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China Updates — 12 January 2023

  • Hong Kong scraps all restrictions on international arrivals as well as on-arrival PCR testing and vaccine pass requirements.
  • Shanghai to explore adoption of digital RMB for payment of taxes and fees.
Hong Kong Scraps All On-Arrival PCR Testing and Vaccine Pass Requirements

On 28 December 2022, the Hong Kong SAR Government axed all requirements for on-arrival PCR testing and vaccine passes, which came into effect on the following day.

Inbound passengers no longer need to conduct a PCR test upon arrival in Hong Kong and on Day 2. Travellers are only required to produce negative results from PCR or rapid antigen tests (RAT) taken within 48 or 24 hours respectively before boarding their flight. Conducting daily RAT tests until Day 5 is now voluntary.

In addition, the vaccine pass requirement that had been in place from February 2022 was dropped. Residents no longer need to present their vaccine pass to enter public venues, including bars, restaurants, pubs, gyms, cinemas as well as schools.

Furthermore, capacity limits are no longer imposed on eateries and other premises, and restrictions on group gatherings in public are no longer in place. Restaurants and other establishments are not required to adhere to the 1.5-metre social distancing rule.

The mask-wearing mandate remains in effect.

 

Hong Kong Lifts All Restrictions on International Arrivals

On 13 December 2022, the Hong Kong Special Administrative Region Government announced that the “0+3” medical surveillance period would be scrapped, lifting all restrictions on overseas arrivals. These changes came into effect on the following day.

Inbound travellers are no longer assigned an amber health code upon arrival, which means that they do not have to wait for three days until they can enter certain places, such as restaurants, gyms and beauty parlours.

In addition, it is no longer compulsory to use the risk-exposure “Leave Home Safe” app for public venues.

 
China to Set Up 33 New Pilot Zones to Promote Cross-Border E-Commerce

On 24 November, China’s State Council approved the establishment of 33 more pilot zones to promote cross-border e-commerce, including in Langfang, Cangzhou, Yuncheng, Baotou and Anshan. Many of the newest pilot zones are situated in central and western China, and in regions close to the border.

The comprehensive pilot zones will play a positive role in facilitating the transformation and upgrading of traditional industries as well as optimising foreign trade. 

Further complementary policy measures such as exemption from VAT and consumption tax on cross-border e-commerce retail export goods will be introduced.

The first cross-border e-commerce zone was established in 2015.  With the addition of the 33 newly established zones making up the seventh batch, the total number of such zones stands at 165, spanning all 31 regions of the country.

China has seen an exponential increase in cross-border e-commerce in recent years. Its trade volume has risen nearly tenfold over the last five years – to the tune of RMB1.92 trillion in 2021. In the first half of this year, a 28.6-percent year-on-year growth in trade volume was recorded.

 
Shanghai to Explore Adoption of Digital RMB for Payment of Taxes and Fees

On December 7 2022, the Shanghai Municipal People’s Government promulgated a set of measures to comprehensively improve the ease of doing business and boost the “vitality” of market entities through reducing institutional transaction costs.

Most notably, among the support measures include a call for increased quality and efficiency of tax and fee payment services, such as, through:

🔵Promoting the fully online one-stop processing of corporate income tax settlement and payment as well as tax refund;

🔵Cutting the processing time for export tax refunds in respect of Class I and Class II exports enterprises from five to three business days;

🔵 Optimising the system for refunds of excess input VAT credits via a user-friendly online refund function;

🔵Exploring new payment methods of paying taxes and social insurance premiums in digital RMB;

🔵Launching a pilot scheme which allows residents to pay social insurance premiums in digital RMB at service centres of community affairs;

🔵Promoting the construction of an e-financing platform in the Yangtze River Delta Integrated Development Demonstration Zone.

 
Hong Kong Releases Draft Legislation on Concessionary Tax Regime for Family Offices

In the 2022 Policy Address, the Hong Kong Special Administrative Region Government identified family offices as a key growth segment within the asset and wealth management industry. With the aim of attracting no fewer than 200 family offices to set up or expand their operations to Hong Kong by the end of 2025, the Government introduced a draft bill in December 2022 to implement a concessionary tax regime for eligible family offices.

With effect from the 2022/2023 tax year, eligible family-owned investment holding vehicles that are managed by a single family office will be able to enjoy a 0% tax rate on assessable profits from qualified transactions subject to specific conditions.

 In order to qualify for the tax concession, a family-owned investment holding vehicle must:

Be an entity (corporation, partnership or trust) incorporated, registered or established in or outside Hong Kong;

🔵Exercise its central management and control in Hong Kong;

🔵Have 95% of its beneficial interest held directly or indirectly by one or more members of the same family – which can span different generations; and

🔵Not be a business undertaking for general commercial or industrial purposes.

In addition, an eligible single family office must:

🔵Be a private company;

🔵Exercise its central management and control in Hong Kong;

🔵Provide services to a family-owned investment holding vehicle and/or specified members of the family, and the service fees in question are subject to Hong Kong profits tax;

🔵Have 95% of its beneficial interest held directly or indirectly by one or more members of the same family; and

🔵Meet the relevant safe harbour rules.

 

Beijing Introduces New Measures to Implement Preferential Tax Policies for MSMEs

In December 2022, the General Office of the People’s Government of Beijing Municipality promulgated 12 new measures to help businesses tide over the financial difficulties caused by the pandemic.  

The key takeaways are as follows:

🔵 For medium-sized manufacturing enterprises that have been eligible for deferred payment on 50% of taxes and fees since 1 September 2022, the deferral period shall be extended for a further four months upon its expiry.

🔵 For micro and small manufacturing enterprises that have been eligible for deferred payment on 100% of taxes and fees since 1 September 2022, the deferral period shall be extended for a further four months upon its expiry.

🔵  For hi-tech enterprises, purchases of qualified equipment and apparatus during the period from 1 October 2022 to 31 December 2022 are eligible for a one-off full-amount deduction claim in the computation of assessable profits and an additional 100% deduction. In other words, the total amount of deductions allowed to be claimed in the calculation of assessable profits is twice the amount of such purchases.

🔵 For enterprises currently eligible for the additional 75% deduction on qualified research and development expenses, the pre-tax deduction ratio shall be increased to 100% during the period from 1 October 2022 to 31 December 2022.

 

 

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