Archive for the ‘China’ Category
China’s February Foreign Direct Investment Increases 32.2%
Monday, March 21st, 2011Foreign direct investment in China climbed in February, indicating investor confidence in the world’s second-biggest economy.
Investment rose 32.2 percent to $7.8 billion last month from a year earlier, the Ministry of Commerce said in a statement on its website today. That compares with a 23.4 percent gain in January.
Raising wages and reducing income inequality will be among the government’s top tasks in the next five years as the nation switches the focus of growth to consumption from investment, Wen said on March 5.
Foreign investment in the first two months rose 27.1 percent to $17.8 billion, the commerce ministry said today. The number of newly approved foreign-invested companies in the first two months of the year rose 7.5 percent from a year earlier to 3,399, according to the statement.
Chinese Premier sets 7% growth target
Monday, February 28th, 2011An annual growth target of 7 percent over the 12th Five-Year Plan (2011-2015) has been set to ensure sustainable development, Premier Wen Jiabao said on Sunday.
“We must not any longer sacrifice the environment for the sake of rapid growth and reckless roll-outs, as that would result in unsustainable growth featuring industrial overcapacity and intensive resource consumption,” Wen said during an online chat with Internet users.
The target was lower than the 7.5 percent set for the previous five years, when the country’s economy actually grew at an annual rate of around 10 percent from 2006 to 2010.
China’s GDP growth reached 10.3 percent last year. Most economists expect growth to be around 9 percent this year, and slightly less in 2012.
Increased efforts will be made to improve people’s living standards, and the government will adopt new performance evaluations for local governments to hasten economic restructuring.
He also promised to strengthen efforts to contain increases in prices of food and other commodities, which have stoked inflation. Maintaining price stability has always been a priority as “rapid price rises have affected people’s lives and even social stability”, he said, adding adequate grain supplies and abundant foreign exchange reserves would help curb inflation.
The consumer price index (CPI), a main gauge of inflation, rose 4.9 percent in January from a year earlier as food prices increased 10.3 percent due to rising demand and a drought in key grain-growing regions. Food accounts for one third of the CPI basket. The CPI increased 4.6 percent in December and 5.1 percent in November, a 28-month high.
The government has taken a slew of measures to keep prices under control, including increasing grain output and boosting drought relief. To mop up excess liquidity, the central bank has lifted the reserve requirement ratio (the minimum reserve banks must hold) for commercial banks eight times since the start of last year, and hiked interest rates three times since mid-October.
The government set the CPI target at 4 percent this year, a goal most analysts said will be hard to achieve.
According to the China Quarterly Macroeconomic Model, a study jointly conducted by Xiamen University and the National University of Singapore, China’s CPI will hit 5.4 percent in 2011, 2.07 percentage points more than last year. The study predicted it will ease to 4.55 percent in 2012.
China attracts 106 billion dollars in direct investments
Thursday, January 20th, 2011China attracted record-high direct investment volume – 106 billion dollars in 2010, which is a leap of 17.4%, compared to the previous year.
An opposite tendency was observed in 2009, when investments shrunk by 2.3%.
Last year, approximately 20% of all foreign investments were directed to the real estate sector. At the same time, the inflow of investments to poorer and less-developed regions in the country increased significantly.
While, China’s external investments rose even faster. They have increased by 36.3%, totaling 59 billion dollars. The Chinese companies bought ready-made companies abroad, as well as a variety of already launched perspective projects.
New Regulation on Administration of Representative Offices in China
Monday, December 13th, 2010On November 19, 2010 the State Council promulgated Regulation of the Administration of Representative offices of foreign enterprises (order of the State Council no. 584). Regulations will come into effects on March 1, 2011.
The previous Regulations provided that Representative Office shall only engage in activities which are not profit-generating unless otherwise stipulated by the agreement between China and the country in which foreign enterprise resides. The Regulations promulgated recently expressly provides that activities related to the business of the foreign enterprises which a Representative Office may engage in includes:
- market investigation, display, promotional activities in connection with the products or services of foreign enterprises;
- Liaison activities in connection with products sales, services provision, domestic procurement and domestic investment of foreign enterprises.
Article 35 of the Regulations expressly provides the legal liabilities for the engagement in profit-generating activities and increases the fine and legal liabilities for such violations, including ordering a Representative Office to correct and confiscate the illegal gains and the tools, equipments, raw materials, products (commodities) and other property that are specially used for engaging in profit-generating activities, and imposing a fine of no less than RMB50 000 and no more than RMB500 000. In egregious cases, the registration certificate of a Representative Office shall be revoked.
