On November 30, South Korea’s National Assembly ratified its free trade agreements (FTA) with China, New Zealand and Vietnam. The agreement with China had been signed in June earlier this year, and could come into effect as early as the end of this year subject to China’s pending authorization.
The terms of agreement reached include the elimination of import tariffs on over 85 percent of annual trade and 90 percent of all products traded between the two countries within 20 years after implementation. This FTA has been labelled as unique and unprecedented, primarily due to its scale in trade liberalization and market opening for China compared to any others previously, becoming the country’s largest FTA deal in terms of trade volume. It is also the first time China has included financial, telecommunications and ecommerce industries in an FTA.
South Korea is China’s third largest trading partner, and total trade value between them is set to reach US$300 billion this year.
On December 2, China’s State Council released the “Draft Revision of the Patent Law of the People’s Republic of China,” which is currently open to public comments until January 1, 2016. According to the Draft, the valid term of the patents on inventions is 20 years, 10 years for utility models and 15 years for appearance design, starting from the date of application. The Draft also clarifies that anyone who provides products, including raw materials, intermediates, parts and equipment to infringers, are jointly liable if they knew about the infringement.
On November 26, the State Administration of Taxation announced its decision to abolish the preliminary approval system for preferential CIT policies, meaning that enterprises are no longer required to apply to the local tax bureau before they obtain the preferential tax benefits. Instead, the SAT launched a new “afterwards filing system” for the administration of preferential CIT policies and the “Catalogue for Administration of Filing of Preferential CIT Policies,” which clarifies filing procedure such as the filing period and the required documents. Taxpayers may decide whether they are qualified for the tax incentives on their own and complete the record-filing procedure. The local tax bureau will then check and examine the company’s tax status based on the submitted documents at the end of each year.
Starting October 1, 2016, the RMB will be part of the IMF’s basket of currencies for the Special Drawing Right (SDR) as the fifth currency – after the US Dollar, euro, British pound, and Japanese yen. The new weighting of the SDR basket will be composed as: US Dollar (41.7 percent), Euro (30.9 percent), British pound (8.1 percent), Japanese yen (8.3 percent) and Chinese RMB (10.9 percent). This is the first time in over 15 years that the list of currencies comprising the SDR has been altered, and also the first time for the Chinese RMB to be included. This move is expected to help the Chinese RMB be adopted by more central banks and trading partners as a reserve currency, and thus promote the international use of China’s local currency. The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves.
On November 30, the General Office of the People’s Government of Tianjin issued the Measures for Administration of Foreigners Working in Tianjin. The measures state that an employer must obtain a foreign workers work permit and residence permit for foreign workers arriving in Tianjin. In advance of their arrival, an employer is also obliged to make an online application for approval, and to take relevant documentation to the Human Resources Bureau services counter to apply for a foreign work permit. Once the application has been approved, documentation is to be taken to the relevant foreign affairs department in Tianjin with a company invitation letter in order to process a formal invitation document. The application materials are then given to the foreign worker who is to personally apply at a Chinese embassy or consulate for a Work (Z) or Specialist (R) Visa.
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Using China’s Free Trade & Double Tax Agreements 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.
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