Background 

 

According to the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, one of the region’s strategic positioning is to grow into an international scientific and technological innovation center with global influence. As talent is the basic driving force for science and technology development and innovation, the development of the Guangdong-Hong Kong-Macao Greater Bay Area will rely on innovative system and mechanism to stimulate the innovation vitality of talents. 

 

On 14 March 2019, China’s Ministry of Finance and State Administration of Taxation jointly issued a Notice on Individual Income Tax Incentives for Guangdong-Hong Kong-Macau Greater Bay Area. Guangdong Province and Shenzhen Municipality shall grant subsidy overseas (including Hong Kong, Macau and Taiwan, same hereinafter) high-end talents and talents in short supply working in the Greater Bay Area, and such subsidy, equivalent to the individual income tax difference between Mainland and Hong Kong, will be exempted from individual income tax. 

 

Following the above policy, Shenzhen Municipality issued two documents detailing the implementation of the IIT subsidy application for high-end talents and talents in short supply working in Shenzhen: 

  • Notice on the Implementation of Preferential Individual Income Tax Policies for the Guangdong-Hong Kong-Macau Greater Bay Area, effective since 27 March 2020. 
  • Notice on Promulgation of the Guidelines for the Application for Individual Income Tax Subsidies for Overseas High-end Talent and Talent in Short Supply in Shenzhen for Tax Year 2019, effective since 10 July 2020. 

 

Based on the instructions given by the government of Guangdong Province, the preferential policy refines the detailed conditions and criteria for applicants according to the actual situation in Shenzhen. The promulgation of the above two documents marks the official landing of the Greater Bay Area (GBA) Individual Income Tax rebate in Shenzhen, which will effectively help Shenzhen acquire more talents. 

 

Eligibility Criteria 

 

To be eligible for the IIT subsidy, an applicant should first meet the basic requirements in terms of identity and his/her employment condition. Under the guidelines provided by the Shenzhen Government, an applicant should fall in one of the following categories: 

  • A permanent resident of Hong Kong or Macao;  
  • A mainland resident having settled down in Hong Kong or Macao (having deregistered his Mainland household registration) 
  • A Hong Kong resident under admission schemes for talent, professionals and entrepreneurs; 
  • A resident in Taiwan region; 
  • Foreign nationals; 
  • An overseas returnee who has obtained the right of long-term residence in a foreign country; 
  • Overseas Chinese. 

 

In addition, the applicant should prove that he/she has entered into an employment contract with an employer in Shenzhen or has signed a dispatch agreement with an overseas employer and an entity in Shenzhen. For certain qualified applicants who provide independent personal services in Shenzhen, they must provide their corresponding service contract with a taxpayer in Shenzhen. 

 

Qualification Requirements 

 

Besides the above basic requirements, an applicant should meet any of the following conditions: 

 

  • Being selected for national, provincial or municipal major talent projects; 
  • Being an overseas high-level talent recognized by the State, the Province or the Municipality. 
  • Obtaining Guangdong Superior Talent Card of Guangdong Province; 
  • Talent with permanent residency in China, work permit for foreigners working in China (Type A and Type B) or confirmation letter for foreign high-end talent;  
  • Any member of a scientific research team or manager at or above the middle level of a national, provincial, or municipal major innovation platform; 
  • Any member of a scientific research and technology team or manager above the middle level in an institution of higher learning, scientific research institute, hospital or any other relevant institution, or any member of a team undertaking a major vertical project under research at or above the municipal level, or any leader for a key discipline or key specialty at or above the municipal level.  
  • Managers above the middle level, scientific research team members, technical and skill backbones and excellent young talent of headquarters enterprises, top global 500 enterprises and their branches and high-tech enterprises, large backbone enterprises, listed enterprises and enterprises included in the pool for cultivation and innovation-oriented high growth sci-tech SMEs; 
  • Managers above the middle level, members of scientific research team, technical and technical backbones and excellent young talent who start business or are employed in key industries and fields to be developed in Shenzhen, and have not passed or failed to pass within the time limit the acceptance inspection of a project supported by the special fund for the development of a strategic emerging industry in Shenzhen that they are responsible for or participate in within the latest three years.  

