Establishment of Retail Enterprises and Procedures for Opening Stores
August 26, 2009
The approval procedures for foreign-invested commercial retail enterprises are the same as those for wholesale enterprises.
Stores opened by foreign-invested commercial enterprises engaging in retail in the provincial-level administrative region where they are located are approved by the local provincial-level commerce department and the applications are forwarded to MOFCOM for the record. For the opening of stores in another province, the opinions of the commerce department of that province have to be sought. The provincial-level commerce department in charge will send a letter to its counterpart in the place where the store is to be located seeking its opinion. During this process, the enterprise should cooperate by supplying the necessary documents.
Provincial-level commerce departments may grant approval to the establishment of the following stores, with the applications forwarded to MOFCOM for the record:
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Stores with a business area of less than 3,000 sqm each and not exceeding three in number; the foreign investor may not open a total of more than 30 similar stores through its foreign-invested commercial enterprise in China;
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Stores with a business area of less than 300 sqm each and not exceeding 30 in number; the foreign investor may not open a total of more than 300 similar stores through its foreign-invested commercial enterprise in China;
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Stores whose scope of business does not include television, telephone, mail order, Internet and the sale of automatic vending machines;
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Stores not engaging in tobacco retailing, and not selling chemical fertilisers
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Application Procedures for the Establishment of Wholly Foreign-Owned Enterprises
August 23, 2009
The time limit for the approval of applications for the establishment of wholly foreign-owned enterprises is as follows: The approval organ must give a written reply within 30 days after receiving preliminary application from the foreign investor and decide whether or not to grant approval within 90 days (for Guangzhou and Shenzhen, 15 working days) as from the day all documents required for the formal application are received.
For wholly foreign-owned enterprises, the date of the issuance of business licence is the date of their incorporation. The foreign investor may appoint an FIE service company or other economic organisations to handle the application procedures, but a power of attorney must be signed.
Application Procedures for Establishment of Wholly Foreign-owned Enterprises
Step 1: Submission of Preliminary Application
The foreign investor of a foreign enterprise should submit a report to the foreign trade and economic cooperation department at county level or above at the place where the proposed enterprise is located.
Content of report: Objectives of the wholly foreign-owned enterprise, business scope, scale of operation, products to be produced, technology and equipment to be used, land area required, conditions and quantities of water, electricity, gas and other forms of energy resources required, and requirements for public facilities.
Step 2: Submission of Formal Application
After the foreign investor receives a written reply from the relevant government authorities, a formal application supported by all the required documents should be filed with the local foreign trade and economic cooperation department at county, municipal or provincial level.
Documents required: Application letter for establishing the wholly foreign-owned enterprise; feasibility study report; articles of association; list of legal representatives (or board of directors); foreign investor’s legal papers and credit report; list of materials to be imported; written replies from the local approval authorities at county level or above; application for registration of the name of the enterprise approved by the provincial or municipal administration for industry and commerce; comments on the project by various government departments such as environmental protection, fire services, health and land administration. In case where two or more foreign investors are involved, copies of the contracts signed by them should be submitted to the approval authority for the record.
Step 3: Application for Approval Certificate
After the formal application is approved, the foreign investor should apply to the foreign trade and economic cooperation department at county, municipal or provincial level for an approval certificate by presenting all the necessary documents.
Documents required: Application letter for establishing the wholly foreign-owned enterprise, feasibility study report, articles of association and list of board of directors.
Step 4: Registration
Upon collection of the approval certificate, an application for business licence should be filed with the provincial or municipal administration for industry and commerce within 30 days. Subsequently, the enterprise should complete such procedures as applying for official seal and enterprise code, opening bank account, and registering for tax payment and customs declaration with the local public security, technical supervision, taxation, Customs, finance, foreign exchange administration, banking, insurance and commodity inspection departments.
Tags: Enterprise, Wholly Foreign-Owned, EstablishmentRelated Posts:
Tax Administration for Non-Tax Resident Enterprises in China
April 23, 2009
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
Tags: tax resident, passive income, tax authoritiesRelated Posts:
Setup, Extension, Alteration and Termination of Permanent Representative Bodies of Foreign Countries
April 11, 2009
A.Acceptance and Hearing
Qualifications:
Applicant shall submit the following materials:
1.Setup:
（1）Application signed by the Chairman of the Board or General Manager containing items of: basic information of the enterprise, purpose for setting up the Permanent Representative Body, Name of the body, Personnel appointed (Chief Representative and Representative), business scope, term of residence, Office address and so on.
