By Yao Lu
Since first opening in September 2013, investors and businesses have flocked to the Shanghai FTZ. According to local media reports, more than 4,600 new companies, including 280 foreign-invested enterprises (FIEs), were established in the Zone as of January 14, 2014. This surge can be attributed to the Zone’s relaxed requirements and streamlined approval procedures for company establishment, which we will further describe below.
Relaxed Incorporation Requirements
The Zone cancels out the minimum registration capital of RMB30,000 for limited liability companies, the RMB100,000 minimum for single shareholder companies, and the RMB5 million minimum for joint stock companies. Moreover, the Shanghai FTZ has implemented a new capital registration system under which foreign investors are no longer required to contribute 15-percent capital within three months and full capital within two years of the FIE’s establishment. Continue reading
SHANGHAI – China’s ongoing value-added tax (VAT) reforms will be expanded to the telecommunications sector, likely starting April 1st, according to an announcement made by Premier Li Keqiang last week.
Initially limited to certain transportation and modern service industries in Shanghai, the VAT reform on services met with such success that it quickly spread to other regions of China, replacing the heavy-handed “business tax” (BT) as it went. Currently, the VAT reform has covered transportation, postal, broadcasting and other modern service sectors and has implemented VAT rates ranging from 0 percent to 17 percent depending on the specific service sector involved. For example, leasing of tangible movable property is taxed on a 17 percent VAT rate, while providing certification and consulting services are taxed at 6 percent. Continue reading
By Adam Livermore, Dezan Shira & Associates
SHANGHAI – It is coming around to the time of the year again when people working in China and earning income over 120,000 RMB / year are required to make their personal declarations, which effectively forces them to take personal responsibility for the amount of tax withheld by the company on their behalf during the previous financial year.
Although this requirement has not been universally observed in the past, last year many companies were chased up by the tax bureaus to ensure all their employees had completed this procedure by the end of the month, under threat of further punishment for those that failed to file. This year is expected to be the same. Continue reading
By Angela Ma, Dezan Shira & Associates
BEIJING – Wholly Foreign Owned Enterprises (WFOEs) are able to repatriate funds out of China in a variety of forms, for which tax implications vary according to the form of repatriation used and the Double Taxation Agreement (DTA) in place between China and the recipient country. The four most commonly used channels for profit repatriation are dividends, loans, service fees, and royalties. While WFOEs can repatriate funds to an overseas shareholding company in any of these forms, it is important to note that funds may be repatriated using dividends or loans only if the recipient entity is a shareholding company of the WFOE. Continue reading
SHANGHAI – On February 28, the Shanghai State Administration of Foreign Exchange (Shanghai SAFE) issued the “ Notice Concerning Support for the Implementation of Foreign Exchange Administration in the China (Shanghai) Pilot Free Trade Zone” (Shanghai Huifa  No. 26, hereinafter referred to as the “Notice”). The Notice aims to simplify the process of foreign direct investment (FDI) and facilitates the management of capital accounts in the Shanghai free trade zone (FTZ) – a 28.78 square kilometer free-trade zone launched in 2013.
These reform measures move China one step closer to the liberalization of foreign exchange capital accounts and carry great importance for foreign investors with an eye on the Chinese market. Continue reading
HONG KONG – Passed by the Legislative Council on July 12, 2012 after a year’s-long process of deliberation and review, Hong Kong’s new Companies Ordinance (Cap. 622, “new CO”) went into effect on Monday of this week. The Ordinance consists of 921 sections and 11 schedules and is described in Hong Kong’s official media as addressing four goals: to enhance corporate governance, ensure better regulation, facilitate business, and modernize the law.
Overall, the Ordinance strengthens the position of shareholders vis-à-vis company directors and expands the powers of the Registrar of Companies, even while removing some bureaucratic obstacles to the smooth flow of business. It is hoped that these latter provisions will reduce some unnecessary costs of doing business in Hong Kong (see “Facilitating business” below) and further strengthen its position as a capital of international commerce. Continue reading
SHANGHAI – The new issue of China Briefing Magazine, titled Guide to the Shanghai Free Trade Zone, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the month of March.
This year has seen some exciting changes in China’s foreign investment landscape as the government explores new ways to lessen previous restrictions on doing business in China. Most recently, the Shanghai Free Trade Zone (FTZ), seen as the testing ground of China’s economic reforms, has garnered a lot of attention. We along with many foreign investors are very interested to see what opportunities and benefits it will offer. To this end, we have been in close contact with officials in the Zone to learn about its establishment procedures and preferential policies available to various industries in the zone. Continue reading
By Chet Scheltema & Leonard Liu, Dezan Shira & Associates
BEIJING – Starting March 1, 2014, Beijing adopts new incorporation requirements for all companies, including for foreign invested enterprises, consistent with national reforms enacted in the legislation “Reform of Registered Capital Rules.” Beijing’s announcement follows similar pronouncements in February of other major Chinese municipalities such as Tianjin and Guangzhou and also in Zhejiang.
According to inquiries with Beijing authorities, foreign invested enterprises may now complete incorporation in Beijing and obtain a business license without needing to inject “registered capital” or complete capital verification. Old rules required that one installment be made within six months of obtaining a company’s preliminary business license or several installments within a two-year period and that such injection be formally verified. Also, the minimum invested capital requirement has been formally eliminated (except for enterprises operating in restricted or special industries). Continue reading