 

 

Key Points on the Guidelines for Application in Shenzhen 

 

  • It should be noted that the subsidy is only granted to applicants paying taxes exceeding 15% of the taxable income. Foreign nationals are, in addition, subject to a minimum annual taxable income threshold of RMB500,000. 
  • Once the eligible applicants are identified, proper travel schedules should be maintained by the applicants to ensure that they stay in Shenzhen for at least 90 days during a tax year.  
  • Successful applicants cannot enjoy other IIT-related talent preferential policies in Shenzhen. Meanwhile, the details of IIT policy in GBA may vary in different cities. The criteria, requirements, calculation methods and procedures in Shenzhen may not be applicable to other cities in the GBA. 
  • The applicant’s credit information may be inquired through channels such as Shenzhen Credit Platform. 

 

 

Calculation of IIT Subsidy 

 

The basic formula is that the IIT subsidy should equal to the tax paid according to the PRC IIT Law deducted by the estimated tax calculated at 15% of the taxable income, so that the taxpayer would have an effective IIT rate of 15%: 

 

IIT Subsidy=Tax Paid – (15% x taxable income) 

 

Taxable Income refers to the following income categories according to the Individual Income Tax Law of the People’s Republic of China: 

  • Income from wages and salaries; 
  • Income from remuneration for labor services., 
  • Income from authorial remuneration; 
  • Income from royalties; 
  • Business income;  
  • Subsidized income from the talent projects. 

 

Estimated tax amount means the tax amount payable for the taxpayer’s individual income derived in Shenzhen within the tax year computed pursuant to the tax laws of Hong Kong. It will be calculated according to the standard tax rate method, which is, estimated tax amount = taxable income of the taxpayer in Shenzhen x 15%. 

 

 

What CW Can Offer 

 

Our multilingual professionals can help to facilitate communications throughout the application process and enable us to provide tailored services to our clients.  We offer: 

 

  • Guidance throughout the whole application process; 
  • Professional consultation services to help you resolve your concerns and difficulties; 
  • Collect, review and file documents and materials according to the specific policy requirements; 
  • Organize training sessions for each client before submitting their online applications. 

 

If any assistance is required, we are here to listen and help. Please do not hesitate to get in touch if you have any questions.  

 

Written by China Consultancy Team, CW CPA

FOREIGN DIRECT INVESTMENTS 

Stabilize the Foreign Trade and Foreign Investment Mentioned in PRC Government Work Report 2020

A closing meeting of the third session of the 13th National People’s Congress was held in Beijing on 28 May 2020 and the resolution on the report on the work of the Government was adopted and approved. The key messages for foreign investors are the following: 

  • Promote a higher level of opening-up of the Chinese market to foreign investments 
  • Support further liberalization and facilitation of international trade 
  • Provide guidance of healthy development of Chinese outbound investments 

Full text of the Report can be downloaded from here: Download Report 

 

China’s Civil Code coming into force on 1 January 2021 

China’s third session of the 13th National People’s Congress voted to adopt the Civil Code of the People’s Republic of China, which will come into force on 1 January 2021. The current Marriage Law, Inheritance Law, General Principles of Civil Law, Adoption Law, Guarantee law, Contract law, Property law, and Tort Liability Law shall be repealed simultaneously. It is a systematic integration and compilation of decentralized civil legislation since 1949. One of the key points of the amendment of the Civil Code is to strengthen the protection of personal information and privacy.  

 

The State Council Issues the Overall Plan for the Construction of Hainan Free Trade Port 

On 1 June 2020, the Overall Plan for the Construction of Hainan Free Trade Port, formulated by the State Council, was officially released. The key policies include but not limited to: 

  • Maximum personal income tax of 15 percent high-end talents; 
  • Corporate income tax of 15 percent on encouraged industrial enterprises; 
  • Exempt from import duties, import value-added tax and consumption tax on imported goods purchase by island residents; 
  • Conduct the negative list of cross-border trade in services for Hainan Free Trade Port; 
  • Conduct a negative list management system on the issuance of work permit for foreign employees. 

 

TRADE, CUSTOMS AND INDUSTRIES 

Further compliance management guidelines for online retail platforms 

The China Council for the Promotion of International Trade has completed the drafting of The Compliance Management Guide for Online Retail Platforms. The draft was published on 5 June 2020 for consultation until 26 June 2020.    

