RMB Settlement in Foreign Direct Investment
January 2, 2012
Chapter I General Provisions
Article 1 For the purpose of expanding the scope of application of RMB in cross-border trade and investment and regulating the financial institutes in the banking industry (hereinafter referred to as banks) to handle RMB settlement in foreign direct investment, in accordance with the Law of the People’s Bank of China of the People’s Republic of China, the Administrative Measures for the RMB Bank Settlement Accounts (Decree of the People’s Bank of China [2003] No. 5) and related laws, administrative regulations and rules, the Measures shall hereby be formulated.
Article 2 Banks handling RMB settlement in foreign direct investment shall be subject to the Measures.
Article 3Any foreign enterprise, economic organization or individual (hereinafter referred to as foreign investor) investing within China in RMB should abide by laws and regulations of the People’s Republic of China on foreign direct investment.
Article 4 The People’s Bank of China shall, in accordance with the Measures, execute administration on RMB settlement in foreign direct investment.
Chapter II Business Process
Article 5 Any foreign investor may in accordance with the Administrative Measures for RMB Bank Settlement Accounts and the Administrative Measures for RMB Bank Settlement Accounts for Foreign Institutes (Yin Fa [2010] No. 249) apply for the opening RMB bank settlement account for foreign institutes in handling RMB settlement in foreign direct investment. And for the early-stage RMB costs fund related to investment project and the RMB capital gained through distribution of profits, liquidation, reduction of capital, transfer of equity and recovery of investment ahead of time for reinvestment within China should in the principle of special account for special purpose be opened special deposit account for the early-stage RMB costs and the one for RMB reinvestment respectively, which shall not handle cash receipt and payment business.
Article 6 Banks should handle payment of the early-stage costs to the RMB bank settlement account within China after examining and reviewing such materials as payment command letter, capital purpose specification and capital utilization commitment letter. The rest early-stage costs should be transferred to the special deposit account for RMB capital fund opened according to Article 8 of the Measures or refunded after the foreign investment enterprise is established.
Article 7 The foreign investment enterprise (inclusive of the newly-established and merged and acquired)should within 10 working days upon receiving the business license apply to the branch of the People’s Bank of China where it is registered for handling the registration of enterprise information with the following materials.
（I）copies of certificate of approval for foreign investment enterprise;
（II）duplicate of the business license and organization institution code certification.
Foreign investment partnership shall not submit the materials as mentioned in （I）.
The branch of the People’s Bank of China where the foreign investment enterprise is registered should complete the formalities of enterprise information registration within 10 working days upon receiving the application materials.
Where the alterations of the name, operating period, contribution mode, partners, joint venture and cooperation mode and other basic information of the registered foreign investment enterprise, or material alterations of increase of capital, decrease of capital, equity transfer or replacement, merger or division arise, it should within 15 working days upon altering registration or filing in the industrial and commercial administration report and submit the aforesaid alterations to the branch of the People’s Bank of China where it is registered.
Article 8 Any foreign investment enterprise should in accordance with the administrative provisions for bank settlement accounts including the Administrative Measures for RMB Bank Settlement Accounts submit the business license and other materials to apply for the opening RMB bank settlement account. And the RMB registered capital remitted inward or RMB contribution by foreign investor should in the principle of special account for special purpose be opened special deposit account for RMB capital fund, which shall not handle cash receipt and payment business.
Where any foreign investor merges and acquires the domestic enterprise in RMB to establish the foreign investment enterprise, Chinese shareholders of the merged and acquired domestic enterprise should in accordance with the provisions for the administration over bank settlement accounts including the Administrative Measures for RMB Bank Settlement Accounts apply for opening the special deposit account for RMB merger and acquisition specially for the deposit of the RMB merger and acquisition capital remitted inward by foreign investor, which shall not handle cash receipt and payment business.
Where any foreign investor makes equivalent payment to Chinese shareholder of foreign-funded enterprise abroad for equity transfer in RMB, Chinese shareholder should in accordance with the provisions for the administration over bank settlement accounts including the Administrative Measures for RMB Bank Settlement Accounts apply for opening the special deposit account for RMB equity transfer specially for the deposit of the equivalent payment for RMB equity transfer remitted inward by foreign investor, which shall not handle cash receipt and payment business.