（2）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in (duplicate);
（3）Credit Standing Certificate (original)issued by the bank having business connections with the enterprise;
（4）Power of Authority for the Chief Representative and Representative signed by Chairman of the Board or the General Manager of the enterprise; Resumes of the Chief Representative and Representative and their ID card copies. In case that the Chairman of the Board acts as the Chief Representative and Representative, the Power of Authority must be signed by at least 2 directors of the enterprise. For Enterprise with no board of directors, the Executive Director may sign the documents concerned.
（5）Lease Contract for the Office Site signed by person in charge or person authorized, as well as certificate concerning foreign affairs issued by Police
（6）Fill in Application form for setting up Permanent Representative Body of Foreign Enterprise;
（7）Other materials for application considered necessary by examination authority.
Pursuant to Article 12 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise
2. Extension
（1） Application for Extension signed by Chairman of Board or General Manager;
（2） Report of Business activity of this representative body during the last term of residence;
（3）Credit Standing Certificate (original) issued by the bank having business connections with the enterprise;
（4）Practice Legality Certificate issued by the appropriate authority of the state that the enterprise locates in( duplicate);
（5）Approval Certificate of the Permanent Representative Body and its register card copies;
（6）Lease Contract or Access Certificate of the Office Site signed by person in charge or person authorized of the enterprise.
（7）Fill in Application Form for Extending Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 17 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、Alteration
Any foreign, or Hong Kong and Macao enterprise that asks for alteration on the name of the Permanent Representative Body, changing or adding Chief Representative and Representative, alteration on the business scope, term of residence and office site of the Body, shall submit application signed by the Chairman of the Board or the General Manager and other materials related the alterations (the application for altering the office location may be signed by Chief Representative) , as well as fill in the Application Form for Alterations of Permanent Representative Body of Foreign Enterprise.
(Pursuant to Article 19 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Termination
Upon the expiration of the term of residence or terminating business ahead of the term , the Permanent Representative Body of foreign or Hong Kong and Macao enterprises shall apply for cancellation of the permanent body . To fulfill this, the Chairman of the Board of Directors or the General Manager shall make signature on the Cancellation Application and the Original Approval Certificate, and submit them to the original approval departments for records through the original undertaking unit.
Criterion:
1.Application Materials shall be complete , standard and valid.
2.Application forms for Setup, Extension, Alteration and Termination of Permanent Representative Bodies of foreign, Hong Kong or Macao Enterprises as well as the Power of Authority for the Chief Representative and Representative shall be written in Chinese and if they are committed in other languages, the a Chinese version shall be attached. Other materials written in other languages shall also be attached by Chinese version. (Pursuant to Article 21 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3.If necessary, the examination and approval authorities are empowered to request all of part of the application materials for the setting up of Permanent Representative Body submitted by Foreign Enterprise be notarized by the Notarization Authorities of the state concerned, meanwhile be authenticated by Chinese Embassy in that country. (Pursuant to Article 22 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
Person responsible for this post: the acceptance and hearing personnel of Foreign Enterprise Representative Office of the Foreign Trade Administration Department.
Duty and Power:
Examine and Check the application materials in accordance with the criterion for acceptance and hearing;
Accept and hear the case if the materials submitted is qualified; and transfer the materials to the examiner.
Unqualified materials will not be accepted, whereas inform applicant all materials needing further supplement and amending at one time. Meanwhile apply to the higher-up for records.
Time Limit: 1 working day
B. Examination
Criterion:
1.Application Materials shall be complete, standard and valid.
