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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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 Regulatory Brief: FTZ Foreign Investment Negative List, Environmental Pollution Liability Insurance

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Cybersecurity Law’s critical network equipment catalogue released

The Cyberspace Administration of China (CAC), along with other bureaus such as the Ministry of Industry and Information Technology (MIIT), jointly issued the first dedicated security products catalogue on June 1, 2017.

It outlines specific critical network equipment (CNEs) such as routers, switches, servers, and programmable logic controllers, that will be subject to inspection and accreditation requirements in China’s controversial new Cybersecurity Law.

In particular, dedicated cybersecurity products subject to inspection stipulated in the rules include ones relating to integrated data backup, firewall hardware, web application firewall, intrusion detection systems, intrusion defense systems, security isolation and information exchange products, anti-spam mail products, network synthetic audit system, network vulnerability scanning products, security data systems, website recovery products, and other accredited bodies.

The catalogue itself provides that the issuing bureaus will jointly promulgate further information on how a body may become an accredited body and to provide the accreditation and certification contemplated in the catalogue.

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China Regulatory Brief: Liaoning Loosens FDI Regulation, Large Overseas Bank Transactions to be Reported

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Liaoning to loosen restrictions on foreign investment

On June 6, Liaoning province’s Department of Commerce released measures to further open the market and use foreign capital, which will ease restrictions for foreign investors and reduce operating costs to create a fairer and more efficient investment environment.

These will be specifically aimed at investors in the service, manufacturing, and mining sectors, with supportive policies implemented to encourage investors to contribute to the state-owned manufacturing industry’s transition to mixed ownership.

China has been loosening restrictions on FDI in order to combat capital outflows in recent months. The measures also compliment the country’s wider initiative to reform the manufacturing industry under the name of ‘Made in China 2025’, which encourages innovation in the high tech sector.

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China Regulatory Brief: New Cybersecurity Law, Regulation for Bike Sharing

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Language for China’s new cybersecurity law amended before enforcement

Changes to the language of China’s new cybersecurity law, which will come into force on June 1, could implicate a wider range of products and services, and provide the government with access to foreign companies’ sensitive data and technologies.

The law will necessitate many companies to store information within mainland China. Companies storing information via cloud computing may need to use domestic cloud computing services.

The government has chosen to go ahead despite more than 50 trade associations and chambers of commerce signing a petition calling for a delay passing the law. They argued that the law could affect billions of dollars of cross-border trade and lock out foreign cloud operators because of limits on how they operate in the country.

The law will also introduce a mechanism that will allow the government to oversee cybersecurity, implement a multi-layered cyber protection scheme, a security review of network products and services, and a security assessment for cross-border data transmission.

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China Regulatory Brief: 2017 Legislation Plan Released, More Certificates to be Consolidated

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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.

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China Regulatory Brief: Six New Tax Cut Measures for 2017, Key Tasks for Economic System Reform

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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.

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China Regulatory Brief: New Five Year Work Permit, Foreign Banks Allowed to Invest in Finance

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China’s new five year work permit for foreign employees

China’s Ministry of Public Security has recently unveiled a new pilot program for foreign work permits, which allows anyone who has been employed for at least two consecutive years to apply for a new five year work permit. Previously, foreign nationals were required to renew their work permit every year, even if they were on a multiple year labor contract.

In addition to this, foreign nationals who have worked in the same city or province for four consecutive years, and meet other requirements regarding salary and income tax thresholds, will be eligible to apply for a permanent residence permit.

The pilot program will be implemented in “demonstrative zones of innovative reform” in 11 free trade zones, including those in Beijing, Wuhan, Tianjin, Chongqing, Hebei province, and Henan province. This step to ease visa rules is part of an effort to attract global talent to the country, and follows recent reforms such as the unified work permit and relaxed rules for master’s degree holders.

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