Author Archives: China Briefing

Learning from Experience: The Hows and Whens of Hiring Interns in China

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China internBy Rainy Yao and Steven Elsinga

SHANGHAI – Just like in any other country, companies in China often offer internships to young people looking to enter the job market. Typically, this is a win-win situation: the intern gets valuable work experience and the company is able to shift the work-load of its permanent staff to lower paid interns. But in actuality, the laws governing internships in China can make it difficult for companies to legally offer such arrangements. In this article, we detail how and when China-based companies can take on local and foreign interns.

Hiring local interns

Employers seeking to hire Chinese interns should note that only students who have not yet obtained their graduation certificate or diploma can enter into an internship agreement with a company. According to the “Opinions on the Implementation of the Labor Law (Lao Bu Fa [1995] No.309),” a part-time work-study arrangement is not considered employment.

In the case of an internship, no employment relationship is constituted, nor does the Labor Contract Law apply; thus it is unnecessary for an employer to sign a labor contract with the student. However, employers are strongly recommended to sign an internship agreement with their Chinese interns to clarify issues such as confidentiality, the intern’s obligations and terms of payment.

Based on the Opinions, the company is not to be regarded as an employer, meaning that they do not have to assume relevant liabilities such as social welfare contributions or severance payment at the termination of the agreement. However, it may be wise to purchase commercial insurance for interns, given that the company shall assume full liability for their work-related injuries.

As the Labor Contract Law does not apply, minimum wage standards are not applicable to interns. Employers are suggested to explicitly clarify that payments to interns are an allowance and not a salary.

These exceptions cease to apply after the intern graduates. After graduation, the relationship will be considered an employment relationship and covered by the Labor Contract Law. If the employer fails to sign a written labor agreement within a month, the employee may claim double salary for each month without a written contract. As the contract is now deemed a labor contract, the employer will have to comply with social insurance and minimum wage requirements.

If the employer does not want to hire the former intern on a full-time basis, he or she has the option of offering a part-time contract (i.e. no more than 4 hours of work per day). Employers are not allowed to set a probation period for part-time workers, but they may terminate a part-time employment arrangement at any time with prior notice. An official agreement is not necessary in this case.

However, the hourly wage paid to part-time workers must be higher than the hourly minimum wage set by the relevant local government. For example, in Beijing, the minimum hourly wage is RMB 16.9, as of April, 1, 2014. Employers must also pay work-related injury insurance for part-time workers in Beijing.

The law is unclear as to the treatment of students who have graduated but have not yet received their diploma. Employers are thus advised to be cautious in offering internships under these conditions, as the agreement could be deemed an employment relationship and be subject to the Labor Contract Law.

Hiring foreign interns

Comparatively, the laws governing the hiring of foreign interns in China are much stricter. Basically, employers are only allowed to hire foreign students who are studying at universities in China (i.e., foreigners with a foreign student residence permit) as interns. Foreign students seeking to work as interns shall apply to both the college and the exit and entry administration bureau of the Ministry of Public Security (MPS) for approval.

Employers are also required to report to the MPS if their foreign interns graduate or quit their studies for personal reasons. Notably, foreign interns in China are not permitted to earn a salary during their internship; thus employers are advised to ensure that any payments are made in the form of intern stipends.


About
Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

 

Related Reading Social Insurance in China
In this issue of China Briefing Magazine, we introduce China’s current social insurance system and provide an update on the status of foreigners’ participation in the system. We also include a comprehensive chart of updated average wages across China, which is used to calculate social insurance contribution floors and ceilings. We hope this will give you a better understanding of the system in China.
 

Adapting Your China WFOE to Service China’s Consumers
In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

China Retail Industry Report 2014
In this special edition of China Briefing, we provide an overview of the retail industry in China and the procedures for setting up a retail shop, focusing specifically on brick-and-mortar physical retail stores. Further, we have invited our partner Direct HR to offer some insights on the talent landscape in the retail industry, as well as tips for recruiting retail personnel in China.

Dezan Shira & Associates Global Speaking Events – Late November & December 2014

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Speaking engagements in late November and December throughout South and East China, and Germany.

The accounting, tax and legal experts of Dezan Shira & Associates regularly attend and speak at international events pertaining to foreign investment in China, India, Singapore, Vietnam and the wider ASEAN region. Below, we provide a list of events taking place in late November and December, along with the relevant event and contact details to get meet our staff in person.

