Latest China Laws and Regulations in June, I

I. The Supreme People’s Court Issued the Judicial Interpretation on the Issue concerning the Application of Law in the Trial of Disputes Arising from Purchase and Sale Contracts

On 6^th June,2012, the Supreme People’s Court published the Interpretation of Supreme People’s Court on the Issue concerning the Application of Law in the trial of Dispute Arising from Purchase and Sale Contract ( the “ Judicial Interpretation”), which becomes a remarkable interpretation on the issues concerning purchase and sale contracts after the promulgation of Property Law. The Judicial Interpretation is consisted of 46 articles, completely covering the conclusion and validity of a purchase and sale contract, the delivery and transfer of title, risk bearing, inspection of objectives, liability for breach, retention of title and so on. The Judicial Interpretation will come into force on 1^st July, 2012, and it will be applied to the cases that haven’t been finally sentenced when the Judicial Interpretation executes, however, it shall not be applied in the case that has been sentenced before the implementation of the Judicial Interpretation but the retrial is initiated.

II. The Ministries and Commissions under the State Council Largely Issued the Polices to Encourage and Guide the Private Capital to Enter Various Areas

The Ministries and Commissions, according to the Several Opinions of the State Council on Encouraging and Guiding Health Development of Private Investment(GuoFa〔2010〕No. 13) and the Notice on the Division of Key Work concerning Encouraging and Guiding Health Development of Private Investment, have issued implementation opinions and notices in succession. The released policies include: the Notice on Opinions of Further Encouraging and Guiding Private Capital to Enter into Science and Technology Innovation Areas that issued by the Ministry of Science and Technology, the Opinions on Further Encouraging and Guiding Private Capital to Enter Land and Resources Area jointly issued by the Ministry of Land and Resources and the All-China Federation of Industry and Commerce, the Implementation Opinions on Strengthening Electricity Supervision and Regulation to Support Private Capital to Enter into Electricity Area issued by the State Electricity Regulatory Commission, the Notice on Administration for Foreign Exchange concerning Encouraging and Guiding the Health Development of Private Investment issued by the State Administration of Foreign Exchange and so on.

To further open and encourage the private capital’s entry into social undertakings, defense and science, technology and industry, basic industry and basic facilities, financial service, circulation of commerce and trade, housing policies and other areas haven’t be definitely prohibited by laws and regulations, but are hardly for the private to access to. It is expected by some experts that such policies would stimulate economic development, however, till now the vagueness of the key conditions and the barriers to entry set by certain implementation unites make the market’s cold reaction. Additionally, whether the areas formerly monopolized by state-owned enterprises such as the exploration and development of oil and gas, and construction of some railway lines will be accessible to private is still uncertain, which is a focus of concern. Currently, the implementation provisions on such industries as coal, oil, gas and others have been promulgated, but according to the National Development and Reform Commission’s policy, a large amount of implementation provisions regarding to promoting development of private capital will be promulgated by 45 Ministries and/or Commissions in the fist half of this year but no later than 30^thJune.

III.The State Administration of Taxation Issued the Notice on Issues Concerning Administration for Enterprise Income Tax of the Chinese Resident Enterprises Conducting Equity Incentive Plan (the “Notice”)

The State Administration of Taxation issued the Notice on 23^rd May, 2012. The Notice clarifies that a listed company conducting equity incentive according to the Trial Measures of Administration for Equity Incentive Plan of a Listed Company (证监公司字[2005]151号) ( the “Measures”) shall pay the consideration calculated based on the fair price and amounts of the shares, which will be confirmed as the list company’s cost or expenses of this year. For the enterprise income tax of such list company, its cost on wages in this year should be calculated based on the balance between the fair price of the share and the price paid by the insensitive object when he exercise the right and the amount of the shares, which shall be withdrawn according to Chinese laws. Moreover, the enterprise income tax concerning equity insensitive of a Chinese resident enterprise listed overseas and/or a unlisted company which have made the staff equity incentive plan according to the Measures and the accounting is managed in accordance with the Chinese accounting principles, can apply the regulations described above.

IV. The State Administration of Taxation Issued the Measures of Administration for VAT and Consumption Tax of Export Goods and Labor (the “Measures”)

The State Administration of Taxation has issued the Measures recently to clarify the relevant problems and administration regarding to taxpayers’ application for tax reimbursement and/or exemption for export goods and/or labor. The Measures regulate that it applies to the export enterprises and other unites that apply for tax reimbursement and/or exemption for export goods, the goods deemed as export goods, providing such labor services as processing, repair and replacement ( hereinafter collectively referred to as “ export goods and labor”). Additionally, the Measures regulate the determination of the enterprises’ qualification, procedure for declaration, materials needed to be submitted, violation and other matters.

This essay is quoted from DeBund Newsletter of July.

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