The Standing Committee of the National People’s Congress abolished the approval requirement for foreign projects in China (FIEs, including wholly foreign-owned enterprises and joint ventures) in September. No longer do such projects have to undergo the time-consuming and sometiems costly approval process, unless they fall within a negative list (discussed below). Projects not on the negative list need only make a simplified record filing through an online system no later than 30 days after issuance of the Business License.. Continue reading
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The Ministry of Commerce released the PRC Foreign Investment Law (Draft for Comments) (“Draft Law”) in early 2015 for public comment. Although some provisions may change in the final version, which is still under revision and expect to be promulgated is late 2016 or 2017, the Draft Law represents a paradigm shift for foreign investment. It includes both good and bad news for U.S. investors in China. Continue reading
Welcome to the China Bulletin for July to September, 2015 – brief updates of legal changes affecting U.S. companies doing business in China. This edition focuses on TAX DEVELOPMENTS (please SCROLL DOWN), includingChinese individual income tax rules and the Taiwan-mainland bilateral tax agreement. Full articles below.
The chairmen of the cross-straits associations from Taiwan and mainland China recently signed a double taxation agreement (the Agreement) that, when ratified, will accord certain preferential treatment to taxpayers from each jurisdiction receiving income from the other jurisdiction, including reduction of withholding on qualifying dividends to 5%, interest to 7%, royalties to 7% and capital gains to zero. Continue reading
It’s a common situation.
Mr. Lin, a U.S. citizen and chief representative of ForCo’s representative office in Shanghai receives his salary from abroad. So does Mr. Schmidt, an entrepreneur, who has built a thriving business making laser products in China and selling them to the U.S. His Hong Kong sales company pays him a large salary. Ms. Zhou, an Australian citizen living in Beijing and working on contract for ForCo has her salary remitted to an account in Hong Kong. All three have resided in China for more than a year. Mr. Lin and Mr. Schmidt arrange for nominal salary payments in China, on which they pay Chinese individual income tax (“IIT”). Ms. Zhou does not report income for her contracting work or pay IIT on it in China. Continue reading
Through a series of notices, the State Administration of Taxation (SAT) has taken the position that an individual’s contribution of non-monetary assets in exchange for equity is subject to individual income tax (IIT) at the time of contribution to equity. Since the value of such assets may have substantially appreciated, SAT Announcement  No. 20 permits taxpayers to amortize IIT on gains from the appreciation over five years. Continue reading
On June 19, 2015, the Ministry of Information Industry and Technology (MIIT) issued a new notice allowing foreign investors to hold 100% equity in companies engaging in online data processing and transaction processing business in China, a nation-wide relaxation based on the earlier pilot policy effective only in Shanghai Free Trade Zone. Continue reading
The Standing Committee of the National People’s Congress has just adopted the National Security Law, which was introduced in draft form in December, 2014. It is part of a group of laws on terrorism, cybersecurity and non-governmental organizations that have been criticized by foreign governments, businesses, journalist groups (including groups in Hong Kong and Taiwan) and others as vague and problematic, Continue reading
As reported in New Foreign Exchange Rules for FIEs, a foreign invested enterprise (FIE) in China should no longer be required to apply through the State Administration for Foreign Exchange (SAFE) to verify receipt of an injection of paid-in capital. It need no longer hire a qualified CPA to produce a Capital Verification Report (CVR). Instead, the FIE can request its SAFE-certified bank handle the capital registration procedure. Continue reading