For further information on these events or to book a complimentary one-on-one session with our staff at any of the locations below, please contact info@dezshira.com. A comprehensive list of upcoming events that Dezan Shira staff will be attending is available here. Continue reading…

Applying for DTA Benefits in China

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By Eunice Ku, Zhou Qian and Matthew Zito

For foreign investors doing business in China, securing benefits under a double taxation avoidance (DTA) agreement is an important measure for reducing their tax burden as stipulated by Chinese tax law and thereby maximizing profit.

In addition to satisfying the specific requirements of a relevant DTA, certain administrative procedures must be followed according to Chinese laws and regulations, as outlined in Circulars 124 and 290.

The process of applying for DTA benefits can be quite onerous, requiring the applicant to submit a preferential tax treatment form as well as certain forms of documentation from the government of his/her country of tax residency.

In general, there are two pathways of administrative measures—either “approval” or “record-filing” with the relevant tax bureau—to be followed, depending on the type of relief being claimed.

ApplyingDTA

Although the procedure for applying for DTA benefits in China can be somewhat tedious, it usually needs to be completed only once. Professional tax advice can help identify in detail which treaty benefits apply to your specific case.

Related Link IconRELATED: Understanding China’s Double Tax Agreements

The main benefits of DTAs as concerns foreign investors in China is their ability to reduce the tax burden on profits repatriated from a China entity (otherwise subject to 25% CIT). Under a DTA, expenses charged to a China-based entity such as for royalties, trademarks, patents and technology transfers can in many cases be treated with a reduced withholding tax rate of 10%.

The equation is clear: using a DTA can significantly reduce your overall profits tax bill. 

CB-2014-10_cover_90x125

 This article is an excerpt from the October issue of China Briefing Magazine, titled “Double Taxation Avoidance in China: A Business Intelligence Primer.” In our twenty-two years of experience in facilitating foreign investment into Asia, Dezan Shira & Associates has witnessed first-hand the development of China’s double taxation avoidance mechanism and established an extensive library of resources for helping foreign investors obtain DTA benefits. In this issue of China Briefing Magazine, we are proud to present the distillation of this knowledge in the form of a business intelligence primer to DTAs in China.

For a consultation on DTA benefits available to your business and related application procedures, please contact Dezan Shira & Associates at tax@dezshira.com or visit http://www.dezshira.com.

Related Reading

Adapting Your China WFOE to Service China’s Consumers In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

Strategies for Repatriating Profits from China
In this issue of China Briefing, we guide you through the different channels for repatriating profits, including via intercompany expenses (i.e., charging service fees and royalties to the Chinese subsidiary) and loans. We also cover the requirements and procedures for repatriating dividends, as well as how to take advantage of lowered tax rates under double tax avoidance treaties.

 

Annual Audit and Compliance in China
In this issue of China Briefing, we discuss annual compliance requirements for foreign-invested enterprises, including wholly-foreign owned enterprises, joint ventures and foreign-invested commercial enterprises, as well as the less demanding requirements for representative offices. We also highlight the most recent tax and legal changes that will significantly influence the way companies do business in China in 2014.

China Regulatory Brief: Approved Investment Directory, Guangdong Collective Contracts, Interest Rate Cuts

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China-Regulatory-Brief

China Releases Directory of Government Approved Investments for 2014

China’s State Council recently released the “Directory of Government Approved Investments for 2014,” which removed or delegated to a lower level 38 administrative approval items. According to the 2014 Directory, encouraged foreign projects with a total investment of over US$1 billion and requiring Chinese holding (including relative holding) as listed in the Guidance Catalogue for Foreign Investment, as well as restricted projects (excluding real estate) with a total investment of over US$100 million, shall be approved by the investment departments of the State Council; projects with a total investment of over US$2 billion shall also be filed with the State Council. A complete Chinese version of the Directory can be found here.

Guangdong Releases Provincial Regulations on Collective Contracts for Enterprises

The Guangdong provincial government recently released a revised version of the “Regulations on Collective Contracts for Enterprises,” which will take effect on January 1, 2015. A collective contract is a special type of commercial agreement, usually defined as one negotiated “collectively” between the company and trade unions (on behalf of employees). The revised Regulations further specified negotiable subjects and stipulated that collective negotiations between enterprises and employee representatives should be held no more than once a year. Within seven days of signing, the collective contract should be sent by the employer to the Ministry of Human Resources and Social Security for recording. Continue reading…

Case Study: Due Diligence in the Acquisition of a Chinese Company

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Case study bannerBy Rainy Yao and Steven Elsinga

As part of our mission to provide business intelligence on the legal, tax and operational issues of doing business in China, China Briefing presents the next installment in a series of case studies based on the practical experience of Dezan Shira & Associates professionals.

