China Updates

China Updates – December 2020

Updates for this month: 

  • Shanghai Pudong New Area will be testing an integrated license system 
  • State Taxation Administration Simplifies Withholding and Prepayment Methods for Individual   Income Tax on Certain Taxpayers 
  • Export Control Law of the People’s Republic of China 
  • Regional Comprehensive Economic Partnership (RCEP) 

 Compliance Tips: 

  • My Company is registered in Guangzhou. Can I hire employees in Shanghai and have them work in Shanghai? 
  • More on Trademark Registration 

Shanghai Pudong New Area will be testing an integrated license system

A new temporary measure will be tested in the Shanghai Pudong New Area with the State Council’s approval. The “One Integrated License” test will last until the end of 2022, and it is expected to benefit the reduction of access costs of diverse industries. 

Currently, to set up a business in China, besides obtaining a Business License from the local Administration of Market Regulation, companies may also need to apply for the industry permit to carry out activities subject to specific industry regulations. The pilot measure in Shanghai Pudong New Area provides one integrated license to companies combining the business license and the industry permit. Once granted, business owners no longer need to spend extra time applying for any additional industry permits.

31 sectors will be covered during the first phase of the implementation. These industries range from e-commerce, accounting firms, data centers, construction, convenience stores, hotels, cinemas, cosmetics manufacturing, etc. The integration of licenses will allow companies to access better specific sectors and the government’s online services. 

 

State Taxation Administration Simplifies Withholding and Prepayment Methods for Individual Income Tax on Certain Taxpayers

Effective from 1 January 2021, for resident individuals whose wage and salary income in the whole year does not exceed RMB60,000 on which individual income tax is withheld and prepaid by the same organization monthly within the preceding complete tax year, the withholding agent shall, at the time of withholding and prepayment of individual income tax on income from wages and salaries for the current year, compute and deduct the cumulative amount for expenses directly based on RMB60,000 for the whole year with effect from January. 

That said, no individual income tax shall be withheld and prepaid for the taxpayer in the month in which his/her cumulative income does not exceed RMB60,000, and individual income tax shall be withheld and prepaid for the taxpayer in the month in which his/her cumulative income exceeds RMB60,000 and subsequent months within the year.

 

Export Control Law of the People’s Republic of China

China adopted its first Export Control Law (ECL), which has taken effect from 1 December 2020. The ECL applies to the export control by the State over dual-use items, military products, nuclear, and other goods, technologies, services and items that relate to the safeguarding of national security and interests. 

Exporters engaging in the export of controlled items shall abide by the ECL and obtain the corresponding qualification for the export of relevant controlled items.

Any organization or individual outside the territory of China that violates the ECL on the administration of export control endangers China’s national security and interests or hinders the fulfillment of international obligations such as non-proliferation shall be investigated for legal liability.

 

Regional Comprehensive Economic Partnership (RCEP)

The Regional Comprehensive Economic Partnership (RCEP) was signed on 15 November 2020 by 15 states in the Asia Pacific region to establish a mutually beneficial economic partnership that will expand regional trade and investment. The RCEP participating countries account for about 30% of the global GDP and 30% of the world population.

 

My Company is registered in Guangzhou. Can I hire employees in Shanghai and have them work in Shanghai?

The Chinese consumer market has fewer and fewer domestic borders, and often businesses want to cover more expansive geographical areas. 

If you want to use your Guangzhou entity to hire employees in Shanghai and have them work permanently in Shanghai,  you might find the obstacle that their social insurance account must link to the city of employment, Guangzhou. 

Therefore, the most compliant solution is to set up a Branch office in Shanghai, which of course increases your operating costs. Some cities allow purchasing social insurance through a local dispatch company to act as the employer. However, this is not a long-term solution. Cities like Beijing do not allow this option anymore. 

 

More on Trademark Registration

Many agencies can register the trademark for you in China. However, we should pay attention to other details as well: 

  • First, the filing must be done BEFORE showing it to the public. Countless foreign trademarks have been registered after the locals saw potential in those brands.
  • Secondly, the pre-application screening is a crucial step before applying for it. If the chances of success are low, then it will be a waste of time and money. If the trademark has been registered by another company previously, you can get it if they have not used it for the last three years.
  • The choice of categories, different from the Nice system, must be carefully thought to stop others from using it for their benefit.
  • Finally, if further action is needed, make sure a specialized IP attorney is at your disposal.
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