Article 9 Any foreign investor should submit the related materials approved or filed by the national departments concerned in handling inward remittance of foreign RMB investment capital. Banks should conduct careful examination and verification and may enter the cross-border RMB payment information management system for related information.
For foreign investment enterprise in the real estate handling the inward remittance of RMB capital fund for foreign direct investment, banks should also log on the website of the Ministry of Commerce to verify whether the enterprise has been filed in the Ministry of Commerce.
Article 10 Any foreign investment enterprise should in accordance with related provisions entrust an accounting firm to conduct capital verification and confirmation of the paid-in situation of the registered capital, contribution and RMB capital in equity paid by foreign investor. The accounting firm may issue the capital verification report after conducting the capital verification and confirmation on the bank of deposit.
The bank of deposit should actively coordinate with the accounting firm, carefully check related data, specify the signature of opinion, affix the special seal with legal proof effectiveness upon receiving the confirmation letter of the bank, and make a reply within 5 working days upon the receipt of the letter.
Article 11 The bank should in accordance with the related administrative provisions for foreign direct investment supervise foreign investment enterprise to use the RMB capital fund by law, review the capital payment handled through the special deposit account for RMB capital fund, and shall not handle the foreign payment of RMB capital for the special deposit account for RMB capital fund without completing the formalities of capital verification.
Article 12 Where any foreign investor remits the RMB profits abroad, the bank may directly handle it after examining and checking the resolutions related to profits disposition, tax certificate and other related materials of the foreign investment enterprise.
Article 13 Where any foreign investor remits the RMB capital gained through decrease of capital, equity transfer, liquidation and recovery of investment ahead of time abroad, the bank should handle the formalities of RMB capital remittance after examining and checking the approval or filing documents of the related national departments and tax certificate.
Article 14 Where any foreign investor uses the RMB capital gained through distribution of RMB profits, recovery of investment ahead of time, liquidation, decrease of capital and equity transfer to reinvest or increase registered capital within China, it may deposit the RMB capital in the special account for RMB reinvestment and handle related settlement in accordance with the Measures. The bank should handle the foreign payment of RMB capital after examining and checking the approval or filing documents of the related national departments and tax certificate.
Article 15 Where the foreign investment company, the foreign investment venture capital investment enterprise, foreign-owned investment enterprise and foreign investment partnership with investment as main business conduct investment business in RMB within China by law, its investment enterprise should in accordance with the administrative provisions for bank settlement accounts including the Administrative Measures for RMB Bank Settlement Accounts apply for opening the special deposit account for RMB capital fund for RMB registered capital or contribution capital and to handle related capital settlement business, which shall not handle the cash receipt and payment business.
Article 16 Where any foreign investor uses RMB capital and foreign currency capital to make contributions simultaneously, the bank should in accordance with the Measures handle the formalities of RMB capital settlement and foreign exchange capital settlement according to related administrative provisions for foreign exchange. And the conversion exchange rate RMB and foreign currency is the central parity of RMB released by the People’s Bank of China on the day of registration and capital verification.
Article 17 The total scale of the foreign investment enterprise should be subject to aggregative calculation when conducting RMB lending and foreign exchange lending to foreign shareholders, affiliated enterprises in the group and foreign financial institutions.
Article 18 Any foreign investment enterprise should in accordance with Article 12 of the Administrative Measures for RMB Bank Settlement Accounts hold the RMB loan contract to apply for opening the general deposit account of RMB specially for the deposit of the RMB capital borrowed from abroad.
Article 19 The bank should review the registered capital of RMB of the foreign investment enterprise and authenticity and compliance of the purpose of RMB borrowing capital and supervise the foreign investment enterprise to utilize RMB capital by law. And in handling the settlement, the bank should in accordance with the provisions related to prudential supervision require the enterprise to submit such materials as payment command letter and capital purpose certification and conduct careful examination and verification.
Article 20 Where any foreign investment enterprise uses RMB to compensate for the principal and interests of the foreign RMB borrowing, it may hold the loan contract, payment command letter and tax certificate to directly handle it in the bank.
Chapter III Supervision and Administration
Article 21 The bank should carefully fulfill the duty of information submission to submit timely, accurately and completely to the cross-border RMB settlement management system the information of the RMB bank settlement account for foreign institutions opened according to the Measures by law, special deposit account for RMB capital fund, special deposit account for RMB merger and acquisition, special deposit account for RMB equity transfer and the general deposit account of RMB as well as the information of handling cross-border and domestic receipt and payment of RMB capital through the above-mentioned accounts.
