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China Briefing is a monthly magazine and daily news service about doing business in China. We cover topics relating to the Chinese economy, the market in China, foreign direct investment and Chinese law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates




East China

Following Shanghai, Beijing to Roll out VAT Reform in July

Also includes special heads-up for taxpayers in non-pilot areas

Feb. 29 – Following the experiment in Shanghai, the Chinese government has approved Beijing to become the second city that implements a value-added tax (VAT) reform pilot scheme, according to the state-run China National Radio.

Beijing’s tax authorities are in consultation with the city’s 54,000 business tax (BT) payers in order to get prepared for the pilot program set to commence on July 1, 2012. However, it remains unclear how many service sectors will finally be involved in the scheme. In Shanghai – the city that set the first example for such a program – BT impositions are substituted with VAT impositions in six modern service sectors as well as the transportation sector. Continue reading

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Update: Minimum Wage Hikes Across China

Shanghai, Shandong, Sichuan and Tianjin hike up minimum wage levels in 2012

Feb. 28 – A number of local governments across China have recently announced plans to further raise minimum wage levels in an effort to keep up with the national minimum wage growth target of 13 percent per year, set in the latest 12th Five-Year Plan on Employment Improvement.

Continue reading

Posted in East China, Legal and Regulatory, Minimum Wages, Regulatory Update, West China | Tagged , , , , , , , | Leave a comment

American Express Extends Reach to China’s e-Payment Market

By Vivian Ni

Jan. 30 – Although China has made it more difficult for foreign investors to enter its e-payment sector over the last year, the potential profits offered by the country’s massive consumer population are proving too attractive to miss. Recently, American Express – the U.S. financial service provider that has long considered China as its critical strategic market – established a new partnership with a growing Chinese payment service company, Lianlian Group, by means of equity investment and technology authorization.

AmEx said on January 18 that it will license its digital wallet Serve – a next-generation commerce technology developed to target lower-end consumers – to the Zhejiang-based Lianlian Group. The Chinese company will be allowed to apply the technology in its payment services, but will not necessarily use the Serve brand. Continue reading

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Shanghai Offers Fiscal Support to Promote VAT Reform

Jan. 30 – Shanghai’s newly included value-added tax (VAT) payers (pilot enterprises) may be able to receive fiscal compensation if they see increases in their actual tax burdens under the new tax scheme, local authorities said recently.

The focus of the ongoing VAT reform is to reduce duplicate taxation and extend supply chains that are eligible for VAT deductions, the local government emphasized. Continue reading

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Zhejiang to Invest RMB2 Billion into Oceanic Economy

Jan. 17 – In order to exploit its massive “oceanic productivity potential,” the Chinese eastern coastal province of Zhejiang is looking to establish a special RMB1 billion fund for the development of its oceanic economy, and another separate RMB1 billion fund for the promotion of its oceanic industries.

The RMB2 billion investment will mainly focus on the advancement of emerging oceanic industries, the development as well as protection of important islands, the expansion of bulk commodity exchange centers, and the improvement of port logistics information interconnection as well as interchange throughout Northeast Asia. Continue reading

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China Specifies Services Eligible for Zero VAT Rate and VAT Exemption

Jan. 10 – The beginning of China’s pilot value-added tax (VAT) reform has aimed to make transport services and a list of modern services in pilot areas subject to VAT, instead of business tax. Recently, as a new update to the implementation details of the ongoing VAT reform, China’s Ministry of Finance (MoF) and State Administration of Taxation (SAT) clarified that some of these VATable services can enjoy zero VAT rate and VAT exemption.

Zero VAT rate
According to the “Circular on the Application of Zero VAT Rate and VAT Exemption on VATable Services (caishui [2011] No. 131)” issued on December 20, 2011, the following VATable services provided by taxpayers in pilot areas are subject to the zero VAT rate: Continue reading

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Shanghai SAFE Requires Additional Documents for Forex Settlement

Jan. 3 – The State Administration of Foreign Exchange (SAFE) issued the “Supplementary Circular on Issues Relating to Improving Business Operations with Respect to the Administration over Payment and Settlement of Foreign Exchange Capital of Foreign-invested Enterprises” (Huizongfa [2011] No. 88, “Supplementary Circular”) on July 18, 2011, which came into effect on August 1, 2011. Our previous posting on the content of the Supplementary Circular can be found here.

On July 29, 2011, the Shanghai branch of SAFE issued a Circular (“Shanghai Circular”) requiring designated foreign exchange banks to comply with the Supplementary Circular. However, for small-amount invoices under RMB2,000, the Shanghai Circular states that an enterprise applying for foreign exchange capital settlement only needs to submit written documents guaranteeing the authenticity of the small-amount invoices, signed by the legal representative and stamped with the official seal of the enterprise. This requirement replaces the Supplementary Circular’s requirement of providing hard copies of results of the tax department’s Internet invoice authenticity inquiry system stamped with the official or financial seal of the enterprise. Continue reading

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Hangzhou to Raise Maternity Insurance Contribution Rate

Jan. 2 – Hangzhou, the capital city of Zhejiang Province, has recently announced a new regulation on maternity insurance, a move that may bring employers in the city higher expenses on social security coverage.

The new “Measures on Hangzhou Municipality Maternity Insurance Scheme (Hangzhengban [2011] No.22),” issued by Hangzhou’s local government on November 15, 2011, stipulates that the employer contribution rate to maternity insurance within Hangzhou City shall stand at 1.2 percent (compared to the existing 0.8 percent), whilst the contribution rate in suburban and rural Hangzhou shall be determined by the local governments of the districts/county-level municipalities. Continue reading

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