The Compliance Management Guide for Online Retail Platforms includes detailed rules on the online retail operators in adopting compliance grading, assessment, management & supervision of online retailers. It is suitable for online retail platform operators in evaluating and managing the compliance of online retailers applying for joining the platform.

 

EMPLOYMENT & LABOR 

Guangdong Province’s guidelines on applying for China visa under existing travel restriction 

On 28 May 2020, the Foreign Affairs Office of the People’s Government of Guangdong Province issued an announcement explaining the basic procedures of applying for an invitation letter for the purpose of China visa under existing travel restriction imposed by the Ministry of Foreign Affairs of PRC and National Immigration Administration since 26 March 2020. 

Foreign nationals engaging in necessary economic, trade, scientific or technological activities may apply for an invitation letter with the local Foreign Affairs Office, which then can be used to apply for a visa to enter China. 

Similar procedures apply to other provinces. Foreign nationals who wish to travel to China should contact the local Foreign Affairs Office.  

 

Shanghai – employer subsidy scheme for training fees 

All types of enterprises in Shanghai affected by the pandemic which organized online training for employees and dispatched workers during the shutdown period can receive 95% subsidy based on the actual amount spent on the training course. Platform enterprises (e-commerce enterprises) and new business enterprises are eligible to apply. (Responsible units: Shanghai Municipal Human Resources and Social Security Bureau and Shanghai Municipal Finance Bureau) 

 

FINANCE & TAXATION

The Application Period for Preferential Policy of Personal Income Tax of GBA is from 1 July to 15 August 2020 

In accordance with Interim Measures of Guangzhou for Administration of Financial Subsidies under Preferential Individual Income Tax (IIT) Policies in Guangdong-Hong Kong-Macao Greater Bay Area (GBA), overseas high-end talents and talents in short supply who work within the administrative areas of Guangzhou shall be given financial subsidies if their IIT paid in Guangzhou exceeding the tax amount computed at 15% of their taxable income. The application period of this year for preferential policy in Guangzhou city begins from 1 July to 15 August.  

Currently, out of the 9 mainland cities in the GBA, GuangzhouJiangmenZhongshanZhuhaiFoshanDongguanHuizhou have issued implementation measures on applying for the subsidies. 

 

Announcement of the State Taxation Administration on Matters concerning the Deferred Payment of Income Tax in 2020 by Small Low-profit Enterprises 

From 1 May 2020 to 31 December 2020, small low-profit enterprises may defer the payment of corporate income tax for the current period after completing the filing of tax returns with prepayment according to the provisions in the remaining filing period in 2020, and the payment of all income tax amount may be deferred to the first period for filing tax returns in 2021.  

Small low-profit enterprises refer to enterprises engaging in non-restricted and non-prohibited businesses, which satisfy three criteria simultaneously, namely, annual taxable income amount does not exceed RMB3 million, staff headcount does not exceed 300 and total assets do not exceed RMB50 million. 

 

Written by China Consultancy Team, CW CPA

The Greater Bay Area (GBA) initiative is an ambitious scheme to link the nine cities in Mainland and 2 Special Administrative Regions, namely Hong Kong and Macau, into an integrated economy and world-class business hub.

In 2019, by deepening reform, prioritizing innovation, and accelerating connectivity, the development of GBA has gained considerable momentum. Having the right talent to help develop the GBA economy is important. To address this issue, for “High-end Talents” and “Talents in Short Supply”, the Municipal Governments in the GBA will grant subsidies to the residents for the Individual Income Tax (IIT) paid exceeding 15% of the taxable income.

 

IIT subsidy application criteria

To be eligible for the IIT subsidy application, ALL the following 3 Basic Conditions must be met:

  1. Hong Kong or Macau permanent residents, Hong Kong residents under the Hong Kong Immigration Admission Schemes for Talents, Professionals and Entrepreneurs, Taiwan residents, foreigners, or Chinese students or overseas Chinese who obtained long term residency abroad;
  2. Work in one of the nine GBA cities and pay taxes according to the IIT law; and
  3. Compliance with laws and regulations, ethics and integrity relating to scientific research.

The definitions of “High-end Talent” and “Talent in Short Supply” vary among the nine Mainland GBA cities, of which only Guangzhou and 3 other cities have finalized the local implementation rules.