Article 22 The bank should in accordance with the administrative provisions for bank settlement accounts including the Administrative Measures for RMB Bank Settlement Accounts, the Implementing Rules of the Administrative Measures for RMB Bank Settlement Accounts (Yin Fa [2005] No. 16) and the Administrative Measures for RMB Bank Settlement Accounts for Foreign Institutions handle the RMB bank settlement account business for such depositors as foreign investors, foreign investment enterprises, and Chinese shareholders.
Article 23 The bank and foreign investment enterprise should in accordance with the Measures for the Declaration of Balance of Payment Statistics and other related provisions to handle the declaration of the balance of payment in handling RMB settlement in foreign direct investment.
Article 24 The bank should in accordance with the Anti-money-laundering Law of the People’s Republic of China and related provisions of the People’s Bank of China practically perform the obligation of anti-money laundering and anti-terrorist financing and prevent the illegal criminal activities of utilizing RMB settlement in foreign direct investment to conduct money laundering and terrorist financing in handling the business of RMB settlement in foreign direct investment, and also collect the anti-money laundering and anti-terrorist financing information where the foreign investor is domiciled, know about the natural person actually controlling investment and the true beneficiary of investment, evaluate the risks of money laundering and terrorist financing of investment and adopt proper measures of risk management.
Article 25 The People’s Bank of China and related departments shall establish the necessary information-sharing and management mechanism, intensify the strength of after-event inspection and effectively supervise and manage the RMB settlement in foreign direct investment.
Article 26 The People’s Bank of China, together with related departments, shall conduct the on-site inspection and offsite surveillance in the RMB settlement in foreign direct investment, the extending inspection over capital purpose on banks and foreign investment enterprises and urge banks to practically fulfill such duties as the verification of authenticity of transactions, information submission and anti-money laundering.
Article 27 Where the bank and foreign investment enterprise violate related provisions of the Measures, the People’s Bank of China together with related departments may circulate a notice of criticism or impose penalty on it; if the situation is serious, the bank and foreign investment enterprise shall be suspended or banned to continuously carry out cross-border RMB business.
Article 28 Where the bank violates the provisions related to prudential supervision in handling RMB settlement in foreign direct investment, the departments concerned shall make punishment on it by law; where it violates the administrative provisions for RMB bank settlement accounts, anti-money laundering and anti-terrorist financing, the People’s Bank of China shall be responsible for punish it by law.
Chapter IV Supplementary Provisions
Article 29 The People’s Bank of China shall be responsible to interpret the Measures.
Article 30 The Measures shall take effect as of the day of promulgation. And the Measures shall prevail in case of any conflict with the previous provisions concerned.
People’s Bank of China www.pbc.gov.cn
No tag for this post. Related Posts:Undisclosed Commercial Information – Trade Secrets
August 14, 2010
Trade secrets and undisclosed commercial information are confidential information in a commercial setting, such as formulaes, methods, technologies, designs, product specifications, business plans and client lists, that have commercial value. In Hong Kong, trade secrets and undisclosed commercial information are protected by common law of confidence. An obligation of confidence will arise whenever the information is communicated to or acquired by a person who knows or ought as a reasonable person to know that the other person wishes to keep that information confidential. An industry or trade custom or practice may also impose an obligation of confidence. The release of trade secrets and undisclosed commercial information would be detrimental to the owner or advantageous to his or her competitors or others. The remedies available for breach of confidence include injunctions, damages, account of profits and delivery up of materials containing confidential information. To enhance the protection of trade secrets and undisclosed commercial information, you should sign non disclosure agreement with everyone who has knowledge of your secrets.
Protection of trade secrets and undisclosed commercial information is of particular importance when the IP is not registrable or you find the period of patent protection (20 years) not long enough. Whereas patents enjoy a limited term of protection, trade secrets and undisclosed commercial information protection last until the information becomes public knowledge. The formulae for Coca Cola is a good example of long-kept trade secrets and undisclosed commercial information. However, trade secrets and undisclosed commercial information do not give you exclusive rights. Your competitors may independently invent an identical product or process or come up with the same ideas which they can exploit freely.
