Tag Archives: RMB

Is Apple Breaching China’s Foreign Exchange Management Rules in the App Store?

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(By You Yunting) In November of 2011, Apple Inc. began allowing its users in China to purchase app by RMB. At the time, the author believed that it means Apple would operate its AppStore in China. Yet unill now, the business concerning AppStore of Apple is still run by iTunes S.A.R.L.(the “iTunes”), the company registered in Luxembourg, a subsidiary of Apple Inc. Furthermore, according to the relevant International convention on transnational transaction, neither Apple nor iTunes is required to pay taxes for Chinese user’s purchase of the apps to the Chinese government. For Apple and iTunes, on one hand they take the payment in RMB, but on the other hand, they do not pay the taxes. This business model is achieved through the third party payment method. In this situation, the third party payment service provider would collect the payment from the Chinese users, and then transfer them to overseas. But this business model is at risk of violating the foreign currency control regulations of China. The following are the opinions of the author on this issue.

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New Chinese Laws & Regulations of October, 2011 (1)

From this month, Bridge IPR Commentary will update the latest laws and regulations promulgated in China.

1. The Ministry of Commerce issued the Notice of the Problems regarding Cross- border Direct Investment Denominated in RMB (hereinafter referred to the Notice)

On 14th October, 2011, the Ministry of Commerce released the Notice, which regulates that the overseas investors (including the Hong Kong and Macau investors) can directly invest the RMB gained legally from overseas on business. The Notice defines the concept of “the RMB circulating outside China”, and regulates the investment scope, review and approval procedures and so on. By the Notice, the cross-border direct investment in RMB cannot be made in securities or derivatives (except otherwise specified), either be used for the entrusted loans. Regarding the administrative procedure of review and approval, there will be no alternation on the current review and approval power, which provides that the cross-border direct investment in RMB shall be approved by the local administrative departments of commerce according to the effective administrative regulations of the review and approval of foreign investment. For those investment projects and financial warrant of 300 million or more, foreign invested companies, macro control industry and other projects, the agreement from the Ministry of Commerce is demanded before the approval of the provincial commerce administration. And the procedure related will be simplified the Ministry of Commerce basing the practices of the cross-border direct investment in RMB.

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