Highlight: Apple’s acceptation of payment in RMB in its App Store may be deemed as the intention to operate in China, which by local laws shall be administrative licensed of the value-added telecommunication service first and the entity shall be at least 50% owned by local companies. Furthermore, the applications sold in App Store are also demanded for administrative license and registration of Chinese government.
On the afternoon of 17th November, I was interviewed by Mr. Zeng Hang, the journalist from the 21st Century Business Herald, an influential Chinese financial newspaper, on the Apple’s plan to accept the payment in local currency for the purchase of applications of iPhone and iPad. Mr. You replied that it’s infeasible basing on the existing regulations, for any app purchases by Chinese clients is kind of shopping in U.S.A and shall be settled in dollar. And carrying out of the payment in RMB means App Store begins its operation in China which involves many administrative licenses.
However, the payment in RMB was officially permitted by Apple that night, and the default currency for purchases from China is RMB. After that Mr. Zeng Hang commented the report quoted my opinion as kind of embarrassment. Even though, we’re still doubted about Apple’s decision. Despite the convenience it may bring to the Chinese clients when purchasing genuine software, the decision is tailed by many regulatory licenses or approvals, for it’s severely administered in China. Once the Terms of Services is changed for RMB payment, it’s probable for App Store to be determined as operating in China, which may trapped Apple and developers in administration applications. To our knowledge, the license related shall include the followings:
1. The license of value-added telecommunication service and other licenses
The online software purchase is kind of data exchange business, with the most typical one of value added telecommunication service. And as to the operation of value-added telecommunication business for foreign companies including Apple is explicitly regulated in China Telecommunication Regulations and other documents signed for the participation in WTO, by which the foreign invested company could not run such business itself and they could only get involved in such operation as the shareholders of no more than 50% of the joint ventures.
For App Store’s operation in China, Apple shall find a domestic partner with it holding less half shares. Meanwhile, in addition to the license of value-added telecommunication service for Apple, any apps sold in the store, whether free or not, are highly possible to be demanded the administrative license, which mainly includes the online publish license for books, the license from the General Administration of Press and Publication and the Culture Ministry for online games, the license of electronic publication for offline game, and license of internet culture from culture ministry for music. Once the above licenses could not be approved, Apple may face the mandatory withdrawal of the apps in its Store.
Surely, the license for value-added telecommunication service is arguable for the server of App Store is in U.S.A, while the license for online publication, internet culture and games is less questionable for China is strictly governing in such fields.
2. Issues for software registration
The software registration may greatly delay the release of the applications in App Store and increase the cost of the developers. All the applications in App Store are programs for smart phones and tablet PCs, and by the regulations of the Ministry of Industry and Information Technology, all the software shall be registered include the copyright registration and software test.
The copyright registration in China is RMB ￥1000 and demands 3 to 6 months, and it could be approved in urgent for higher cost. The cost of software test is around RMB ￥2000, and demands 1 to 2 months. Although as we know the local governments may grant allowance for the registration, it’s obviously that the development and time cost of the global mobile apps developers will be increased.
Despite the software registration is not mandatory; the company may not enjoy the refund of value added tax if it failed to apply the registration. Once App Store starts its operation in China, it may face the problems of taxation. Furthermore, copyright owner of the apps in the Store will be levied the withholding tax, which shall be withheld and paid by Apple and deducted in remittance.
We can’t help sighing for the ubiquitous administration in China, and the developers in China may be exhausted by the license application for iOS, which was thought to be their paradise before the acceptation of RMB payment. We truly hope our judgment and analysis is wrong and may Apple and developers for iOS blessed with a good luck.
Author: Mr. You Yunting
Founder & Editor-in-Chief of Bridge IP Law Commentary
Partner & Attorney-at-law of Shanghai DeBund Law Offices
Email: Bridge@chinaiplawyer.com, Tel: 8621-5213-4900,
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Bridge IP Law Commentary is a website focus on the introduction of commercial laws in China, especially the intellectual property laws. All the posts here are our original works. And all news or cases referred here are from public reports, and our comments or analysis are of due diligence, neutrality and impartiality, representing our own opinions only and are our original works. You may contact us shall you have any opinions or suggestions.
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