How do trade secrets and undisclosed commercial information differ from patents or copyright?
The application for a patent requires disclosure of details of invention. In other words, details of a patented invention cannot be kept confidential as trade secrets and undisclosed commercial information. As said above, patents enjoy a limited term of protection but trade secrets and undisclosed commercial information last for as long as the information remains confidential.
Copyright only protects the form in which ideas and information are expressed, but not ideas and information per se. The law of confidence protects the substance of ideas and information, no matter how they are expressed. There are statutory permitted acts for works protected by copyright but not works protected by confidence.
The above only set out some basic principles of trade secrets and undisclosed commercial information. You may seek independent professional advice for protection of your trade secrets and undisclosed commercial information from Ming Dynasty (HK) Limited.
Related Posts:
Pilot Operations for Individual Foreign Exchange Settlement and Sales Business via E-banking
June 20, 2010
The SAFE Gives a Green Light for Three Commercial Banks to Engage in Pilot Operations for Individual Foreign Exchange Settlement and Sales Business via E-banking
For the purpose of further encouraging business innovation in banks as well as facilitating individual foreign exchange settlement and sales, the State Administration of Foreign Exchange (SAFE) recently approved that three commercial banks, i.e., the Bank of China, the China Merchants Bank, and the Industrial and Commercial Bank of China, will conduct pilot operations for individual foreign exchange settlement and sales business through e-banking.
The Measures for Individual Foreign Exchange Administration and the detailed rules which took effect in February 2007 allow individuals to carry out foreign exchange purchase and settlement businesses within their yearly quota at bank counters by presenting their valid identity documents. Such pilot operations for individual foreign exchange settlement and sales business via e-banking will provide individuals with more efficient and convenient channels to handle the relevant businesses. Domestic individuals are allowed to conduct non-operational foreign exchange settlement and sales business under the current account within their yearly quota via e-banking or via self-service terminals after opening an account at the pilot banks by presenting their valid resident identification cards of the Peoples Republic of China. This will increase the banks efficiency in handling business and help ease pressures at bank counters and reduce bank costs.
By using the data information-sharing mechanism that connects the e-banking system with the Management Information System for Foreign Exchange Settlement and Sales by Individuals, relevant information about foreign exchange purchases and settlement by domestic individuals in the e-banking system will be transmitted automatically in a real-time manner to the Management Information System for Foreign Exchange Settlement and Sales by Individuals, and will be incorporated into the management of the yearly quota of foreign exchange settlement and sales by individuals. The SAFE will closely track and monitor the status of the pilot operations, sum up the experiences from the pilot operations, guard against inflows and outflows of abnormal foreign exchange funds via individual e-banking channels, and continue to maintain a standardized and orderly foreign exchange market.
Source: SAFE
http://www.safe.gov.cn
Tags: foreign exchange, safe, ChinaRelated Posts:
CEPA FURTHER LIBERALIZATION MEASURES IN 2010
June 12, 2010
The market access conditions in 14 service sectors will be further relaxed under Supplement VII to CEPA. The 14 service sectors include construction; medical services; technical testing, analysis and product testing; specialty design; audiovisual services; distribution; banking; securities; social services; tourism; cultural services; air transport; qualification examinations for professionals and technicians; and individually owned stores. Among them, “technical testing, analysis and product testing” and “specialty design” are new service sectors. In other words, the service sectors covered by liberalization of trade in services under CEPA will expand from 42 to 44.
Major market liberalization measures under Supplement VII to CEPA are highlighted below:
A. Medical services – Hong Kong service suppliers (HKSS) are allowed to set up wholly-owned hospitals in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan; and to set up convalescent hospitals in the form of wholly-owned, equity joint venture or contractual joint venture in Guangdong Province. No requirement is imposed on the total investment in setting up hospitals by HKSS on an equity joint venture or contractual joint venture basis in Guangdong Province; and no restriction is imposed on the ratio of capital investment between Hong Kong and Mainland partners in setting up hospitals in the form of equity joint venture or contractual joint venture in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan. Twelve categories of statutory healthcare professionals who are registered to practise in Hong Kong (medical practitioners, Chinese medicine practitioners, dentists, pharmacists, nurses, midwives, medical laboratory technologists, occupational therapists, optometrists, radiographers, physiotherapists and chiropractors) are allowed to provide short-term services in the Mainland.
B. Tourism – Hong Kong travel agents established on a wholly-owned or joint venture basis in Beijing and Shanghai Municipalities are allowed to apply for the operation, on a pilot basis, of group tours to Hong Kong and Macao for registered permanent residents of the Beijing and Shanghai Municipalities.
C. Banking – A Hong Kong bank that has maintained a representative office in the Mainland for more than one year (previously required more than two years) can apply to set up a wholly foreign-funded bank or a foreign bank branch. A Hong Kong bank’s operating institution in the Mainland which has been operating for more than two years and profitable for one year prior to the application (previously required profitable operation for two consecutive years prior to the application) can apply to conduct Renminbi business. Foreign banking institutions established in the Mainland by Hong Kong banks can establish specialized institutions to provide financial services to small enterprises.
D. Securities – Mainland and Hong Kong will deepen the cooperation in financial services and product development, and launch, in the Mainland at an appropriate time, ETF (open-end index-tracking exchange-traded fund) constituted by Hong Kong listed stocks.
E. Construction – Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification, can act as partners to set up construction and engineering design offices in the Mainland in accordance with the relevant qualification requirements, without restrictions on the ratio of the number of Hong Kong partners to the number of the Mainland partners, the ratio of the total capital contributed by the Hong Kong partners to that by the Mainland partners, or the Hong Kong partners’ period of residence in the Mainland. Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification by mutual recognition, can register and practise in Guangdong;
F. Air Transport – Airport transport sales agencies set up by HKSS in the Mainland in the form of wholly-owned enterprises, equity joint venture or contractual joint venture, can operate air transport sales agency services in the domestic routes in the Mainland. HKSS can also operate aircraft repair and maintenance services in the Mainland in the form of wholly-owned enterprises or with majority shareholding in the enterprises.
G. Distribution – Distribution enterprises set up by HKSS in the Mainland can sell books published in Hong Kong.
H. Technical testing, analysis and product testing services – Testing organizations in Hong Kong to cooperate with designated Mainland organizations to undertake testing of products under the China Compulsory Certification (CCC) System on a pilot basis, in respect of selected products listed in the CCC Catalogue and processed in Hong Kong (i.e. the processing facilities are located in Hong Kong). These testing organizations have to be accredited by the accreditation body of the HKSARG (i.e. the Hong Kong Accreditation Service) to be capable of performing testing for the relevant products under the CCC System.
I. Audiovisual services – HKSS can set up enterprises on a wholly-owned, equity joint venture or contractual joint venture basis in the Mainland to produce video and sound recording products.
J. Specialty design – HKSS can set up wholly-owned enterprises in the Mainland to provide specialty design services.
Apart from benefiting the larger enterprises, measures in Supplement VII to CEPA would also benefit individuals and small businesses, such measures include allowing registered healthcare professionals to provide short-term services in the Mainland, allowing Hong Kong permanent residents to take the qualification examination for real estate valuer in the Mainland, and allowing Hong Kong permanent residents with Chinese citizenship to set up individually owned stores in the Mainland to provide services in the areas of marriage, renting and leasing of comics books, and pet clinics.
All the service liberalization measures under Supplement VII to CEPA will take effect from 1 January 2011.
In accordance with Article 5 of Annex 4 of CEPA, Hong Kong will not impose any new discriminatory measures on the Mainland’s services and service suppliers in the service sectors covered by CEPA. This commitment will also apply to sectors covered by the liberalisation of trade in services measures under Supplement VII to CEPA.
Enhancing cooperation in area of trade and investment facilitation
To enhance trade and investment facilitation, in addition to strengthening the cooperation in testing and certification, the Mainland and Hong Kong have also included under Supplement VII to CEPA cooperation in the cultural, environmental, innovation and technology industries, as well as cooperation on education.
For cooperation in cultural and environmental industries, Supplement VII to CEPA fosters the joint development of the industries of both sides, mainly through strengthening exchanges and communication between relevant organizations and the trade of both sides, as well as cooperating in organization of visits and trade exhibitions and seminars. For cooperation in innovation and technology industry, both sides agree to progressively involve Hong Kong research institutes and enterprises in the national innovation system and encourage Hong Kong research personnel and organizations to participate in national science and technology projects, and also to strengthen exchanges and cooperation between the two places in high technology research, development and application, fundamental scientific research, etc.