Guangzhou rules provide a detailed list of both “High-end Talent” and “Talent in Short Supply.” The “Talent in Short Supply” spans 16 industries with a wide spectrum of work types and seniority. However, the annual taxable income subject to IIT of the applicants in Guangzhou must be more than RMB 300,000.

The following is a selection of professions or positions included in the list:

  • Chartered financial analyst, certified public accountant
  • Private banker, fund manager, insurance actuarial talents, risk management talents
  • Senior management (e.g. chairman, vice chairman, general manager, deputy general manager, director, chief economist, chief accountant, etc.)
  • Software engineer
  • Construction (including planner, designer, engineer, etc.)
  • Professional service (including person with legal professional qualifications, registered surveyors, tax agents, translators, etc.)
  • Product manager or project manager in new generation information technology industry
  • New energy/new material engineer
  • Electrician
  • Logistics manager in modern e-commerce
  • Performing artist
  • Specialist doctor

 

Subsidy application procedures

Once the eligible employees are identified, proper travel schedules should be maintained by the employees to ensure that they meet the specific thresholds for applying the IIT subsidy (eg. Guangzhou requires the IIT subsidy applicants to stay in the city for at least 90 days during a tax year).

If the individual taxpayer’s IIT is withheld by a withholding agent, it is preferable for the application for the IIT subsidy to be submitted by the agent. If not, the individual taxpayer would need to submit their application himself or herself. Whilst the process can vary among the nine Mainland GBA cities the following table illustrates the general application procedures:

  1. Application submitted to Human Resources and Social Security Bureau (HRSSB) and Science and Technology Bureau (STB).
  2. Assessment of “High-end Talent” by STB, and “Talent in Short Supply” by HRSSB.
  3. Examination of the application materials and approval of subsidy by Finance Bureau (assisted by STB, HRSSB and Taxation Bureau).
  4. Distribution of subsidy by Finance Bureau

The subsidy is exempt from PRC IIT, and is calculated and distributed once a year.

 

Claiming tax credit for Hong Kong salaries tax

For Hong Kong residents who hold Hong Kong employment and are required to work in other Mainland Greater Bay Area cities, the Hong Kong residents will be entitled to claim credit in respect of foreign tax payable on the income under Section 50 of the Inland Revenue Ordinance.

Please note that the Inland Revenue Department is authorized to issue additional assessments when the amount of relief from double taxation given to the Hong Kong residents become excessive. 

Conclusion

To secure the IIT subsidy as a measure to attract or retain talents and to minimize their tax exposures and, it is important for both businesses and individuals to stay tuned for the policy updates and implementation details. CW CPA can assist you in both the updates and the application process.

 

Written by Rosanna Choi, Partner, CW CPA

EMPLOYMENT & LABOR

Guangdong High People’s Court Answers Some Questions Concerning the Trial of Labor Disputes Under Covid-19 Outbreak

On 26 April 2020, Guangdong high people’s court and the Guangdong human resources and social security department issue a notification to unify the trial standards for labor and personnel disputes under covid-19 outbreak. It mentions that:

  • If the employer has serious difficulties in production and operation due to the epidemic, through negotiation with the employee, it may change the labor contract by means as salary adjustment, job rotation, reduction of working hours, waiting for work, etc.
  • If the employer and the employee fail to reach an agreement through negotiation, the employer shall terminate the labor contract in accordance with the relevant provisions of the labor contract law and pay for economic compensation to the employee.

FOREIGN DIRECT INVESTMENTS

China Agrees to Set Up Comprehensive Experimental Zones for Cross-Border E-commerce in 46 Cities and Regions

On 27 April 2020, the Chinese Government agrees to set up comprehensive experimental zones for cross-border e-commerce in 46 cities and regions, including Meizhou city, Huizhou city, Zhongshan city, Jiangmen city, Zhanjiang city, Maoming city and Zhaoqing city which are in Guangdong province. The government will make great efforts to explore innovations in the technical standards, business processes, regulatory models and IT infrastructure in the business-to-business (B2B) mode of cross-border e-commerce and work out more supporting measures.