2.Applicant must be Trader, manufacturer, freight agent, contractor, consulting company, advertisement company, investment company, leasing company and other economic and trade organization (Pursuant to Article 2 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
3、The enterprise shall get legal register in home country(Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
4、Must have a good will (Pursuant to Article 8 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
5、Name of the Permanent Representative Body of foreign or Hong Kong and Macao enterprise shall be in the style of Country Name + Enterprise Name + City Name + Representative Office(Pursuant to Article 13 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
6、The maximum term of approval for once for the Permanent Representative Body of foreign or Hong Kong and Macao enterprise is 3 years .Term of Residence begins from the date of the issuance of the approval certificate by the authority. If the term needs extending upon the expiration, the foreign enterprise shall make application 60 days in advance to the original approval authority by means of the formal undertaking unit, and deal with the formality of extension. (Pursuant to Article 16 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
7、When applying for setting up the Permanent Representative Body , foreign or Hong Kong and Macao enterprise must entrust one company vested with foreign trade dealership by the approval of department of Chinese government in charge , or an organization dealing in foreign economic and trade or Foreign affairs service unit approved by MOFTEC as the undertaker to hand in all sorts of materials to the examination and approval authorities and deal with the application formalities. (Pursuant to Article 10 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
8、Examination and Approval authority dealing with the setting up of Foreign Chamber of Commerce in China is Ministry of Foreign Trade and Economic Cooperation and the register authority is Civil Administration Department. One country can only establish one chamber of Commerce in Beijing at present, and no chamber of Commerce or subsidiary chamber is allowed in other cities. (pursuant to Summery Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962 )
9、Chief Representative and Representative of Permanent Body of foreign or Hong Kong and Macao enterprises must be qualified in the following aspects:
（1）Foreign residence holding legal common passport( excluding overseas student in China)
（2）Chinese citizen obtaining permanent residence at abroad
（3）HK and Taiwan fellowmen holding valid certificates( Taiwan passport invalid);
（4）If employing Chinese citizen to act as the Chief Representative and Representative(excluding the NO.2 case of the above), foreign enterprise shall entrust the local foreign affairs service unit or other units appointed by Chinese government to handle the application formalities according to related laws and regulations of China (shall present the delegation letter issued by the empowered unit).
(Pursuant to Article 29 of Enforcement Regulations on examination, approval and management of Permanent Representative Body of Foreign Enterprise)
10、Enterprises of Taiwan, Semi-Official and Non-Diplomatic Countries whose name contains the words like “Study abroad” “Education” “Immigration” will not be allowed to establish permanent representative bodies at present. Permanent representative bodies of Consulting company, Management company, counseling company shall note clearly in their business scope that “ will not engage in the contacting activity of overseas study and immigration” (Pursuant to Notice of Problems concerned with Examination, approval and management of Foreign Permanent Representative Body, MOFTEC Official Release 1999, NO.1802)
11. Chinese enterprises overseas that was established less than 1 year ago shall not be approved to establish permanent representative body in China; Overseas enterprises of non-productive type are generally not allowed to establish permanent representative body back in China; Enterprises running in deficit are not allowed to set up permanent representative body; Chinese Enterprises overseas in the name of the Parent Company, Subsidiary company intending to set up representative office will not be allowed in principle. (Pursuant to Notice of Rules in Understanding some Problems concerned with Examination and approval of Foreign Permanent Representative Body, MOFTEC Official Release 1993, NO.1794).
12、When applying to set up permanent representative bodies, Foreign enterprises engaged in the industries of Finance and Insurance shall apply to the Peoples’ Bank of China for approval; Enterprises in marine, marine agency shall apply to the Ministry of Communication of China for approval; enterprises in aviation transportation shall apply to General Bureau of Civil Aviation of China for approval; enterprises of other industries shall apply to the Commissions, Departments or Bureaus of Chinese government in charge for approval. For example, Law firms shall apply to Ministry Judiciary for approval and Accounting Firms shall apply to Ministry of Finance for approval. ( pursuant to Provisional Regulations on Management of Permanent Representative Bodies of Foreign Enterprises ,State Council of China)
13、Chief Representative and Representative cannot act as Chairman of the Board, General Manager or Manager and other positions in domestic foreign invested enterprises.(Pursuant to Summary Notice of the Work Meeting on Examination and Approval for National Foreign Merchants’ Permanent Representative Bodies and Import Machinery and Electrical Products Maintaining Station, MOFTEC Official Release 1997,NO.1962).
Person responsible for this post: Examination personnel in Foreign Trade Administration Department
Duty and Power:
Examine and Check the application materials in accordance with the examination criterion;
If the materials submitted are qualified, put forward the approval comment, fill in the examination form, then return materials and the comment to the reviewer;
If materials are unqualified, put forward the disagreement comment, then return it to applicant.
Time Limit: 4 working days
D. Review
Criterion: Same as the examination criterion.
Responsible person for this post: Vice director of Foreign Trade Administration Department in charge
Duty and Power:
Review the examination comment according to the criterion.
If agree to the examination comment, sign the reviewer’s comment in the Examination form and issue the Certificate.(If submit to MOFTEC, must transfer to Director of the Department in charge for approval.)
If disagree to the examination comment, exchange ideas with examiner, then put forward review comment and reasons, transfer them together with that of the examiner to the approval personnel.