As regards cooperation on education, both sides agree to strengthen exchanges, communication, and exchange of information in respect of education, to strengthen cooperation in training and organizing visits, etc. to support the Mainland’s education institutions and Hong Kong’s higher education institutions to jointly provide education programmes, to establish joint research facilities and to nurture talents at undergraduate or above level in the Mainland
Moreover, for testing and certification, both sides agree to strengthen co-operation between relevant authorities of both sides, and the Mainland will also assist Hong Kong’s testing laboratories to be recognized under the international multilateral systems on mutual recognition of testing and certification that are open to national member bodies.
By establishing the above cooperation mechanisms, we hope to promote long-term cooperation in the aforementioned industries or service sectors between the two sides, and to jointly open up business opportunities and scope for development.
Conclusion
Inclusive of the measures in Supplement VII to CEPA, the two sides have so far announced nearly 280 liberalization measures in trade in services.
The measures under Supplement VII to CEPA will expedite and facilitate Hong Kong service industries to enter and expand in the Mainland market, and foster service industries integration and professional exchanges between the two sides. Moreover, most of the new measures cover the four pillar industries and six economic industries that Hong Kong has competitive edge, and as such will help consolidate Hong Kong’s status as an international financial, trade, logistics and high value-added service centre, and will lay the foundation for the two sides to jointly develop education, medical services, as well as testing and certification, environmental, innovative technology and cultural industries.
Since 2008, the Mainland and Hong Kong announced 41 measures (including related measures in Supplement VII to CEPA) for “early and pilot implementation” in Guangdong Province. These pilot measures serve to demonstrate the effect of liberalization in the respective service sectors and contribute positively to the exploration of cooperation and integration of the service industries of Hong Kong and Guangdong, and substantively respond to the policy direction of enhancing cooperation between the service industries of Guangdong and Hong Kong as stipulated in the “Framework for Development and Reform Planning for Pearl River Delta Region”; as well as to the positioning with respect to fostering the development of modern service industries under the “Framework Agreement on Hong Kong/Guangdong Co-operation”.
ECONOMIC IMPACT OF CEPA
HKSARG has been closely monitoring the implementation of CEPA from 1 January 2004. We collect statistics relating to the Certificates of Hong Kong Service Supplier (HKSS) and “Individual Visit Scheme” (IVS) etc. to conduct statistical analysis, as well as to assess the impact on Hong Kong’s economy. HKSARG has just updated the assessment of the impact of CEPA liberalisation of trade in services and IVS on Hong Kong’s economy. As reflected by the assessment report, during 2007-2009, liberalisation of trade in services and IVS have continued to bring benefits to Hong Kong enterprises and the economy as a whole.
During 2004-2009, cumulative business receipts obtained by companies in Hong Kong due to CEPA from Mainland-related business reached HK$61.6 billion. During 2007-2009, CEPA-induced business receipts obtained by operations established by Hong Kong service suppliers on the Mainland amounted to HK$198.5 billion. During the same period, companies in Hong Kong obtained additional business receipts totalling about HK$55.1 billion due to CEPA.
IVS is a tourism cooperation measure first introduced under CEPA in 2003. By now, the scheme has been extended to 49 Mainland cities. By March 2010, over 49 million Mainland visitors have come to Hong Kong under the scheme. The number of IVS visitors has drastically increased from 4.26 million in 2004 to 10.59 million in 2009, representing a robust average annual growth rate of 20%. In 2009, benefiting from the implementation of the “multiple-entry” individual visit endorsement to Hong Kong for Shenzhen permanent residents with effect from 1 April, an additional HK$26.4 billion in spending was generated by IVS visitors in 2009, which was almost 40% higher than that in 2008. In cumulative terms, during 2004-2009, IVS visitors brought about additional spending totalling over HK$84.8 billion.
As at end 2009, due to liberalization of trade in services and IVS under CEPA, a total of 54,700 jobs were created in Hong Kong, while 40,600 jobs were created on the Mainland.
