China has removed the requirement on foreign investors’ initial investment and minimum registered capital, the Ministry of Commerce (MOFCOM) said.
According to MOFCOM, foreign investors may decide the type, amount and period of investment. The ministry added that such details should be stated in a contract.
In addition, MOFCOM stated that unless required by other laws and regulations, there is no longer a minimum registered capital requirement for foreign investment. Foreign investors were generally required to contribute at least 25% of the registered capital of a joint venture company in China under previous rules.
The move is reportedly part of the country’s ambitious financial reforms to cut red tape for the world’s second-largest economy to be closer with free markets. In March last year, China amended its Company Law to remove the minimum registered capital requirement for setting up companies.
However, some important sectors, such as banking and shipping, still face limitations and foreign investors’ stakes in joint ventures within these industries are capped at below 50%.
Source: Global Times
In order to strengthen reform of foreign exchange administration of capital accounts, facilitate capital management in enterprises making cross-border investments, and regulate direct investment-related foreign exchange activities, the State Administration of Foreign Exchange (SAFE) has further simplified and improved foreign exchange administration policies for direct investment. The new policies took effect on 1 June 2015.
1. Abolishment of government checks and approval procedures for foreign exchange registration for both domestic and overseas direct investments
2. Simplification of direct investment-related foreign exchange processes
3. Banks shall increase their compliance awareness in handling direct investment-related foreign exchange registration, while SAFE shall strengthen the processes of training, guiding and monitoring banks for compliance.
SAFE’s reformation will facilitate capital management in enterprises making cross-border investments, while banks will undertake more responsibilities in direct investment-related foreign exchange registration.
Since 1 October 2015, China has combined the business licence, organisation code certificate and tax registration certificate into one document for foreign businesses establishing operations in the country.
This means that the industry and commerce, quality supervision, state taxation and local taxation departments now jointly handle registration of the three documents to streamline the registration process. Specifically, a special government department is formed to accept all application materials and information once and share them with all other associated departments for their review within a specified time limit. After receiving the application materials and information, these departments will simultaneously review them based on their division of duties and prepare a joint certificate if the registration is successful. Once notified of the successful registration, the special government department will issue the joint certificate to the applicant. This arrangement allows data of successful registrants to be shared among all associated departments and jointly recognised by them.
Market Access Negative List
Industries in the Market Access Negative List fall under two categories — “Prohibited” and “Restricted”. Businesses are not allowed to invest in “Prohibited” industries, and must seek approvals from the relevant authorities to invest in “Restricted” ones.
Foreign Investment Negative List
Existing legislation governing investment restrictions will be closely integrated with the two negative lists.
China’s State Council has approved a plan to allow companies to conduct comprehensive R&D experiments in Suzhou Industrial Park (SIP) with the aim of promoting product innovation, making SIP the first such experimental zone in the country.
Under the plan, SIP will focus on developing world-class high-tech products and coordinate economic activities with free trade zones in the country.
In February 2015, the State Administration of Taxation (SAT) released Public Notice  No. 7 (“Public Notice 7”), a new tax regime that is different from that under previous Chinese tax laws. Public Notice 7 not only captures offshore indirect equity transfer transactions but also transactions that involve the transfer of immovable property and assets.
Public Notice 7 also provides more explicit and detailed guidance for assessing “reasonable commercial purposes” and introduces “safe harbour” scenarios. However, it also presents challenges to both the foreign transferor and transferee of the offshore indirect transfer as they have to make a self-assessment on whether the transaction should be subject to Corporate Income Tax (CIT) and to file or withhold the CIT accordingly.
The State Administration of Taxation (SAT) has released another two new packages for Corporate Income Tax (CIT) returns that took effect from 1 July 2015 — the provisional CIT returns for Tax Residence Enterprises (TREs) and provisional and annual CIT returns for Non-TREs.
Compared with previous packages for CIT returns, the new packages require taxpayers to disclose more information. In addition, going forward, qualified taxpayers can directly claim and enjoy the relevant CIT incentives during provisional filing, instead of paying tax first in provisional filing and then claiming the tax incentives during the annual filing.
On September 11, the SAT promulgated the Administrative Measures on Non-resident Taxpayers Claiming Tax Treaty Benefits (SAT Public Notice 2015 No.60, PN60), which has been effective since 1 November 2015. The new measures supersede the prevailing Guoshuifa  No.124 (Circular 124).
PN60 introduces a new mechanism of self-assessment on the eligibility for tax treaty benefits (reduced taxation or exemption under the relevant tax treaties) by non-resident taxpayers. The pre-approval process or record-filing acknowledgement from the Chinese tax authorities is no longer necessary. Instead, non-resident taxpayers and their withholding agents will be required to file certain prescribed forms and other supporting documents when performing tax filing to justify their claims for the tax treaty benefits.
Since 1 July 2015, the Ministry of Public Security has implemented a series of entry/exit policies and measures designed to support efforts to turn Shanghai into a science and technology innovation hub.
These include “most-favoured” treatment of housing transactions made by all foreigners and greater support for new entrepreneurs. To better attract highly skilled foreign talent, the efficiency of entry/exit services has also been improved through measures such as removal of restrictions on the types of employers and job titles, as well as relaxation of requirements for the duration of residence.
A foreign client of SBA Stone Forest (SBASF) had to customise its Oracle ERP system — which records daily transactions on its chart of accounts (COA) under US GAAP — to ensure compliance with China’s financial reporting standards (FRS) when it expanded into the country.
SBA assisted the client through:
As some time was needed to complete customisation of the Oracle ERP system for local requirements, SBASF initially deployed the Kingdee system for the client during its initial entry into China. This allowed the client’s Chinese office to fulfil local financial reporting requirements immediately after its establishment.
Once customisation was complete, SBA assisted in migration from the Kingdee system to the Oracle system, allowing the client to ensure compliance with China’s FRS with ease.
SBA Stone Forest HR Workshop: Enterprise Human Resource Management for Organisational Structure Change, 7 July
Corporate & Individual Income Taxes Workshop in Shanghai, 27 August
2015 Tax Audit Seminar Series in Beijing, Shenzhen and Shanghai, September
Round-table Discussion in Shanghai: Role of Legal Counsels in Risk Management, Tax and eDiscovery, 18 September
China Briefing 2015 – A Bite of China’s F&B Market, 29 October
SBA Stone Forest (SBASF) is a Corporate Advisory and CPA group that has focused on serving foreign enterprises in China since 2001.
We adopt international standards and best practices, while delivering Singapore-quality services. At the same time, we have developed a strong local knowledge and understanding of getting things done faster and more effectively for our clients. Headquartered in Shanghai with branch offices in Beijing, Suzhou, Shenzhen, Chengdu and Hangzhou, we help foreign investors to form legal entities in China smoothly. Thereafter, we continue to support them in navigating China’s regulatory and business environment.
The Corporate Advisory firm is a fully-owned subsidiary of the Stone Forest group, the largest accounting and business advisory group outside the Big 4 in Singapore, established since 1985.
The CPA practice is a partner-owned practice that works seamlessly in strategic alliance with the Corporate Advisory firm to serve common clients in a holistic manner. The CPA practice adopts and provides clients with world-class standards and practices adopted by all major international accounting firms. This is made possible with the technical and training support from the Stone Forest group under a technical assistance and transfer of know-how agreement.
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