China business

Greater China Updates – January 2021

  • Update on the 2020 Market Access Negative List 
  • Shanghai Local authorities have introduced some measures to promote the incorporation of foreign companies.  
  • Hainan: Free Trade Port officially launched 
  • Deadlines for Filing Tax Returns in 2021 defined 
  • Compliance tips on employee termination and trademark issues in China 

Update on the 2020 Market Access Negative List 

On 16 December 2020, the National Development and Reform Commission reduced the list from 123 items to 31 compared with the 2019 list. The main industries that will benefit from this update include oil and gas, management of resources, and services on trading and finance. The update allowboth local and foreign firms to enter to some extent to previously prohibited or restricted sectors. It is important to mention that foreign investors still need to review the Foreign Investment Negative List to clarify in which industries they are allowed to conduct business in China 

For more information or more details on the Market Access Negative List from 2020, please visit the following link: 

https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202012/t20201216_1252897_ext.html 

 

Shanghai Local authorities have introduced some measures to promote the incorporation of foreign companies.  

Recent regulations introduced by Shanghai’s local government will help foreign companies cut time in the registration process. Due to the ongoing traveling restrictions, the Administration for Market Registration (AMR) of Shanghai has relaxed the authentication of some essential documents. In the past, most of the documents must be authenticated in the Chinese Embassies or Consulates correspondent to the documents’ country of origin. However, to ease the process for the different kinds of investors or representatives, the authorities are giving a waiver to provide the corresponding authentication documents once available. Additionally, a letter of commitment must be submitted by the parties interested in the incorporation and the notarized correspondent documents to obtain a business license. Further, some banks, such as the Bank of Shanghai (BOS), allow video calls with the Legal Representative to open the Capital Account and the Basic RMB account for the Foreign Invested Enterprise, without his/her physical presence. 

These policies might change as the current situation evolves and may vary from district to district. To be up to date with the changes, please contact us at shanghai@cwhkcpa.com. 

 

Hainan: Free Trade Port officially launched.  

Following a pilot program, Hainan island has been granted the Free Trade Port (FTP) status after China drafted a law formalizing it.   

This event is aligned with a greater plan to take the province into a more influential FTP worldwide.   

At this first stage, specific imported commodities will be exempt from tariffs. At the second stage which will be after 2025, all commodities not included on a restriction list will be tariff-free.   

The Law echoes promising corporate tax along with individual income tax policies in Hainan. Corporations established in Hainan within encouraged industries will be taxed at a lowered corporate tax rate from the standard tax rate of 25% to a more favorable 15% tax rate. Important to stress that after 2025, this policy will be extended to all industries. Additionally, some commodities might be exempted from import duty, import value-added tax (VAT), and consumption tax. 

 

Deadlines for Filing Tax Returns in 2021 defined  

The State Taxation Administration (STA) has released the specific deadlines for filing tax returns in 2021. 

According to the tax law in place, taxpayers must file their returns within 15 days after the end of a month or a quarter. However, these deadlines need to be adjusted due to statutory public holidays in certain months. Thus, deadlines in some months will be granted an extension depending on the number of public holidays. 

* Note: 

Provincial tax bureaus might adjust their deadlines. Taxpayers are advised to be aware of any changes. 

 

Compliance Tips  

On Employee Termination During Pandemic  

Due to the current situation resulting from the pandemic, and with this Chinese New Year in 2021, clients often inquire about Employment and Labor matters, especially regarding dismissal. The employer may not terminate the contract if the employee is pregnant, is under a period of medical treatment for an illness, has been injured at work, is being diagnosed, is under medical observation, or has been working continuously for 15 years. However, the employer is entitled to dismiss him/her under the following conditions: 

  • The employee is proven to be unqualified. 
  • The employee has seriously violated rules and regulations. 
  • The employee has caused significant losses to the employer due to malpractices for personal gain,  
  • The employee has established a labor relation with another employer. 
  • The employee is being investigated for criminal responsibility. 
  • The employee is incompetent after receiving training. 
  • The company has to reduce personnel due to introduction of major technological updates and adjustment of business method. 

 

On Trademark Registration  

If you plan to sell your products in China, have you checked whether your trademark has been registered by others already? If not, you may be facing the possibility of not being able to sell your products with the trademark. Your products may not be allowed to enter China, or you may be sued by the individual/company that owns the trademark.  

Invalidating a trademark registration can be extremely difficult due to the complexity of providing evidence of bad faithEven though you may argue that you use the trademark first, the chance of recovering the trademark is low, since China uses the first-to-file system. 

There are several alternatives, such as buying the trademark from the competitor, collaborating with the competitor as a business partner, or rebranding the trademark to sell your products under a new trademark. All these options involve paying a high price or giving away your established business value. 

Therefore, before selling your products to China and revealing your brand, you must first get your trademark registered in China. There is no shortcut.  

Newsletter