Time Limit: 1 working day
D. Approval
Criterion: Same as the review criterion.
Responsible person for this post: Commission Leader in charge
Duty and Power:
Make approval in a fixed time to the collected examination comment according to the Criterion.
If agree to the review comment, put forward comment in the approval form then transfer it to the acceptance personnel.
If disagree to the review comment, exchange ideas with reviewer, put forward the approval comment and reasons in the approval form, then return it to the acceptance personnel by way of the original means.
Time limit: 1 working day
E. Print and Proof
Criteria
1.Submitted Documents shall be signed by the issuing leader, has clear classification and legible writing;
2.Material to be printed shall be in consistency with original document and has no omissions, mistakes and accretions;
Responsible person for this post: Printing personnel and examination personnel of this department
Work Criterion
1、Put the Approval Certificates for Foreign Representative Body in Beijing complete, accurate and valid;
2、Proof shall be correct and has no errors.
Duty and Power
For the approved materials, Print the Approval Certificate for Foreign Representative Body in Beijing in triplicate as provided, and notify the proof personnel to make proof.
Time Limit: 1 working day
F. Notification
Person responsible for this post: acceptance and hearing personnel in Foreign Trade Administration Department
Criteria:
1.Notify the applicant the result of the matter handled timely and accurately;
2.Make the certificate complete, accurate and valid;
3.Keep the examination documents complete and standard for file.
Duty and Power:
Make notification and issue approval documents and keep them on file according to the above criteria;
With respect to the approved application, issue documents concerned and notify the applicant to receive it; announce the result by way of the Internet if the management through Internet is necessary.
With respect to the denied application, make all materials needing further supplement and amending, the requirement, and related rights of applicants and means of making complaint altogether known to applicants in written form at one time. Meanwhile return the application documents to the applicant.
In terms of the unapproved cases, make the reasons, requirement and related rights of applicants, as well as the means to make complaint known to the applicant, and return the application materials to applicant.
Time Limit: 1 working day
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Income Tax on Enterprises with Foreign Investment and Foreign Enterprises
April 6, 2009
(1) Taxpayers
a. Enterprises with foreign investment include Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and wholly-foreign owned enterprises.
b. Foreign enterprises include foreign companies, enterprises and other economic organizations which have establishments or places in China engaged in production or business operations or which, though without establishments or places in China, have income from sources within China.
(2) Tax base
The enterprises with foreign investment with head office in China pay income tax on their world-wide income. Foreign enterprises pay income tax only on their income derived from sources within China.
The income tax base for enterprises with foreign investment and foreign enterprises is the taxable income which is the amount remaining from its gross income in a tax year after allowable deduction for costs, expenses and losses.
Any foreign enterprise which has no establishment or place in China but derives income of profits, interest, rental, royalties and other income from sources within China or which, though it has an establishment or place in China, the said income is not effectively connected with such establishment or place, is taxed on the basis of the gross amount of such income.
(3) Tax rates and calculation of the amount of tax payable
The income tax on enterprises with foreign investment and foreign enterprises is 30% of the taxable income plus 3% local income tax, totalling 33% rate. Any foreign enterprise which has no establishment or place in China but derives income of profits, interest, rental, royalties and other income from sources within China or which, though it has an establishment or place in China, the said income is not effectively connected with such establishment or place, pays tax of 20% on such income. The formula for computing the amount of tax payable is:
Amount of tax payable = Taxable income ×Applicable tax rate
(4) Main tax incentives
a. Tax exemptions or tax reductions may be granted to enterprises with foreign investment of a production nature, export-oriented enterprises with foreign investment, technologically advanced enterprises with foreign investment, and enterprises with foreign investment and foreign enterprises established in the Special Economic Zones, the Economic and Technological Development Zones, the Coastal Open Economic Zones and the New and High-technology Industrial Development Zones specified by the State.
b. The share of profits earned by foreign investors from their invested enterprises may be exempted from tax. The foreign investor who reinvests its share of profits from enterprises with his investment directly into that enterprise by increasing its registered capital or who uses the profit as capital investment to establish another enterprises with foreign investment may receive some tax refund.
c. The exemption from or reduction of local income tax for any enterprise with foreign investment engaged in an encouraged industry or project may, in accordance with the actual situation, be granted by the People’s Government of the relevant Province, Autonomous Region or Municipality directly under the State Council
Tags: tax reductions, profits, establishmentsRelated Posts:
