Legal & Regulatory

China’s Five-in-One Business License: Pressure Mounts for Foreign Businesses to Implement

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By Gidon Gautel 

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Companies in China with soon-to-be outdated certification would be wise to put the Five-in-One business license amendment on their upcoming agenda.

China’s Five-in-One system combines a business’ tax registration certificate, organization code, business license, social security registration certificate, and statistical registration certificate into a single document with one social credit code. This has made setting up a business in China faster and easier for foreign investors.

Businesses without an integrated business license under the Three-in-One or Five-in-One system should now upgrade. The deadline for converting to Five-in-One certification is December 31, 2017. Beyond this date, all five certificates held by the company, now encompassed by the Five-in-One system, will be deemed as invalid and cancelled.

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How to Prevent Corruption in QC Inspections in China

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By John Niggl, Client Manager for InTouch Manufacturing Services

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This is Part 2 of a two-part article about quality control inspections in China. In Part 1, we discussed how corruption typically appears in the quality control process, and some specific problems it may cause. 

Confronting the possibility of integrity risks during your product’s quality control (QC) inspection process in China can be a challenge, especially when doing so from halfway around the world. But there are some actionable steps you and your QC partner can take now that will help you to minimize your risk.

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China Regulatory Brief: Personal Access to VPNs to be Blocked, Tax Approval Items Streamlined

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Telecoms service providers told to block individuals’ access to VPNs

China’s central government has given directives to the country’s three largest telecommunications providers, namely China Telecom, China Unicom, and China Mobile, to block individuals’ access to virtual private networks (VPNs) by February 1, 2018.

Previously, China’s ‘Great Firewall’, the government’s tool to enforce ‘internet sovereignty’, has hindered access to VPNs, but did not make access impossible. While there have been government drives in many forms to crack down on VPN usage and further censorship in the past, few have come to any real result.

However, the latest directive has been a serious concern for internet users. On June 22, VPN service provider Green announced that it would stop operations on July 1, while many other services have disappeared from app stores all together.

Businesses depending on VPNs for operation will also be affected, but may be able to lease lines to access international internet, meaning that the move primarily affects individuals. So far, government authorities have not released any official statements on the matter.

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What Does Corruption in Your China QC Inspection Process Look Like?

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By John Niggl, Client Manager for InTouch Manufacturing Services

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This is Part 1 of a two-part article about quality control inspections in China. In Part 2, we discuss steps to prevent corruption in your quality control inspection process.

Transparency International’s latest Corruption Perception Index places most countries in the Asia Pacific region in the bottom half of their world ranking. And given the prevalence of contract manufacturing in countries like China, India, and Vietnam — all of which scored 40 or less out of a possible 100 points — these results continue to give importers cause for concern.

If you’re like most importers, your supply chain probably contains tens, if not hundreds, of different suppliers, though you may have only directly contacted a few. And even if you’re careful to conduct quality control inspection at various stages of production, you may still be vulnerable to corruption and its consequences.

In fact, high integrity is one of the traits importers most often seek in a quality control (QC) inspector, whether hiring their own staff or an independent inspection firm. But even despite your best efforts at due diligence, corruption can still impact your inspections. Results can vary from receiving defective or otherwise unsellable goods, to losing valued customers and distribution channels when retailers refuse to stock your products.

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China’s 2017 Foreign Investment Catalogue Opens Access to New Industries

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By Alexander Chipman Koty and Zhou Qian

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On June 28, China’s National Development and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM) released the 2017 version of the Catalogue for the Guidance of Foreign Investment Industries (the Catalogue). The Catalogue, which will come into effect on July 28, introduces a national negative list to guide foreign investment, and cuts the number of special administrative measures restricting foreign investment from 93 to 63, compared to the previous 2015 version.

Industries with foreign investment restrictions eased or removed in the new Catalogue include rail transportation equipment, motorcycles, new energy vehicle batteries, civil satellites, unconventional oil and gas development, and credit investigation and rating services. Additionally, a handful of high-tech industries, such as virtual reality (VR) and augmented reality (AR) devices, have been given special incentives to encourage foreign investment.

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China Regulatory Brief: Tax Relief for Retaining Talent, New Rules for Preventing False Data

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China-Regulatory Brief bannerChina to offer tax relief to help companies retain talent

China is expected to implement a new series of preferential individual income tax (IIT) rates in an effort to help high performing firms retain executives and high-earning talent.

Tax relief will be offered on non-cash income equity incentives, such as stock options, the types of remuneration more commonly comprising executive pay packages.

Many firms in China struggle to retain top talent, as they are attracted by more promising prospects overseas. China levies a 45 percent IIT rate on the top income bracket, compared to 17 percent in Hong Kong, and 20 percent in Singapore.

China has a seven tier progressive IIT regime, and many businesses have been waiting for government policy for rewarding staff on the top tiers of the system.

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China’s New FTZ Negative List Removes Restrictions on Foreign Investment

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By Alexander Chipman Koty and Zhou Qian 

China’s State Council released an updated foreign investment negative list for its 11 free trade zones (FTZs) on June 16, 2017, removing a number of restrictions on foreign investment.

The new negative list, which comes into effect on July 10, 2017, cuts 10 items and 27 special administrative measures from the previous negative list released in 2015. The lifted restrictions on foreign investment apply to a number of industries, including mining, manufacturing, transportation, information, commercial service, finance, scientific research, and culture.

The updated negative list presents new opportunities for investment in China’s growing number of FTZs, and provides a glimpse into future economic reforms.

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Establishing a Legal Representative Office in China

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By Dezan Shira & Associates
Editors: Lorena Miera and Thibaut Minot

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This is the first feature in a two-part series. The second article will explore taxation and funding issues for LROs.

The legal representative office (LRO) is one of the handful of special representative offices with unique characteristics in China. These special ROs are usually established in China’s restricted industries, within which foreign investors are not allowed to set up a wholly foreign-owned enterprise (WFOE) and sometimes not even a Sino-foreign joint venture (JV), as is the case of the legal services industry.

Effectively, the LRO structure allows foreign law firms to perform their legal services in China while the parent company overseas assumes civil liabilities for the activities of its LRO in China. Key differences set the LRO structure apart from traditional ROs, differences that range from the traditional RO registration process to the entity’s business scope, and from the different accounting and tax practices they must follow to the funding mechanisms available to grow their operations.

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Dezan Shira & Associates

Meet the firm behind our content. Dezan Shira & Associates have been servicing foreign investors in China, India and the ASEAN region since 1992. Click here to visit their professional services website and discover how they can help your business succeed in Asia.

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