Alibaba’s multiple nationalities are an invitation to trouble. Taiwan has challenged the e-commerce group’s status as a non-Chinese company. The regulators could be forgiven for being confused. Chinese tax authorities regard Alibaba as a company with its main base in Hong Kong, licensing bodies see China, while investors see the Cayman Islands. The ambiguity may not always be beneficial.
Mainland Chinese companies require special approval in Taiwan and are subject to strict regulations. Alibaba got in years ago by using its Singaporean subsidiary. Now Taipei authorities say it must pull back its operations and reapply as a Chinese company. The impact on Alibaba’s core business is likely to be small, but the company is appealing, saying it followed the rules.
Alibaba’s real nationality, like that of many Chinese companies, depends on who asks. In the mainland, the group argues it’s not a resident Chinese company so as to avoid a 25 percent tax on its worldwide income. The reason is that its “de facto management body”, accounts and board meeting minutes are physically outside China. By having a base in Hong Kong, Alibaba gets an extra perk from the Chinese taxman: a 5 percent witholding tax rate, compared with the 10 percent it would pay elsewhere.
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