In an increasingly global market, hedge funds must keep up with numerous tax issues when investing in non-U.S. securities, including withholding on interest, dividends and capital gains, as well as the fund’s exposure under FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). In addition to regimes developing in the E.U., China has taken positions that are helpful to hedge funds, although significant issues remain for foreign hedge funds investing in Chinese securities. In this guest three-part series, Harold Adrion of EisnerAmper discusses foreign withholding taxes and FIN 48 exposure applicable to hedge funds. This second article focuses on the limited exemption from capital gains taxation for non-Chinese residents and other issues faced by non-resident investors. The first article explained FIN 48 and explored E.U. developments regarding free movement of capital and its impact on funds. The third article will address developments in Australia and Mexico, and how hedge funds can minimize exposure to withholding taxes in those jurisdictions. For more on investing in Chinese securities, see “China Launches Landmark Reforms Impacting Hedge Fund Capital Raising, Investments and Operations” (Aug. 2, 2012); and “Questions Hedge Fund Managers Need to Consider Prior to Making Investments in Chinese Companies” (Jun. 23, 2011). For further insight from EisnerAmper professionals, see “Legal and Accounting Considerations in Connection With Hedge Fund General Redemption Provisions, Lock-Up Periods, Side Pockets, Gates, Redemption Suspensions and Special Purpose Vehicles” (Nov. 5, 2010).