Legal & Regulatory
By Alexander Chipman Koty
The Cyberspace Administration of China recently released the Measures for the Security Assessment of Personal Information and Critical Data Leaving the Country (the Measures), which regulates the transfer and storage of personal information and data leaving China. The Measures are part of China’s expansive Cybersecurity Law (the Law), which will come into effect on June 1.
Although the Measures are designed to aid in the implementation of the Law, they raise fresh concerns for foreign companies in China that store information overseas. In particular, stipulations governing the collection and storage of “personal information” could pose a challenge for foreign companies that centralize their HR operations for China-based employees outside of the country.
By Dezan Shira & Associates
Editors: Zolzaya Erdenebileg and Tongyu Zhang
Before committing to the WFOE as an investment vehicle in China, there are several pre-establishment considerations that investors should take into account. In recent years, there have been numerous changes made to the basic pre-application process of setting up WFOEs in China, particularly surrounding how they are taxed, their required registered capital, and their intellectual property. In order to expedite the process and decrease the risk of costly errors, investors should carefully analyze each of these developments to ensure that they enter the market with eyes wide open.
By Dezan Shira & Associates
Editor: Alexander Chipman Koty
An official company chop– sometimes referred to as a seal or stamp – is a necessity for doing business in China. In contrast to business places in the West, management and administrative teams in China use the chop to legally authorize documents, often in place of a signature.
Beyond the company chop, a business may need others. A company will likely need several chops – each for a different purpose and used on different types of official documentation – depending on its business scope. Regardless, every business should consider diversifying their use of chops.
For some chops, any person simply in possession is deemed as authorized to use it. Given the implications, businesses should consider working with independent advisors, who can manage the application process and design internal controls for their responsible use once obtained. In this article, we explain the different chops in China and how businesses can use them.
2017 legislation plan released
At the beginning of this month, China’s Standing Committee of the National People’s Congress released its 2017 legislation plan, which announces proposals for legislative amendments and new laws for the year.
Under the plan, new laws such as the Tobacco Tax Law, Shipping Tonnage Tax Law, Individual Income Tax, Real Estate Tax Law, the Tariff Law, and the Farmland Occupancy Tax Law are scheduled for deliberation later this year.
Notably, the Administrative Supervision Law will be changed to the National Supervision Law. Other amendments include those of the Judge Law, Procurators Law, Rural Land Contracting Law, Patent Law, Copyright Law, Maritime Traffic Safety Law, Vocational Education Law, Land Management Law, Tax Collection Administration Law, Forest Law, Metrology Law, and Mine Safety Law.
The formulation of laws like the Land Border Law, Ocean Basic Law, Futures Law, Atomic Energy Law, and Criminal Victim Relief Law are also scheduled.
China’s counterfeit food & beverage business is booming. In January, global news sources reported that for years around 50 family-run factories had been producing fake condiments, producing revenues of up to RMB 100 million (US$14.5 million) per year. Not only were these factories using industrial and recycled ingredients, they were packaging potentially toxic mixtures in brand named packaging, including Knorr and Nestle.
It has also been estimated that over five percent of the Chinese wine market is counterfeit, whether that be ‘bathtub booze’ concocted from a random mix of industrial ingredients, or cheap wine repackaged in luxury branded bottles. Instances like this can severely affect your brand’s image in the market and reduce your brand’s equity significantly. Because products with a strong brand equity are much more difficult to imitate and challenge in the marketplace, it is imperative that companies take all possible measures to protect brand equity.
By Weining Hu
Companies that would like to setup in China will benefit from a more efficient corporate registration process by the end of October this year. The State Administration for Industry and Commerce (SAIC) released an opinion (“the Opinion”) on April 11 that outlined its digitization effort, which will entail the construction of a nationwide digitized corporate registration platform and a new electronic business license.
This reform will improve the turnaround-time and streamline the registration workflow for all types of companies. The Beijing Administration of Industry and Commerce (AIC) online system is currently the only platform that allows foreign invested companies (FIEs) to register their business online, but more regions of China will follow suit once a national model is ready to set forth.
State Council introduces six tax cut measures for 2017
At the executive meeting of the State Council last week, a series of six tax cuts were introduced. The following details the plans:
(I) A continuation of the Business Tax to value-added tax (VAT) reform, in the form of simplification of VAT rates from four brackets to three. As of July 1, 2017, the 13 percent bracket will be eliminated, leaving only the 17 percent, 11 percent and 6 percent brackets. Furthermore, agricultural products and natural gas VAT rates will be reduced from 13 percent to 11.
(II) The scope of small and micro profit enterprises entitled to preferential enterprise income tax (EIT) rates will be widened. From January 1, 2017, the upper limit of taxable income has been increased from RMB 300,000 to RMB 500,000, valid until December 31, 2019.
By Weining Hu
Exporters from the least developing countries (LDCs) in Africa and Southeast Asia can benefit from China’s new measures for special preferential tariff treatment. In order to be entitled to preferential tariff treatment, a beneficiary country needs to register with China’s customs the national source of the export product, showing the product is indeed originating from that country.
The Administrative Measures of the PRC Customs on Rules of Origin of Imported Goods from the Least Developed Countries Entitled to Special Preferential Tariff Treatment (“the new measures”), which became effective April 1, is the latest action taken by the General Administration of Customs of China (GACC) to improve the administration of the origin of the import goods. China began granting preferential tariff treatments to LDCs that have diplomatic relations with China in 2002.