Wholly Foreign-owned E-commerce Companies Allowed in the Shanghai Free Trade Zone
On January 13, China’s Ministry of Industry and Information Technology released an announcement allowing foreign investors to set up wholly foreign-owned e-commerce companies to conduct online data processing and transaction processing (for-profit e-commerce) businesses in the Shanghai FTZ. Previously, the shares a foreign party was permitted to own in such businesses was limited to 55 percent in the FTZ and 50 percent in other parts of China. Meanwhile, foreign investors may now provide call center, domestic multi-party communication, internet access and domestic VPN services as cooperative joint ventures with a Chinese partner, also within the Shanghai FTZ.
China Grants Tax Exemptions for Elderly Care, Traditional Medicine and Protecting Historical Relics
China’s Ministry of Finance and State Administration of Taxation recently released the “Circular on Business Tax Policies to Support the Export of Cultural Services and Other Services (Cai Shui  No.118),” which took effect on January 1, 2015. The circular exempts companies and individuals from business tax if they restore or protect cultural and historical relics, provide traditional health care (included in the national directory of intangible cultural heritage) or elderly care in China.
By Chris Devonshire-Ellis
China has been drafting a new version of its Charity Law that will significantly impact upon the manner in which foreign charities and NGOs operate in the country. The new law, the drafting of which has been in the pipeline for several years now, is understood to now be in bill format and was introduced to the NPC last month. This new draft makes significant improvements and clarifications on previous attempts, reflecting a more pragmatic approach to the status of charitable organizations by the Chinese State.
The draft includes recommendations from the Chinese Ministry of Public Security, Ministry of Civil Affairs, and crucially, guidance from the State Administration of Taxation for charity certification and determination of tax status for charities. Previously, applications from charities for legal status in China were extremely difficult to obtain due to conflicts within the registration system, notably with systematic problems taxing not-for-profit entities.
By Chris Devonshire-Ellis
Chinese President Xi Jinping has been busy in Central Asia, touring the region last year and including visits to Turkmenistan, Kazakhstan, Uzbekistan and Kyrgyzstan. He also proposed, in cooperation with leaders of the Shanghai Cooperation Organisation (SCO), the establishment of a new Silk Road that would encompass free trade throughout Central Asia.
The SCO is an official grouping that includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan, with Afghanistan, India, Iran, Mongolia and Pakistan as observer states; Belarus, Sri Lanka and Turkey as dialogue partners; and ASEAN, the Commonwealth of Independent States (CIS) and Turkmenistan as guests.
Xi is looking for both new markets and to leverage some economic clout over the region’s vast oil and gas reserves, as well as hoping to minimize the potential for conflict that could spill over into China’s Xinjiang Autonomous Region by raising local incomes and wealth throughout the region. He has stated that the proposed region contains “close to 3 billion people and represents the biggest market in the world with unparalleled potential.” Continue reading…
By Zhou Qian and Steven Elsinga
In September 2013, the Chinese government amended its visa regulations. The revised law mainly introduced a number of new visa categories, increasing the total number from eight to 12, and altered the scope of a few existing categories. In this section, we walk you through the most recent changes.
The F-visa, also known as a business visa, was previously used by foreign businesspeople visiting China on business but who were not employed by a Chinese entity. However, the new regulations have now limited its scope to non-commercial purposes only, such as cultural exchanges, visits and inspections. At the same time, the regulations introduced a new visa for business travelers called the M-visa. It is applicable to foreigners coming to the country for business and trade purposes of
no more than six months (180 days). Continue reading…
By Steven Elsinga
On December 31, 2014, China’s Ministry of Human Resources and Social Security released a draft amendment on mass layoffs. The draft invites the public to provide comments and feedback, with the final version going into effect on January 31 of this year.
What is considered a mass layoff?
According to Chinese law, a mass layoff occurs when two conditions are met. First, the company is dismissing over 20 employees, or the number of employees to be dismissed exceeds ten percent of the company’s total staff.
The draft rules newly clarify that for a branch company with its own business license, the calculation is based on the staff number and percentage at the branch company, not the whole company. Continue reading…
China Clarifies CIT Policies for the Investment of Non-Monetary Assets
On December 31, the Ministry of Finance and the State Administration of Taxation jointly released the “Circular on Corporate Income Tax Policies for Non-Monetary Assets Investment,” aimed at encouraging enterprises to invest non-monetary assets and thereby reduce their tax burden. The Circular clarifies that any enterprises registered in China that receive income from the investment of non-monetary assets are allowed to defer the payment of corporate income tax for five years. Notably, the regulation applies to both newly set-up companies and existing companies looking to increase their capital.
Comments Sought on Revised Tax Administration Law
On January 5, the Legislative Affairs Office of the State Council released the “Draft of Revised Tax Administration Law,” which clarified issues for the payment of e-commerce tax. The Draft explicitly stipulates that taxpayers selling products or services online should clearly display their tax registration certificates on their websites. Also, trading platforms are required to submit all the relevant registration information of their vendors to the tax bureau. Currently, Chinese legislators are researching and collecting opinions to prepare for the promulgation of the “Administrative Regulations on Online Retail.” If ratified, the Draft would be China’s first law on tax payment for online stores. The specific tax rates and tax payment rules are expected to be released later this year.
Given the recent problems American trading companies are having in establishing bank accounts in Hong Kong, viable alternatives need to be found. These issues, which are directly related to the American IRS carrying out extensive investigations in Hong Kong concerning breaches of the new FATCA regulations, have made banks in the territory wary of setting up any new personal or even company bank accounts. Other, smaller account holders have been asked to find ‘alternative’ banking arrangements, which is hardly conducive to assisting SMEs. Continue reading…
The newest issue of China Briefing Magazine, titled “Using China’s Free Trade & Double Tax Agreements,” is out now and available as a complimentary download in the Asia Briefing Bookstore through the month of January.
- Understanding China’s Bilateral & Multilateral Agreements
- China’s Proposed New Silk Road Free Trade Area
- Taking Advantage of China’s Double Tax Agreements
Tax is always a fast evolving subject, and over the years China has been shrewd in how it uses tax concessions to either encourage or discourage trade in certain areas. Double Tax Treaties are an important symbol of the mutual desire of both China and the reciprocating nation to boost trade, and should be very much at the forefront of any strategic planning when considering an investment into China.
China has been assertive when it comes to attracting and encouraging trade and investment – especially so when it comes to entering into Free Trade Agreements and bilateral Double Tax Treaties. However, remains a disconnect when it comes to many would-be foreign investors in China, who are often unaware that their country of origin may well have treaties in place with China, which, if used correctly, can significantly reduce their China tax burden and thereby increase the overall level of profitability of the China based entity.
This issue of China Briefing is of special interest to:
Chief Executive Officers
Trade Policy Reviews
Supply Chain Directors
In this issue of China Briefing, we examine the role of Free Trade Agreements and the various regional blocs that China is either a member of or considering becoming so, as well as how these can be of significance to your China business. We also examine the role of Double Tax Treaties, provide a list of active agreements, and explain how to obtain the tax minimization benefits on offer.
However, the tax benefits that can be obtained from enacting such treaties and concessions need to be applied for – they do not automatically appear. Local tax bureaus in China need to be made aware of treaty status, and provided with supporting documentation; otherwise, the opportunity will be lost.
We wish you all a profitable 2015 and Chinese New Year of the Sheep!
Tax, Accounting, and Audit in China 2015 This edition of Tax, Accounting, and Audit in China, updated for 2015, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.
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.
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.