China Regulatory Brief: Support for Venture Capital & New VAT Exemptions

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China to Support the Development of Venture Capital Enterprises

On May 13, the National Development and Reform Commission (NDRC) released the “Circular on Further Supporting the Development of Venture Capital (VC) Enterprises (Fa Gai Ban Cai Jin [2014] No.1044).” The announcement encourages eligible VC enterprises to issue company bonds and the establishment of angel investment institutions. Angel investment institutions (consisting of investors who provide capital for business startups, usually in exchange for ownership equity) can register as VC enterprises to enjoy the related supporting policies. Additional preferential tax policies for angel investment institutions will be rolled out in the future.

Unusual Enterprise Operations to be Recorded and Publicized

On May 12, the State Administration for Industry and Commerce (SAIC) released the “Administrative Measures for Directory of Enterprises with Abnormal Operations (Opinion Seeking Draft).” The SAIC clarified that the unusual operations of three types of enterprises will be recorded and publicized in accordance with the “Regulations on the Disclosure of Enterprise Information” released in April, 2014, namely:

  • Those failing to submit an annual report to the SAIC within the period of January 1 to June 30.
  • Those failing to disclose information via the enterprise credit information disclosure system within 20 working days of obtaining or modifying an administrative license.
  • Those unable to be contacted at the registered business site.

Objections may be submitted here prior to May 31, 2014.

Shanghai FTZ Implements Pre-inspection Mechanism for Eligible Imports

The Shanghai Entry-Exit Inspection and Quarantine Bureau recently announced that a pre-inspection mechanism would be established in the Shanghai Free Trade Zone (FTZ) from May 1, 2014. A verification certificate will be granted to eligible imported goods as evidence of their passing the pre-inspection. Export goods with a verification certificate will be exempt from further inspection. Based on these reforms, the time required for customs clearance will be reduced by 50 percent. For example, importing cosmetics, which previously might have taken 12 working days, will now be dealt with within five working days.

Soybeans to Receive VAT Exemption

On May 8, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly released the “Circular on Exempting Soybean Reserves from Value-Added Tax (VAT) (Cai Shui [2014] No. 38).” According to the Circular, soybeans shall be exempt from VAT, and special VAT invoices will be granted to tax-exempt businesses. The Circular came into effect on May 1, 2014.

ATMs to Receive Adjusted Tariff Rate and Tax Item from July 1

The Customs Tariff Commission of the State Council recently released the “Announcement on Adjusting the Tax Item Number and Temporary Import Tariff Rate for Cash Dispensers (Automatic Teller Machines) (Shui Wei Hui [2014] No.9).” According to the Announcement, the name “cash dispensers” under tax item 84734010 will be changed to “cash dispensers and loop cash dispensers.” A temporary import tariff rate of five percent shall be applied from July 1, 2014.

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