 

Ministry of Commerce (“MOFCOM”) issued the Letter on Promoting the 24 New Measures of Shanghai Municipality for Foreign Investment Stabilization

MOFCOM is introducing 24 measures (“Several Measures”) intended to stabilize foreign investment, in four aspects, including:

  1. Putting in place the national policies for wider opening up;
  2. Stepping up efforts to boost foreign investment;
  3. Improving foreign investment facilitation; and
  4. Strengthening the protection of foreign investment.

These measures are believed to help foreign businesses in countering the impacts of the epidemic and sustain an open and convenient environment for investment in Shanghai. Specifically, regarding strengthening the protection of foreign investment, the Several Measures highlight the need to improve the transparency of policies related to foreign investment and strengthen reviews of the legality of foreign-investment-related administrative normative documents before they are officially released. In this regard, China shall seek opinions and advice from foreign-invested enterprises and relevant chambers of commerce and associations beforehand.

To access the full Chinese version of the document, please click here: http://images.mofcom.gov.cn/wzs/202004/20200424092434547.pdf

FOREIGN TRADE & CUSTOMOS

Increase in the List of Imported Fruit Species and Exporting Countries and Regions

On 15 May 2020, the General Administration of Customs updates the directory of the countries and regions that are allowed to import fresh fruits and the directory of the countries and regions that are allowed to import frozen fruits. The fruits allowed to be imported include Chilean fresh citrus, American fresh blueberry and American Hass Avocado.

CYBERSECURITY

Cybersecurity Review Measures Will Take Effect on 1 June 2020

Cybersecurity Review Measures, developed based on State Security Law and Cybersecurity Law, aim to ensure the safety of the supply chain of critical information infrastructure and guarantee national security. When a critical information infrastructure operator purchases any network products or services with a potential effect on national security, this purchase must go through a cybersecurity review in accordance with the new measures. During a cybersecurity review, the state security risk, which may be generated by the purchase of network products and services, will be evaluated and the following factors taken into consideration:

  • the risk of illegal control over, disturbance or destruction of critical information infrastructure and the risk of critical data being stolen, divulged or damaged after the use of products and services;
  • damage to the continuity of critical information infrastructure business, due to interruption of supply for the products or services;
  • the security, openness, transparency and the diversity of sources of products or services, the dependability of the supply chain, and the risk of supply interruption due to factors such as politics, diplomacy or trade;
  • conditions of compliance with state laws, administrative regulations and department rules by the provider of products or services; and
  • other factors which may endanger the safety of critical information infrastructure and state security.

 

FINANCE & TAXATION

A Financial Support Guideline for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area Has Been Issued

The Greater Bay Area consists of Hong Kong, Macao and nine cities in Guangdong — Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing. The guideline was jointly issued by the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange on 24 April 2020. The guideline put forward 26 specific measures for these five areas:

  1. Promoting the Greater Bay Area’s cross-border trade and facilitating investment and financing;
  2. Expanding the opening-up of the financial sector;
  3. Promoting the connectivity of financial markets and financial infrastructure;
  4. Boosting innovation of the Greater Bay Area’s financial services; and
  5. Preventing cross-border financial risks.

Important tax matters for attention in May

For taxpayers who file tax return on a monthly basis, the deadline for filling tax returns in May is extended to 22 May 2020.

Although the monthly filing period has been extended, the enterprise still needs to complete the year 2019 final settlement of corporate income tax before 31 May 2020.

Written by China Consultancy Team, CW CPA

To alleviate the impact of the COVID-19, the Chinese government has introduced a series of supporting policies at both central and local level. In the following, we have summarized some of the key relief measures.

 

Measures at Central Level

 

Policies Related to Foreign Investment

Tariff on self-use equipment imported for foreign investment projects encouraged by the Catalogue of Industries Encouraging Foreign Investment will continue to be waived within the investment quota. For projects beyond the investment quota, project companies can make applications with the provincial development and reform commission to enjoy tariff exemptions.

 

Postponement in Principal and Interest Repayment for Loans to SMEs and Micro Enterprises

SMEs and micro businesses affected by the epidemic can make applications with banks to defer repayment of principal and interest expenses payable from 25 January to 30 June 2020. Overdue loan repayments in the period will not be subject to penalties. Before the end of June, enterprises can also apply for deferred payment of the housing fund.

