China Administration of Taxation recently promulgated a Circular (Guoshuifa 2009 No 3) (“hereinafter referred to as “The Circular”) to strengthen the control of Non-TRE Income Tax Resourcing Deduction. The below mentioned enterprises shall be regarded as Chinese Tax Resident Enterprise (TRE):
a. An enterprise which is established and registered in China, or
b. An enterprise which has in actual fact a management institution in China.
Correspondingly, Article 2 of the Circular indicates that so called Non-TRE which shall be set up in accordance with the law of the foreign country (region) whose actual administration institution is outside China; could have incomes originating from China without setting up institutions or establishments in China or they have already set up institutions or establishments in China but the income is not effectively connected with the institutions or establishments that were set up in China.
If a non-tax resident enterprise (”Non-TRE”) derives passive income, interest, dividend, rental, royalties and capital gains, etcetera from China, the payer of the income in China, a so-called Withholding Agent, is obligated to withhold and settle the withholding income tax (”WHT”), if any, on the passive income to the Chinese tax authorities at the time when the payment of the passive income is made or due.
Aforementioned income shall be divided into two categories. The first category is service income, since there is some specialty while determining tax liability considering the limit in respect of the length of time by the contact, shall be regarded as one category; besides, the income listed above shall fall into the second category of income. The tax treatment against these two categories of incomes is different. For service income, the tax bureau will ratify relevant margin align with the industry to which the service belong. For the second category of income, the taxation rate is normally ten percent.
The Circular sets out the detailed requirements for the Withholding Agents in relation to the WHT withholding obligations. It is generally considered that Circular 3 provides more strict collection measures than previous regulations. It will have significant impact on both non-TRE taxpayers and the Chinese Withholding Agents.
Source: By Teresa Zhang
http://www.crowehorwathinternational.com
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China has a long history of mediation and conciliation. [5] However, before the mid-1950s, there was no independent international commercial arbitration in China. As a result, when a dispute arose between a Chinese party and a foreign party, the parties typically referred the arbitration to a tribunal outside China, notwithstanding that Chinese parties were concerned about arbitrating in a foreign tribunal.[6] The former Government Administration Council of the Central People’s Government established the Foreign & Trade Arbitration Commission which is the former name of today’s Chinese International Economic & Trade Arbitration Commission (“CIETAC”).[7]
However, the organization developed very slowly. By the end of the next 20 years, the CIETAC only accepted about 100 arbitral cases.[8] The development of international commercial arbitration in China grew dramatically after China began to implement its open-door policy in the late 1970s.[9] By the middle of 1990s, CIETAC filings were averaging more than 700 cases per year. CIETAC has thus become the world’s busiest international arbitration tribunal.[10] The evaluation on CIETAC competency was overwhelmingly positive. The American Chamber of Commerce in Beijing conducted a survey among American companies and found that companies having experience with the organization had positive feedback on the competency of CIETAC. [11]
The primary law regulating arbitration today is the Chinese Arbitration Law (“CAL”). In addition, the Civil Procedure Law and other laws contain some provisions concerning arbitration or enforcement of arbitral agreements and awards.[12] The CAL was adopted and promulgated in 1994, as China began to implement a market economy.[13]
The CAL has the characteristics which are essential to modern international commercial arbitration law. [14] First, the CAL considers promoting party autonomy as one of its primary goals. Parties must agree to arbitrate of their own will before an arbitration institution can exert jurisdiction unless parties agree to arbitrate “of their own record”; Chinese courts cannot assert jurisdiction over the dispute. And an arbitration provider cannot accept a dispute if there is no valid agreement to arbitrate.[15] Second, the CAL provides that arbitration institutions shall be independent from the government. For example, Article 8 provides that arbitration shall be conducted independently according to the law and shall not be subject to interference from government entities. Article 14 further provides that “all arbitration committees are independent from the administrative organs.”
Enacted in 1991, the Civil Procedure Law is another law containing provisions related to arbitration.[16] It separates arbitral awards into domestic, foreign-related and foreign awards with each receiving a different standard of judicial review. For domestic awards, courts may conduct a substantive review. Foreign awards that are arising from arbitrations made by an international arbitration tribunal enjoy deferential treatment from the courts – courts only conduct a procedural review. The Civil Procedural Law categorizes awards resulting from arbitrations, involving foreign parties and arbitrated by a Chinese arbitration tribunal, as foreign-related awards. [17]
In December 2003, the Chinese Supreme People’s Court promulgated a draft judicial interpretation, clarifying that the more deferential standard of review should apply to all awards with foreign parties or elements, regardless of whether the awards were issued from a domestic or international arbitration institution. The more deferential standard of judicial review afforded to foreign awards and foreign-related awards is based on Article V(1) of the New York Convention.[18]
With regard to the enforcement of awards, the Supreme People’s Court took steps to avoid the local protectionism by setting up a reporting system to monitor the lower courts’ refusals to enforce foreign arbitral awards.[19]
In general, the Chinese commercial arbitration system is in conformity with the international standard. In addition, with deferential treatment from the courts, enforcement of foreign and foreign-related awards in China becomes predictable. With its development over the past decades, Chinese commercial arbitration deserves to be the first choice in resolving international commercial disputes in China.
