China Laws and Regulations Update in July 2018

1.Circular on Promoting Economic Growth by Actively and Effectively Using Foreign Funds

Promulgated by the State Council

File number: No.19 issued by SC in 2018

Promulgation date: 15 June 2018

Effective date: 28 April 2018

The Circular states that the foreign funds “regulatory system” reform will continue. Provincial governments are responsible for approving and administering the incorporation and change of any foreign-funded company with a total investment of less than USD 1 billion in items on the negative list for admittance of foreign investment funds. Local governments are encouraged to attempt an intensive reform of the administrative permit system. Foreign-funded companies outside the negative list can complete the recordation and the AIC registration formalities through “one-stop” service. (Source: Website of the State Council)

http://www.gov.cn/zhengce/content/2018-06/15/content_5298972.htm

2.Special Administrative Measures (Negative List) for Admittance of foreign investment funds (2018 Edition)

Promulgated by the National Development and Reform Commission and the Ministry of Commerce

File number: No.18 Order in 2018

Promulgation date: 28 June 2018

Effective date: 28 July 2018

The Special Administrative Measures (Negative List) for Admittance of foreign investment funds (2018 Edition) is published independently as an amended version of the negative list for admittance of foreign investment funds included in the Catalogue for the Guidance of Foreign Investment Industries (Amended in 2017). The 2018 edition of the negative list has relaxed conditions for admittance of foreign investment funds, reduced the number of items from 63 to 48 and initiated market-opening measures in 22 sectors, especially the service sector. In the financial industry, the shareholding percentage limit on foreign investment funds in the banking sector is canceled, the shareholding percentage limit on foreign investment funds in a securities, fund, future or life insurance company is relaxed to 51%, the shareholding percentage limit on foreign investment funds in the financial industry will be canceled completely. In the infrastructure sector, restrictions on foreign investment funds in main railway networks and power grid are canceled. In the transport sector, restrictions on foreign investment funds in railway passenger transport companies and international sea transport and shipping agencies are canceled. In the commercial sector, restrictions on foreign investment funds in gas stations and purchases and wholesale of grain are canceled. In the cultural sector, prohibitions on investment in places where services are provided for internet users. (Source: Website of the Ministry of Commerce)

http://www.mofcom.gov.cn/article/b/f/201806/20180602760432.shtml

3.Special Administrative Measures (Negative List) for Admittance of foreign investment funds to Pilot Free Trade Zones (2018 Edition)

Promulgated by the National Development and Reform Commission and the Ministry of Commerce

File number: No.19 Order in 2018

Promulgation date: 30 June 2018

Effective date: 30 July 2018             

In addition to the national opening measures, the negative list for the pilot free trade zone includes further opening measures on an experimental basis: increasing the maximum shareholding percentage of foreign investment funds in the cultivation of new types and seeds of wheat and corn from 49% to 66%; the restriction that only allows jointly funded and cooperation businesses to explore for oil and natural gas is canceled; the prohibition on foreign investment in radioactive mineral and nuclear fuel work is canceled; the requirement that a theatrical agency should be controlled by Chinese shareholders is canceled; the prohibition on foreign investment in arts and entertainment groups is changed to the requirement that an arts or entertainment group should be controlled by Chinese shareholders; promoting the opening measures in the added-value telecommunication sector that were initiated in the area of 28.8 square kilometers in Shanghai Pilot Free Trade Zone, to all pilot free trade zones, canceling shareholding percentage limits on foreign investment funds in storage and transmission, calling center, muti-channel internal communication and internet access services, limiting shareholding percentage of foreign investment funds in virtual private networks at home to 50%. (Source: Website of the Ministry of Commerce)

http://www.mofcom.gov.cn/article/b/c/201806/20180602760435.shtml

4.Regulations of Foreign Exchange for Qualified Foreign Institutional Investors in the Securities Industry in China

Promulgated by the State Administration of Taxation

File number: No.1 Announcement in 2018

Promulgation date: 12 June 2018

Effective date: 12 June 2018

The Regulations cancels the requirement of the 20% percentage on QFII funds to be transferred, allows the authorized trustee to transfer funds on behalf of QFII, cancels the requirement that QFII and RQFII funds should be locked for a particular period of time, QFII and RQFII can transfer funds as necessary for the investment, and allows QFII and RQFII to use hedge to offset against foreign exchange risks in onshore investments. (Source: Website of the State Administration of Taxation)

http://t.cn/Rr3IzxU

5.The Rules on Approving the Permanent Representative Office of a Foreign Air Transport Company

Promulgated by the Ministry of Transport

File Number: No.9 Announcement by the Ministry of Transport in 2018

Promulgation date: 5 June 2018

Effective date: 1 September 2018                                 

The Rules states that foreign air transport companies that are not registered or approved cannot set up a representative office within the People’s Republic of China. The representative office is approved on the basis of reciprocity and equality, on which the CAA can take actions equivalent to and against unfair restrictions imposed by the civil aviation authority of a foreign government on the permanent representative office set up by a Chinese air transport business according to the air transport agreement or protocol between the governments involved. (Source: Website of the Ministry of Transport)

http://zizhan.mot.gov.cn/zfxxgk/bnssj/zcfgs/201806/t20180605_3029142.html

6.Rules on Proof of Deductible Expenses Before Payment of Enterprise Income Tax

Promulgated by the State Administration of Taxation

File number: No.28 Announcement by the State Administration of Taxation in 2018

Promulgation date: 6 June 2018

Effective date: 1 July 2018                          

The Rules states that receipts, internal documents, payment allocation lists can be used as proof of deductible expenses before tax in order to simplify tax payment formalities, and includes specific requirements on types, contents, date of obtaining, late issuance and exchange of proof of deductible expenses before tax, in order to help businesses to improve financial and internal control systems and reduce tax risks. (Source: Website of the State Administration of Taxation)

http://www.chinatax.gov.cn/n810341/n810755/c3501702/content.html

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