 

Extension of Tax Filing Deadline

According to the latest Circular issued by China’s State Administration of Taxation, the tax declaration deadline in May is postponed to 22 May 2020, nationwide. Taxpayers who still have difficulties in meeting the new deadline due to the severe impact of the epidemic can apply to the relevant tax authorities for further extensions.

 

Supporting the “Difficult Industries”

Transportation, catering, accommodation, tourism industries are categorized as “difficult industries”. For losses incurred by enterprises in difficult industries seriously affected by the epidemic in 2020, the maximum carryover period may be extended from five years to eight years.

 

Measures at Local Level (Selected cities in Guangdong Province)

 

Overview

 

Local governments mainly formulate policies from the following two aspects:

  • Reducing labor cost, social insurance premium and housing fund, e.g. SMEs are exempted from pension, unemployment and industrial injury insurance expenses borne by enterprises from February to June 2020.
  • Launching preferential tax policies, e.g. the VAT rate of small-scale taxpayers will be reduced from 3% to 1%; Measures for tax deduction and exemption will be provided for manufacturers of key materials for epidemic prevention and control.

 

Shenzhen

  • Enterprises producing epidemic prevention materials are encouraged to expand investment in technological transformation. The enterprises can receive a maximum subsidy of 20 million yuan for not exceeding 50% of the investment in equipment.
  • The housing provident fund contribution rate is reduced, in which the minimum deposit rate is reduced from 5% to 3%; the housing provident fund payment is also postponed. The period of enjoyment cannot exceed 12 months.

 

Guangzhou

  • Require all banking institutions to ensure that the credit balance and the number of households of small and micro businesses and individuals in the first half of 2020 are not lower than that of the same period in 2019.
  • For catering, accommodation, tourism, trade, transportation and other industries that are greatly affected by the epidemic, banks are encouraged to reduce the original loan interest rate by more than 10%.
  • Policy-based financing guarantee companies at the municipal and district levels will cancel the counter-guarantee requirements, and the guarantee rate of the affected enterprises will be lowered by 1% point compared with the same period last year.
  • In 2020, the Bank of Guangzhou and the Rural Commercial Bank of Guangzhou plan to increase loans to micro, small and medium-sized enterprises by 57 billion yuan and cut the interest rate for new loans to micro, small and medium-sized enterprises across the board, by no less than 10% compared with the same period last year.

 

Dongguan

  • The qualified enterprises, including the “Made In Dongguan” brand exhibition and sales center outside the province, shall be given subsidies of up to 1 million yuan.
  • Provide employment subsidies to enterprises that directly recruit employees who are employed in Dongguan for the first time, expand social insurance subsidies for small and micro enterprises to college graduates within two years after graduation, and provide one-time employment subsidies to enterprises that recruit employees who register unemployment for more than half a year.
  • 30 million yuan arranged for the development of local mask production equipment enterprises, providing subsidies for enterprises to produce and sell mask machine.
  • Set up 10 million yuan of special funds, giving no more than 12% of the subsidies to insurance products related to resuming work and production of the enterprise products.

 

Following the implementation of various measures, we believe that China’s domestic market and its competitive advantages in attracting foreign investment will remain unchanged. The central and local governments are expected to roll out further stimulus measures for various industries. Companies should keep a close eye on these developments, evaluate their operations in China, and make prompt applications if they are eligible to benefit from these incentives and supporting measures.

Written by Delilah Li, China Consultancy Team, CW CPA

FOREIGN DIRECT INVESTMENTS

 

State Council Announced Measures to Stabilize Foreign Investment and Trade

On 7 April 2020, China’s State Council announced several decisions to stabilize foreign investments and trade. These decisions are:

  • To build another 46 cross-border e-commerce comprehensive pilot zones and implement preferential policies, including exemption of value-added tax, consumption tax and assessed levy of corporate income tax for retail export goods within the zones;
  • To support companies engaged in processing trade by suspending interest on deferred taxes until end of 2020 for companies that sell bonded materials and products on domestic markets, expanding fields for foreign investment and reducing goods categories forbidden for processing trade;
  • To hold the 127th China Import and Export Fair (Canton Fair) online during mid-late June.
  • To continue parts of expired preferential tax policies including exemption of value added tax for interest income of financial institutions.