The Representative Offices shall provide an annual report to the Registration Authorities between March 1 and June 30. The content of such annual report shall include the legal existing and standing information of the foreign enterprises, the information on the carry-out of business activities of the Representative Offices and the information on the expenses and expenditure and revenues audited by their accounting firms and other related information.
Failure to provide such report will result in a penalty of RMB10000 to RMB30000.
The Regulation provides the new rules for the publication of the establishment registration. The Regulations provide that the registration authorities shall record the registration matters of a Representative Office in the registrars to be made available to or copied by the general public. Moreover, the Regulations provide that foreign enterprises shall announce the establishment or change of the Representative Offices to the general public via media designated by the registration authorities.
China allows foreign institutions to open RMB accounts
Thursday, October 14th, 2010The People’s Bank of China end of September released regulations to allow foreign institutions to open cross-border RMB-settlement accounts at locally registered banks from Oct. 1, which will further expand its ongoing RMB-settlement trial program.
According to the rules published on the central bank’s website, an overseas institution can choose either a domestic bank or a local unit of a foreign bank to open an RMB-settlement account.
However, the PBOC posted some restrictions on such accounts. For example, the RMB in these accounts are not allowed to be converted into foreign currencies or withdrawn in cash.
The central bank said the rules do not apply to RMB-settlement accounts opened by foreign central banks, interbank settlement accounts set up by foreign banks, special RMB accounts opened by qualified foreign institutional investors for trading securities in China, or special accounts for investing in China’s interbank bond markets.
New Taxation Rules for Representative Offices of Foreign Enterprises in China
Wednesday, May 26th, 2010On February 20, 2010, the State Administration of Taxation issued the Provisional Measures for Tax Collection and Administration for Foreign-Enterprise Representative Office (“Provisional Measures”). The Provisional Measures bring significant changes to the existing taxation rules and may have significant implications for the tax liabilities of representative offices (“Rep Offices”).
The Provisional Measures, which apply to representative offices established in China by foreign enterprises, including enterprises in Hong Kong, Macau and Taiwan (i.e. essentially all Rep Offices), are the first regulations clarifying taxation issues relating to foreign representative offices after the Corporate Income Tax Law (“CIT Law”) took effect in 2008. The Provisional Measures bring significant changes to the existing taxation rules related to Rep Offices. The Provisional Measures bring the Corporate Income Tax (“CIT”) of Rep Offices in line with the CIT Law applicable to other enterprises, and clarify that Rep Offices are subject to business tax and value-added tax (“VAT”) on their relevant taxable incomes.
Released on February 20, 2010, the Provisional Measures apply retroactively from January 1, 2010.
Below is a summary of the significant issues in the Provisional Measures
(1) Previous Tax Exemptions Revoked as of January 1, 2010
As of January 1, 2010, the provisional measures invalidate previous tax circulars governing various tax exemptions for representative offices. The tax authorities are prohibited from accepting new CIT exemption applications, whist being required to review and clean up the existing tax exemptions granted to Rep Offices.
The Rep Offices’ income eligible for preferential taxation treatments under a Sino-foreign double taxation agreement (“DTA”) may continue to enjoy such preferential treatments. However, from October 1, 2009, as a prerequisite for enjoying the DTA treatments, the qualified non-tax-resident taxpayers are required to seek approval from or to file for record with a competent tax authority before enjoying such DTA treatments. The application shall be conducted in accordance with the Administrative Measures of Enjoying Tax Treaty Treatments by Non-Tax-Residents (Trial) (GuoShuiFa [2009] 124).
(2) Tax Registration and Filing Requirements
Rep Offices are required to perform tax registration within 30 days after the business registration certificate is issued. When there are any changes to the registration or where the Rep Office is to be closed, the Rep Office shall amend the tax registration or deregister it after liquidation and settlement of all the outstanding tax liabilities.
(3) Accounting and Record-keeping
The Provisional Measures require all Rep Offices to keep accurate accounting books and records according to laws and regulations and to determine the taxable income according to the principle commensurate with the functions and risks the Rep Office actually undertakes. On meeting the statutory requirements of accounting book and record-keeping, Rep Offices are permitted to use actual taxable income to file the CIT returns. If the actual taxable income is used, the Rep Office shall file quarterly the CIT and business tax returns within 15 days of the end of each quarter. Filing of VAT returns is required to be done in accordance with the rules set out in the Provisional Regulations on Value-Added Tax and the implementing regulations.
(4) Taxation of Representative Offices
CIT on the profits of a Rep Office is at the statutory rate of 25% on its taxable profit, and the Rep Office is also liable to pay business tax or VAT. The Rep Office is required to pay CIT and business tax to the appropriate tax authorities within 15 days after the end of each quarter, while it has a duty to report and settle VAT with its tax authorities by the due date according to the revised VAT provisional regulations and its implementation rules.