Scenario

An American manufacturer of sprockets (“Sprock Co.”) considered acquiring a Chinese competitor company (“Sino Sprock”), and approached Dezan Shira to conduct due diligence on their take-over target.

Sprock Co. wanted to thoroughly examine the financial position and internal operations of Sino Sprock before deciding on the takeover. Sprock Co. was especially interested in finding out whether the target’s financial information was fairly represented and in reviewing Sino Sprock’s internal control systems to avoid unhappy surprises after the sale of the company.

Continue reading…

Using Serviced Offices to Support Your China Growth Strategy

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外侧间By Matthew Zito

For companies newly looking to set up a presence in China or expand their existing China operations, the prospect of costs incurred when entering an unknown market can be daunting, appearing as a sort of “make or break” venture. One lesser-known option available to foreign investors in this position is the use of serviced offices (also known as “executive suites”).

Especially prevalent in fast-paced Asian markets like China, Hong Kong and Singapore, serviced offices are rentable office spaces that come fully furnished and equipped with technology and service amenities. For example, a premium serviced office in Shanghai might provide tenants with secretarial services, state-of-the-art IT infrastructure and conference space.

The benefits of such an arrangement for a China growth strategy are manifold, especially for start-up operations. Most significant among these are the cost savings achievable through the use of serviced offices rather than a traditionally leased space. Continue reading…

Australia Secures Far-reaching Benefits in Free Trade Agreement with China

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Op-Ed Commentary: Steven Elsinga

SHANGHAI – China and Australia concluded a Free Trade Agreement (FTA) on November 17 in Canberra, with Chinese President Xi Jinping and Australian Prime Minister Tony Abbott signing the official document. This marks the conclusion of negotiations originally begun in 2005.

China is Australia’s largest trade partner, with 20 percent of Australian imports coming from China, and 36 percent of exports going to China. Previously, bilateral talks had stalled over two main key points: China reducing its tariffs on agricultural products and services, and Australia easing the investor climate for inbound Chinese companies. Continue reading…

China Investment Roadmap: The Medical Device Industry – New Issue of China Briefing Magazine

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CB 2014 11_cover_250x350The newest issue of China Briefing Magazine, titled “China Investment Roadmap: The Medical Device Industry,” is out now and available as a complimentary download in the Asia Briefing Bookstore through the month of November.

Contents:

  • Market Overview: Medical Devices in China
  • Investing in China’s Medical Device Industry
  • Case Study: Choosing a Distribution Model for the Chinese Market

Today’s opportunities for foreign investment in the medical device industry in China are the product of a near perfect storm of factors in the country: social, technological, economic and regulatory.

In the social realm, China’s greying and increasingly wealthy population has created an unprecedented demand for medical products, services and institutions. Here, the capital, technology and expertise of foreign firms hold an indispensable value. Meanwhile, the long-standing pattern of China as a low-tech manufacturer and high-tech importer of medical devices is slowly giving way to more China-side manufacturing of mid-to-high tech devices by foreign-invested enterprises.

Economically, the currently fractured and immature market in low-tech devices will likely see consolidation over the coming years, as trade barriers are lowered and more sophisticated supply chains put in place. And on the regulatory front, China’s new Trademark Law (effective May 1, 2014), in conjunction with alternative dispute resolution (ADR) initiatives such as the Shanghai International Arbitration Centre (“SHIAC”), mean that foreign investors can feel safer than ever bringing their core technologies to China.

In this issue of China Briefing, we present a roadmap for investing in China’s medical device industry, from initial market research, to establishing a manufacturing or trading company in China, to obtaining the licenses needed to make or distribute your products. With our specialized knowledge and experience in the medical industry, Dezan Shira & Associates can help you to newly establish or grow your operations in China and beyond.


About
Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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Related Reading

Industry Specific Licenses and Certifications in China
In this issue of China Briefing, we provide an overview of the licensing schemes for industrial products; food production, distribution and catering services; and advertising. We also introduce two important types of certification in China: the CCC and the China Energy Label (CEL). This issue will provide you with an understanding of the requirements for selling your products or services in China.

 

Adapting Your China WFOE to Service China’s Consumers
In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

Revisiting the Shanghai Free Trade Zone: A Year of Reforms
In this issue of China Briefing, we revisit the Shanghai FTZ and its preferential environment for foreign investment. In the first three articles, we highlight the many changes that have been introduced in the Zone’s first year of operations, including the 2014 Revised Negative List, as well as new measures relating to alternative dispute resolution, cash pooling, and logistics. Lastly, we include a case study of a foreign company successfully utilizing the Shanghai FTZ to access the Outbound Tourism Industry.

Asia Briefing Bookstore Catalogue 2013
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