May 23 – The Bank of England and the People’s Bank of China are working towards a joint RMB/GBP currency swap line after the banks’ governors met earlier this year to discuss a reciprocal exchange arrangement.

According to the Bank of England, the agreement will initiate a three-year currency swap program designed to “finance trade and direct investment between the two countries,” as well as strengthen the financial stability of the currency markets. As a result, England will be the first G7 nation to have direct access to the RMB. Continue Reading

May 23 – China’s first national Mental Health Law (hereinafter referred to as the ‘Law’), which has taken almost 27 years to draft, came into effect on May 1, 2013.  The Law for the first time explicitly forbids the involuntary confinement of individuals with mental disorders, and offers greater protection to employees suffering from such disorders. Detailed information can be found below. Continue Reading

May 22 – China’s “Good Supply Practice of Pharmaceutical Products,” issued in 2000, has played an important role in regulating pharmaceutical operation activities and ensuring drug quality and safety over the past decade. However, with the country’s rapid economic and social development in recent years, some provisions of the current Good Supply Practice of Pharmaceutical Products have fallen behind the times, and are therefore hindering the healthy development of the pharmaceutical industry.

In response, China’s State Food and Drug Administration (SFDA) started revising the Good Supply Practice of Pharmaceutical Products in 2009 and now, after three rounds of public consultation, China’s Ministry of Health (MOH) at last released the newly-revised “Good Supply Practice of Pharmaceutical Products (MOH Decree No. 90, hereinafter referred to as ‘Revised GSP Standards’)” on January 22, which is scheduled to take effect on June 1, 2013. Continue Reading

May 22 – China’s State Administration of Taxation (SAT) recently released the “Opinion on Implementing the Dividends Provision under the Tax Arrangement between Mainland China and Hong Kong in Cases involving Beneficial Ownership (Shuizonghan [2013] No. 165, hereinafter referred to as ‘Opinion 165′)” on April 12, in response to inquiries made by the tax bureaus of various provinces and cities throughout China. The inquiries concern cases involving several Hong Kong companies applying for beneficial ownership status under the dividends provision of the Double Taxation Avoidance Agreement (DTA) between Mainland China and Hong Kong. Opinion 165 will apply nationwide to similar provisions in China’s other tax treaties from the date of promulgation.

To enjoy reduced withholding rates on dividends, interest and royalties under China’s tax treaties with other countries, the nonresident recipient must be considered a “beneficial owner” of the income. Opinion 165 clarifies the “unfavorable factors” in determining beneficial ownership as addressed in two previously issued regulations:

• The “Notice Concerning the Meaning and Determination of ‘Beneficial Owner’ in Tax Treaties” (Guoshuihan [2009] No. 601, hereinafter referred to as “Circular 601”), effective October, 2009; and
• The “Circular Concerning the Determination of ‘Beneficial Owner’ in Tax Treaties” (SAT Announcement [2012] No. 30, hereinafter referred to as “Announcement 30”), effective June, 2012. Continue Reading

May 21 – China’s State Administration of Foreign Exchange (SAFE) released the “Circular on Administrative Measures for Foreign Debt Registration (huifa [2013] No.19, hereinafter referred to as ‘Circular’)” on April 28, which came into effect on May 13, 2013. Five distinct features of the Circular can be found below. Continue Reading

May 20 – With the view to encourage private investment in the insurance industry, China’s Insurance Regulatory Commission (CIRC) released the “Circular on Relevant Issues regarding the Investment and Shareholding of Limited Partnership Equity Investment Enterprises in Insurance Companies (Baojianfa [2013] No. 36, hereinafter referred to as the ‘Circular’)” on April 24, which allows limited partnership equity investment enterprises to invest in the country’s insurance companies.

The Circular sets out the requirements for a limited partnership equity investment enterprise to invest in an insurance company and outlines the application materials required by the CIRC. The Circular applies to all Chinese insurance companies in which the shareholding of all foreign investors is less than 25 percent, as well as domestic and foreign-invested limited partnership equity investment enterprises. Detailed information can be found below. Continue Reading

By Eunice Ku and Shirley Zhang

May 20 – With an increasing number of foreign enterprises starting to conduct business in China, tax liabilities resulting from business activities within the country are fast becoming an issue of key concern. If an establishment or venue of a non-resident enterprise constitutes a service permanent establishment (PE) in China, it will be subject to 25 percent CIT on all of its China-sourced income, as well as non-China sourced income that has an actual connection to the PE. We outline what constitutes a service permanent establishment in the current issue of China Briefing Magazine “Understanding Permanent Establishments in China,” which is available as a complimentary download on the Asia Briefing Bookstore through the end of the month. Continue Reading

May 17 – In order to fully implement the “Regulations on Work-Related Injury Insurance (hereinafter referred to as ‘Regulations’),” China’s Ministry of Human Resources and Social Security (MOHRSS) released the “Opinions on Certain Issues Concerning the Implementation of the Regulations on Work-Related Injury Insurance (Renshebufa [2013] No.34, hereinafter referred to as the ‘Opinions’)” on April 25, 2013, which clarifies several issues regarding the implementation of the Regulations. Detailed information can be found below. Continue Reading