health Information Technology (Ali Health) dropped the deal announced last year to acquire from another unit a sales platform for online pharmacies due to ongoing regulatory uncertainties. It instead entered into a new agreement to operate Tmall's platform for a service fee amounting to 21.5% of payments made by online pharmacies. This follows as the CFDA decided to drop Ali Health as its exclusive partner for its online drug authenticity monitoring system in February. The regulatory environment surrounding e-health, which some investors speculate will be very lucrative, is still ambiguous and all the players are treading carefully. It isn't even clear yet under which regulators' jurisdiction (CFDA, MIIT, SAIC…) it will fall.

In the news: VAT reform expands to all industries, McDonald's plans to open 1,000 more China outlets and Ali Health receives Tmall's nutrition business

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