 

China’s Absorption of Foreign Investment in the First Quarter of 2020

In January-March 2020, China’s utilization of foreign investment nationwide was 216.19 billion yuan, down 10.8% year on year, excluding banking, securities, and insurance, the same below). However, the utilization of foreign investment in high-tech service industry increased by 15.5% year on year, accounting for 29.9% of the service industry. Of the total amount, information service, e-commerce service, and professional and technical service increased by 28.5%, 62.4% and 95% year on year respectively.

 

China’s Ministry of Foreign Commerce Introduces Policy Initiatives to Support Foreign-Invested Enterprises (FIE)

On 10 March 2020, Premier Li Keqiang chaired a State Council executive meeting which determined six measures on addressing the impact of covid-19 and stabilizing development of foreign trade and foreign investment. The Ministry of Foreign Commerce then introduced the following initiatives to support foreign investments in China:

  • Keep expanding market access for foreign investment and add more encouraged industries allowed for foreign investments;
  • Offer policy support for foreign trade companies to comprehensively resume work and production;
  • Promote the innovation and upgrading of 218 national economic and technological development zones and giving Free Trade Zones more autonomy for reform and innovation;
  • Improve the efficiency of multilateral and bilateral investment promotion mechanism and leverage the roles of China International Import Expo, China International Fair for Investment and Trade and other major exhibition platforms in investment promotion;
  • Implement well the Foreign Investment Law and its supporting regulations, establish a service system for foreign investment and improve a working mechanism for foreign investment companies to file complaints in order to attract, reassure and keep business.

 

IMMIGRATION

 

Temporary Suspension of Entry by Foreign Nationals Holding Valid Chinese Visas or Residence Permits

China has decided to temporarily suspend the entry into China by foreign nationals holding visas or residence permits still valid to the time of this announcement, effective from 0 a.m., 28 March 2020. Foreign nationals coming to China for necessary economic, trade, scientific or technological activities or out of emergency humanitarian needs may apply for visas at Chinese embassies or consulates. Entry by foreign nationals with visas issued after this announcement will not be affected.

 

CUSTOMS

 

China strengthens regulation of medical equipment for export

Starting from 26 April 2020, all non-medical-use face masks to be exported must meet the quality standards of China or export destinations; if a purchase contract has been signed before the date, the exporter shall present a joint statement, electronic or written, signed by the importer when it makes customs declarations. Furthermore, if an export company has obtained certification or registration for their COVID-19 testing kits or other medical supplies, the customs department shall clear their exports based on a list of certified or registered producers provided by the Ministry of Commerce, which requires that relevant departments should examine and confirm the list of foreign certified or registered producers of anti-epidemic supplies.

 

Lower Export Fares and Facilitate Transportation of Trade Goods

Importers and exporters will be exempted from port construction fees, and other expenses for port operation, port security and oil damage compensation fund will be reduced. Foreign trade companies are supported to have a greater say in determining shipping fares; shipping companies are guided to adjust the price structure of shipping services and reduce the proportion of shipping surcharges.

 

FINANCE AND TAXATION

 

Guangdong Province Issued Implementation Opinions on Reduction of Enterprise Social Security Premium Contribution in Phases

Social security participating organizations in Guangdong Province can now refer to the Implementation Opinion to enjoy reduction of the company’s social security premium contribution. Small, medium and micro enterprises who are qualified to enjoy the reduction policy can be exempted from social security premium contributions from February to June 2020. For large enterprises and other organizations, the payment of social security premium contributions borne by the employers will be halved.

 

China and Chile Amend Agreement on Avoidance of Double Taxation and Prevention of Fiscal Evasion

China’s State Taxation Administration released on 14 April 2020 the Announcement on the Entry into Force and Implementation of the Agreement between the Government of the People’s Republic of China and the Government of the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and the Protocol.

Optimize Foreign Exchange Management and Support Development of Foreign-related Businesses

The State Administration of Foreign Exchange (SAFE) will launch nationwide reform to facilitate payment of capital account items, simplify registration procedures for some capital account businesses, and relax restrictions for export-background domestic companies to buy foreign currencies and repay foreign-currency loans. Besides, the SAFE will make it more convenient for companies to use electronic certificates and documents to process foreign exchange businesses, optimize foreign exchange settlement procedures for cross-border e-commerce operators and support banks to introduce innovative financial services.

