I. The Ministry of Commerce has Issued the Interim Provisions of the Ministry of Commerce on Equity Contributions Involving Foreign-funded Enterprises
On October 24, 2012, the Ministry of Commerce published the Interim Provisions of the Ministry of Commerce on Equity Contributions Involving Foreign-funded Enterprises (“Interim Provisions”), which came into effect on October 22, 2012. The Interim Provisions apply to the formation and modification of foreign-funded enterprises by domestic and foreign investors that hold equity in domestic enterprises as capital contributions. The conditions for equity contributions, procedures for application for approval, and so forth are explicitly defined in the Interim Provisions.
(From the website of the Ministry of Commerce)
II. The State Administration of Foreign Exchange Issued the Notice on Further Improving and Adjusting the Foreign Exchange Administration Policies for Direct Investment
On November 21, 2012, the State Administration of Foreign Exchange published two Notices: the Notice on Further Improving and Adjusting the Foreign Exchange Administration Policies for Direct Investment and the Notice on Some Issues Regarding Foreign Exchange Administration of Foreign Invested Partnerships, both of which will come into effect on December 17, 2012.
The Notice on Further Improving and Adjusting the Foreign Exchange Administration Policies for Direct Investment primarily simplifies the foreign exchange administration for direct investment. The contents include the cancellation of the approval for opening an account related to foreign investment, settlement and purchase of foreign exchange, cancellation of approval for investment by income gained by foreign investors in China, cancellation of inquiry for capital verification by reduction of capital, and so forth. At the same time, the administration procedures are further simplified, and the restriction on the usage of direct investment is loosened, such as permitting domestic entities to make loans using domestic foreign exchange loans, permitting foreign invested enterprises to make loans to their overseas parent companies, and so forth.
The Notice on Some Issues Regarding Foreign Exchange Administration of Foreign Invested Partnerships mainly regulates the foreign exchange administration of foreign invested partnerships, especially by simplifying administration procedures, specifying registration for confirmation of contribution by foreign partners, managing foreign exchange registration and foreign exchange accounts, and strengthening supervision.
(From the website of the State Administration of Foreign Exchange)
III. The China Securities Regulatory Commission and the Ministry of Science and Technology Issued the Guiding Opinions on Support for Confirmation of Equity Contributed by Scientific and Technological Achievements
To support confirmation of equity contributed by scientific and technological achievement, the China Securities Regulatory Commission and the Ministry of Science and Technology jointly issued the Guiding Opinions on Support on Confirmation of Equity Contributed by Scientific and Technological Achievements (“Guiding Opinions”) on 19 November. The Guiding Opinions expressly support confirmation of equity contributed by scientific and technological achievement and encourage the enterprises to define the rights and interests enjoyed by the scientific and technological personnel as well as to confirm their equity legally.
The Guiding Opinions to specifically provide support for the enterprises, higher education institutes, and scientific research institutions in Beijing Zhongguancun, Shanghai Zhangjiang, Wuhan East Lake National Independent Innovation Demonstration Zone. and Anhui Hewubang Independent Innovation Comprehensive Experimental Zone in order to implement the new policy to distribute incentive equity and dividends, particularly by carrying out technology contributions, equity awards, and dividend rights for the scientific, technological, and management personnel who have made prominent contributions, and to confirm their shareholdings in reasonable ways. Follow up policies that may be promulgated by Shanghai Zhangjiang deserve attention.
(From the website of the Ministry of Science and Technology)
IV. The Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission Jointly Issued Different Individual Income Tax Policies for Dividends and Bonuses in Listed Companies
On November 16, 2012, the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission jointly issued the Notice on Some Issued Regarding Implementation of Different Individual Income Tax Policies of Dividends and Bonus in Listed Companies [Cai Shui(2012) No.85] (“Notice”), which will take into effect on January 1, 2013.
The Notice is to provide for application of different individual income tax policies for dividends and bonuses in listed companies based on different holding periods of shares. If the holding period is no more than one month, the income of dividends and bonuses shall be totally calculated as taxable income at a tax rate of twenty percent. If the holding period is more than one month but no more than one year, fifty percent of the income of dividends and bonuses shall be calculated as taxable income at a tax rate of ten percent. And, if the holding period is more than one year, twenty five percent of the income of dividends and bonuses shall be calculated as taxable income at a rate of five percent. Officials from the Ministry of Finance, the State Administration of Taxation, and the China Securities Regulatory Commission stated in a press conference that the aim is to adjust the tax policy is to encourage long-term investment and control short-term speculation and thus improve the stable and healthy development of the capital market.
(From the website of the State Administration of Taxation)
Quoted from DeBund Newsletter, Dec.
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