CEPA also has a positive impact on attracting Mainland and foreign investments to Hong Kong. According to the information provided by InvestHK, among the 265 foreign companies assisted by InvestHK to invest or expand in Hong Kong in 2009, 70 (or 26%) cited CEPA as one of the key considerations for investing in Hong Kong. Moreover, since the Mainland streamlined the application procedures for Mainland enterprises to invest in Hong Kong in August 2004, the trade and investment between the Mainland and Hong Kong has further increased. According to the information provided by the Ministry of Commerce, between September 2004 and December 2009, 2,602 Mainland enterprises were granted approval to invest in Hong Kong, involving over US$24.4 billion of investment.
We would wish to point out that, as implementation of CEPA deepens, the economic impact of CEPA has become more closely interwined with the overall macro economic environment, and as such it has become more and more difficult to single out the CEPA-induced benefits for quantitative analysis. Also, the longer CEPA has been implemented, the respondents’ impression of the CEPA-induced effects might become less clear with the passage of time, and the value of conducting quantitative analysis of CEPA-induced impact through opinion survey would reduce over time.
Source: HK Trade and Industry Department
http://www.tid.gov.hk
Tags: Hong Kong, foreign investment, mainland marketRelated Posts:
New Rules For Non-Resident Enterprise Income Tax
March 24, 2010
On February 20, 2010, the State Administration of Tax (the “SAT”) issued “Measures on the Administration of Approval and Collection of Non-resident Enterprise Income Tax” (the “Measures”). Non-resident corporations, defined in Article 3, Paragraph 2 of the Enterprise Income Tax Law of China, are governed by the Measures regarding enterprise income tax (EIT) issues. The EIT of representative offices of foreign enterprises is covered by Circular 18 [2010] issued by SAT on the same day. The Measures went into effect of the date of issuance.
Under the Measures, non-resident enterprises shall: set up their account books in accordance with the Law on the Administration of Tax Collection and relevant laws and regulations; record and settle their accounts in accordance with legal and valid invoices; and, in accordance with the principle of correspondence of actual functions to assumed risks, accurately calculate their taxable income, and report and pay the EIT for their actual situation.
If a non-resident corporation has not properly kept account books and cannot calculate the amount of its taxable income, the tax authority will use one of the following methods to decide the amount of payable EIT.
(1) Gross Income-Based Method — This method should be applied when a non-resident corporation calculates its gross income correctly but cannot accurately compute its costs and expenses. The formula is as follows:
Deemed taxable income = Gross income * Deemed profit rate
(2) Cost-Based Method – This method applies when a non-resident corporation calculates its costs and expenses accurately but cannot correctly compute its gross income. The formula is as follows:
Deemed taxable income = The total of costs and expenses / (1 – Deemed profit rate) * Deemed profit rate
(3) Expenditures-Based Method – This method applies when a non-resident corporation accurately calculates its expenditure for operations but cannot correctly compute its gross income or its costs and expenses. The formula is as follows:
Deemed taxable income = Total of expenditure for operations / (1 – Deemed profit rate – EIT rate) * Deemed profit rate
The tax authority should use the deemed profits rate below when calculating the deemed taxable incomes:
(i) The deemed profit rate for income from project construction, design and consulting is 15% to 30%;
(ii) The deemed profit rate for income from management service is 30% to 50%;
(iii) The deemed profit rate for income from other business activities should be no less than 15%.
The tax authority may raise the profit rate if it reasonably holds, with good grounds, that the actual profit rate of a non-resident corporation is higher than the corresponding deemed profit rate. Where a non-resident corporation generates income from more than one type of the activities listed above, the tax authority shall divide the income from the different types of activities and apply appropriate deemed profit rate to the different elements of the income. If the income cannot be divided accurately, the higher deemed profit rate will be applied.
When a non-resident corporation provides equipment installment, training, management and other services to a Chinese resident buyer of its equipment or other goods, the sales contract of such equipment or goods may not stipulate the price of such related services, or the price of service may be unreasonable. In those cases, the tax authority can refer to the general price in the same or similar industry and decide the deemed income from the services provided. In case where there is no general price to refer to, the tax authority may decide the deemed income from the service, which should be no less than 10% of the total price of the sales contract.
With regard to non-resident enterprises providing labor services for customers located in China, if the entire service is provided within China, the revenue in full shall be subject to EIT in China. If the service is provided both inside and outside of China, then the revenue shall be divided by services provided within China and outside of China, and the revenue derived inside China shall be subject to EIT.
Source: Jingyuan Sun
www.sheppardmullin.com
Related Posts:
