China's troubled ethnic provinces, Tibet and Xinjiang, that enjoy preferential tax benefits have become tax havens for Chinese celebrities who are setting companies in these regions.
Celebrities like billionaire film actresses Zhao Wei and Fan Bingbing scramble to set up companies in the two provinces, Hong Kong media reported.
The practice came under spotlight after actress Zhao raised eyebrows with her USD 440 million bid for a Shanghai-listed animation company Longwei Culture & Media based in Lhasa, the provincial capital of Tibet, the South China Morning Post reported.
Tibet and Xinjiang, two inner areas occasionally troubled by acts of ethnic violence, have been assigned preferential tax policies in an effort to entice affluent investors, it said.
China is pouring money into Tibet to win over Tibetans with development to minimise the influence of the Dalai Lama, and Xinjiang - the Uygur Muslim majority province - which witnessed large-scale violence in the last few years also enjoy tax benefits.
China blames separatist East Turkistan Islamic Movement (ETIM) for the violence.
The two provinces have "virtually become China's version of British Virgin Islands", Shen Meng, executive director with boutique investment bank Chanson & Co in Beijing, referring to the Caribbean tax haven.
Thanks to a package of tax breaks, companies registered in Tibet are subject to a corporate tax rate of 15 per cent, well below the national standard rate of 25 per cent.
The overall tax rate can drop to as low as 9 per cent as a result of other incentives granted by local governments.
"Today, you can easily find an agent making money out of helping people register companies in Tibet or Xinjiang. The approval process does not take long," Shenwas quoted as saying by the Post.
Most recently, the Chinese border town Khorgos city in Xinjiang has drawn attention from celebrities such as Fan.
The northwestern city, at the doorstep to Kazakhstan, is home to the production companies behind top-grossing blockbusters Chongqing Hotpot and Buddies in India.
Buddies in India was joint India-China production.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)