China taxes are weird

I got a call from the agent who is helping me incorporate both the Chinese and the Hong Kong company.  The HK company has to be set up as a shell company to own the Chinese company because trying to make any changes to the Chinese company equity ownership is apparently a pain in the ass.  Also, there are some tax benefits.  In any case, I'm shelling out an extra $1700 to set up the HK company and an extra $1300 in fees every year for accounting and business license.  Not real happy about it, but it will leave me the option and I won't kick myself down the road if I need to get investors.

Anyhow the agent tells me that the business district she was going to register me in has arbitrarily changed its preferential tax policies.  Despite the tax law change in 2008 that unified taxes between Chinese and foreign companies, each local govt still has the ability to do little dope deals.  So, since their main objective is to attract investment, the govt of Fengxian had a sweetheart deal with my registration agent to refund 30% of my revenue tax (5% of revenues) and 15% of my business profit tax (25%) back to me.  Quite a good deal and I wasn't expecting it at all.

Unfortunately, Fengxian decided to reduce this by half.  So, now I'm asking the agent to go searching for greener pastures.  The agent obviously doesn't want to do it because they have a special deal with that district, but they should be shopping around for their customers.  It's really surprising that the agents don't bring this up as a selling point, because that could be VERY substantial over the long run depending on the size of the company.

But I guess it also makes sense because it's probably not something they want the central government to know is going on...