[1] Fiona D’Souza, The Recognition and Enforcement of Commercial Arbitral Awards in the People’s Republic of China, 30 Fordham Int’l L.J. 1318, 1318 (April, 2007); see Joseph Kahn, Dispute Leaves U.S. Executive in the Chinese Legal Netherworld, N.Y. Times, Nov. 1, 2005 at A1 (reporting U.S. Business executive deprived of liberty in P.R.C. and coerced into signing documents transferring property).
[2] No Dispute About It, Econ. Intelligence Unit (Bus. China), Apr. 24, 2006.
[3] Id.
[4] Id.
[5] Xiuwen Zhao, Reforming Chinese Arbitration Law and Practices in the Global Economy, 31 U. Dayton L. Rev. 421, 421 (Spring, 2006).
[6] Id. at 423.
[7] Id.
[8] Id. at 424.
[9] Id.
[10] Id. at 425.
[11] Benjamin O. Kostrzewa, China International Economic Trade Arbitration Commission in 2006: New Rules, Same Results, 15 Pac. Rim L. & Pol’y J. 519, 531 (June 2006).
[12] Zhao, supra note 5, at 427-28.
[13] Id. at 428.
[14] Id.
[15] Id.; see also CAL Article 1.
[16] Jian Zhou, Judicial Intervention in International Arbitration: A Comparative Study of The Scope of the New York Convention in U.S. and Chinese Courts, 15 Pac. Rim L. & Pol’y J. 403, 410 (June 2006).
[17] According to a 1992 SPC interpretation implementing the 1991 Civil Procedure Law, a case is a foreign-related case” if (1) one or both parties are foreign nationals, stateless persons, or foreign companies or organizations; (2) the legal actions leading to formation, change, or termination of the legal relationship occurred in a foreign country; or (3) the subject matter of the dispute is located in a foreign country.
[18] Zhao, supra note 5, at 443.
[19] Zhou, supra note 16, at 415.
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The Baltic Dry Index – a composite of 22 main freight routes – leapt over 10% on 9 February to 1,815 aided by rising Capesize rates. The jump came on Monday, a day that is traditionally subdued in activity terms as shipping companies concentrate on vessel position lists.
Tubarao-China hit $25/tonne on Monday, up over $5/t in under a week to its highest level since early October. The long-term average of Tubarao-China since the beginning of 2003 is $38/t, brokerage Simpson Spence & Young tells Steel Business Briefing. Brazil-Rotterdam shipments reached $11.50/t, a rise of almost $3/t since 4 February, while Australia-China was up around $2.80/t at $10/t.
Brokers attribute the gains to stronger Chinese iron ore demand, primarily out of Brazil, and increased congestion: around 50 Capesize vessels are waiting to berth off China. Chinese ore stocks at port have increased slightly over the last few weeks, to just over 60mt according to SSY, but this is unsurprising because of the higher activity.
Tonnage in the Atlantic basin also looks tight in the short-term – according to brokers. This means there are less open ships from charterers to choose from, which normally pushes up rates.
Shipments of iron from India to China, normally carried out on Supramax vessels with a deadweight of between 50-60,000 t, have also climbed as a result of stronger chartering interest. Charterers are paying around $14,000/day for the route, equivalent to around $11/t. This is substantially up from the October bottom of $2,000/day.
Source: Steel Business Briefing
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China Securities Journal reported that market participants are concerned that recent steel price recovery may be short lived since the real steel demand remains slack, although the price rally has extended for ten straight weeks supported by stimulus package and production cut.
As many mills have restarted production in light of price improvement, maybe an overreaction by speculative buyers, which would again put the steel price under downward pressure.
The demand plunge has yet to reverse, and recent price recovery is the result of larger scale of production cut than the demand reduction, which has restored the market balance for the short term. However, the construction activity especially housing market continues to shrink, while many companies have slashed the capital spending significantly for the New Year, which would all suppress the steel demand.
Mr Matao Bohai Securities analyst said down-stream demand may not be that healthy as indicated by the rebounding steel prices. Leading mills have raised up the offer price around Jan in response to the price improvement and they are eager to offset the heavy loss in past months. Meanwhile, trading houses are more willing to restock at the moment. Nevertheless, most are more bearish on long products outlook on back of limited capacity addition and infrastructure oriented stimulus package.
The stimulus package is expected to provide a real demand boost for long products. Therefore, long products price is estimated to held steady or edge upward in days to come.
The steel output grows 15.4% from the month before in December of this, long products output expands 21.8%, while flat products production merely rises 9.97%. Market insiders warn that swelling supply of long products could weigh on prices downward since most sheet producers can readily switch to longs production.
Source: China Securities Journal
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In January Turkish chrome ore exports were 70,490 Tonnes, over 37% lower than the same month of last year Steel Business Briefing learns from Istanbul Mineral & Metals Exporters Association (IMMIB) data.
January exports were substantially higher than December’s 17,435 Tonnes, but still 60% lower than last year’s monthly average.
Turkey’s largest chrome ore exporter, Etikrom, tells SBB that the January export figures are a positive sign, even if they show a decline y-on-y, after the volumes in the last three months of 2008. “Turkish chrome ore exports have started to move up, and we are expecting to see more increases until May or June,” the company says.
Etikrom’s price for February as $275/tonne, and for March $300/Tonnes for 42 % grade lumpy material cfr Chinese main ports, SBB is told.
It is also reported that China imported large amounts of chrome ore (62,069 Ton) before the Chinese New Year, and also that Russia and US imported small amounts last month.
Source: Steel Business Briefing
http://www.steelbb.com
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