Tag Archives: China

DRAFT FOREIGN INVESTMENT LAW
Nov. 2015

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

TAIWAN-MAINLAND CHINA DOUBLE TAX AGREEMENT
Jul. to Sep. 2015

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

PAYING EXPAT COMPENSATION OUTSIDE CHINA
Jul. to Sep. 2015

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

IIT ON INDIVIDUALS’ ASSET CONTRIBUTIONS TO EQUITY
Jul. to Sep. 2015

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 [2015] No. 20 permits taxpayers to amortize IIT on gains from the appreciation over five years. Continue reading

NATIONWIDE WFOE E-COMMERCE PLATFORMS
Mar. to Jun. 2015 China Bulletin

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

NATIONAL SECURITY LAW PASSED
Mar. to Jun. 2015 China Bulletin

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

CAPITAL VERIFICATION REPORT – STILL REQUIRED?
Mar. to Jun. 2015 China Bulletin

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

USING ELECTRONIC EVIDENCE IN CHINA
Mar. to Jun. 2015 China Bulletin

Electronic signatures that meet certain conditions have been valid in China since the PRC Electronic Signature Law came into effect in 2005, and other electronic data is recognized as admissible in court.  However, Chinese courts have proven reluctant to admit electronic data in practice because it can be easily altered and its authenticity is typically open to challenge.  In an interpretation issued January 30, 2015, the Supreme People’s Court (SPC) for the first time Continue reading

CYBERSECURITY REQUIREMENTS SUSPENDED
Mar. to Jun. 2015 China Bulletin

The CBRC and Ministry of Industry and Information Technology (MIIT) have suspended the Guidelines on Secure and Controllable Information Technology that the Banking Industry Should Use (2014-15) (Guidelines) until further notice in order to consider feedback from lenders.   Foreign-owned financial institutions, foreign technology trade groups and others had protested that the Guidelines would have excluded foreign suppliers from the Chinese market; Continue reading

LOCAL INCENTIVES REVOKED
Mar. to Jun. 2015 China Bulletin

The State Council and Ministry of Finance took a decisive stroke by issuing the Notice Regarding Cleaning Up and Standardizing Preferential Policies in November 2014 (Notice 62), possibly ending a decades long tug-of-war over preferential incentives local governments use to attract investment.  Existing incentives were to be reported to the State Council and cleaned-up on a consolidated basis by March, 2015, provoking an outcry from companies such as Continue reading