The Provisional Measures provide that a Rep Office is chargeable to taxes on an actual basis if the Rep Office keeps proper books and records, and can accurately account for the taxable income commensurate with its functions performed and the risks assumed. The normal transfer pricing principles will extend to Rep Offices. However, if a Rep Office does not have proper financial records that accurately reflect revenue, costs or expenses, then the tax authority is empowered to assess the Rep Office’s taxation profits by using a deemed profit rate of no less than 15% of its deemed income, which is either the total revenue (if such figure is available from the records of the Rep Office) or a figure derived using a formula based on the cost-plus method.
Conclusion
Given the impact of the Provisional Measures with the recent developments relating to the administration of Rep Offices (i.e. the limitation on the number of representatives and the restriction on the scope of activities), clients are strongly urged to consider whether a Rep Office is still the most efficient platform for entering the PRC market.
WFOE Registration-Office Address
Monday, March 22nd, 2010Before starting to set up a WFOE in China, the client has to rent an office or a plant (for manufacturing company) in advance. The office could be located in any normal office building in China which could run business. But a virtual address is not allowed for the registration.
Originals (2) of lease agreement (minimum 12 months), and copy of title deed of registered office will be needed during the registration and one thing for clients to remind is that please make sure in the lease contract that the office could be registered a WFOE and otherwise the Landlord should refund the rental. One office room is only allowed to register one company and an already taken office is not available.Registered address and operation location should be the same and if the office address is changed to other districts, all the licenses with business address have to be updated.
Something you may not know during a WFOE formation in China
Thursday, December 17th, 2009The most popular type of running business in China for foreigners is to form a wholly foreign owned enterprise (WFOE).However, obtaining a business license of WFOE is not a little case even for the local Chinese registers. It requires lots of paperwork and a long and complex procedure. Therefore, with the help of a local professional consulting company to take care of the application process is obviously necessary.
It will take two to three months to complete the formation in practice, even though the law says that the process should take no longer than two weeks. Why is it so time consuming? Filling out all the paperwork, preparing long lists of documents such as certificates of incorporation, bank reference letter, leasing contract of office address, ect will take time to begin with. Then, there likely will be obstacles which require correct “guanxi” to be in place. “guanxi” could make whole steps go faster and more smoothly.
For yourself, you just focus on providing all correct information including names, investment amounts, ownership percentage, ect. Pay more careful with the spelling of numbers and foreign names as most Chinese write in a different form of English letters with the local English speakers which may cause trouble getting them right.
As for opening bank in China, they use stamps rather than signatures. Each company has a company stamp, special financial stamp and the legal person has a personal stamp. All banking matters as well as signing contract require you to stamp on the papers. This means that stamps need to be kept in a especially careful way.
Upon the successful registration,you will get all licenses which are packed with red or green covers including business license, enterprise code license, foreign exchange certificate, tax certificate, financial certificate, ect and then you could start your business in China.
Did you invest in China?
Thursday, October 29th, 2009Chinese official says that a large amount of the global top companies have invested in China Since the mid-1990s, and more and more overseas companies have been making their way into Chinese market. The investment covers almost all fields like the manufacturing, service, and rural infrastructure construction sectors, ect. And meanwhile Chinese investment environment has been improving in a large scale which has attracted more and more foreign investors.
Even though the high-tech and trade service industries were most favored by foreign investors, projects funded by foreign companies involve oil, chemical, electronic, machinery, computer, telecommunication equipment, ect. Nearly 90 percent of the projects funded are located in coastal areas and cities such as Shanghai, Guangdong, Jiangsu, Beijing and Shandong, ect.
For some new companies, they usually set up representative offices to do some market research and test the market before they commit themselves to invest in China. By using both the markets and resources from their own homes and China, these companies have remarkably improved their international competitiveness.
Hong Kong companies and China visa issues
Saturday, April 4th, 2009One question that we often get from our clients is whether registering a Hong Kong company can help in obtaining a business visa or a residence permit in China. The answer is NO. Although part of China now, Hong Kong is in reality a very separate jurisdiction, as per the “one country two systems” policy. Hong Kong companies are considered as foreign companies in China, and investment from Hong Kong into the mainland is considered as foreign investment. In that regard, operating a Hong Kong firm is not more helpful to get any visa facility for mainland China, than say a BVI or US company.
The proper way to get a one year residence permit in mainland China as an owner of a Hong Kong company, would therefore be to open a representative office in China for that company, if one doesn’t want to invest in a WFOE (wholly foreign owned enterprise). Obviously additional fees will apply. In most cities it will take about 4 to 6 weeks to process the representative office registration.