Written by China Consultancy Team, CW CPA

On 26 February 2020, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2020-21 Budget Speech.

Faced with the Sino-US trade conflict, other external factors and unexpected outbreak of the novel coronavirus, the Financial Secretary’s 2020-21 budget is focused on supporting enterprises, safeguarding jobs, stimulating the economy and relieving people’s burden.

2020-21 Budget Highlights

We summarize the 2020-21 budget’s key highlights relating to salaries tax, profits tax, measures to smoothen livelihoods, support enterprises and achieve diversified economy, as follows:

Smoothen livelihoods

a) HK$10,000 cash payout to Hong Kong permanent residents aged 18 or above

b) Salaries Tax and tax under personal assessment for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

Support Enterprises

a) Profits Tax for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

b) Concessionary low-interest loan

c) Waive rates for non-domestic properties for 2020-21, subject to a ceiling of HK$5,000 per quarter in first two quarters and HK$1,500 per quarter for remaining two quarters

d) Waive the business registration fees for 2020-21

e) Waive registration fees for company annual returns for 2 years

Continue to implement relief measures announced last year

f) Electricity charges for non-residential account: subsidise 75% of charges for 4 extra months, subject to a monthly cap of HK$5,000

g) Water and sewage charges of non-domestic households: waive 75% of charges for 4 extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively

Achieve diversified economy, Innovation and technology

a) Issue inflation-linked retail bonds and Silver Bonds totalling not less than HK$13 billion

b) Issue green bonds totalling HK$66 billion in next 5 years

c) Waive stamp duty on stock transfers paid by the Exchange Traded Fund (ETF) market makers when creating and redeeming ETF units listed in Hong Kong

d) Establish a limited partnership regime and provide tax concession for carried interest issued by private equity funds to attract them to domicile and operate in Hong Kong

e) Earmark HK$3 billion to take forward Phase 2 of the Science Park Expansion Programme

f) Increase the grant ceiling under the Technology Voucher Programme to HK$600,000 and raise the Government’s funding ratio to 75%

g) Inject HK$345 million for a pilot subsidy scheme to encourage the logistics industry to enhance productivity through the application of technology

h) Additional funding of HK$150 million for the Hong Kong Trade Development Council to assist Hong Kong enterprises in exploring business opportunities

Hong Kong expects a record deficit of HK$139 billion for 2020-2021 that is mainly due to the one-off relief measures of around HK$120 billion. However, the forecast of deficits over the next 5 years, ranging from HK$7 billion to HK$17 billion, means that a holistic review of Hong Kong taxation system is a top priority for the Hong Kong Government to attain Hong Kong’s fiscal health.

Written by May Tung, Tax Advisory Services, CW CPA

 

Appendix

Proposed Budget and Summary of Hong Kong Taxes 2020-21

 

PROFITS TAX

*For 2019-20, the profits tax is proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

SALARIES TAX

  • Salaries tax is charged at the lower of net chargeable income (Total Income – Deductions – Allowances) at progressive rates or net total income (Assessable Income – Deductions) at standard rate.
  • Standard rate remains the same at 15%.
  • Progressive rates are as follows:

*For 2019-20, the salaries tax and tax under personal assessment are proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

Allowances

Deductions

PROPERTY TAX

The standard rate (for non-corporate owners) remains at 15% for 2020-21.

Written by May Tung, Tax Advisory Services, CW CPA   The new version of Profits Tax Return (PTR) issued by the Inland Revenue Department of Hong Kong has become effective from 1 April 2019. A set of supplementary forms has been introduced as part of the PTR. In one of the supplementary forms – Supplementary…

Written by Spring Lin, Accounting and Tax, CW CPA   To further reduce taxpayers’ VAT burden, in 20 March 2019, the Ministry of Finance, State Administration of Taxation and General Administration of Customs jointly issued “Administration and the General Administration of Customs” (Hereinafter referred to as Announcement [2019] No. 39.)   The specific VAT reduction…

Written by May Tung, Tax Advisory Services, CW CPA   On 27 February 2019, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2019-20 Budget Speech. The 2019-20 Budget carries 6 main objectives: 1. Relieve people’s burden; 2. Support Enterprises; 3. Land and Housing; 4. Diversified Economy; 5….

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