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:
- Putting in place the national policies for wider opening up;
- Stepping up efforts to boost foreign investment;
- Improving foreign investment facilitation; and
- 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 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:
- Promoting the Greater Bay Area’s cross-border trade and facilitating investment and financing;
- Expanding the opening-up of the financial sector;
- Promoting the connectivity of financial markets and financial infrastructure;
- Boosting innovation of the Greater Bay Area’s financial services; and
- 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)
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.
- 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.
- 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.
- 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
As the coronavirus pandemic continues to grow and evolve around the world, public and private sectors are scrambling to adapt to these times and take effective responses.
Whilst temporary containment measures are gradually relaxed by the Chinese government, the next step is to focus on mitigating the economic impact of COVID-19 across the Chinese businesses over the long term. This means designing and implementing measures to integrate economic reactivation, investment encouragement, and getting the country back on track. To do so – alleviate the economic impact of the COVID-19 epidemic-, the Chinese government have introduced a series of supporting policies at both central and local level.
On this occasion, CW was pleased to have been invited by The American Chamber of Commerce in South China (“AmCham”) to host a webinar that took place on 19 April 2020. More than 100 people and companies registered and participated in the webinar focused on business crisis management and the government’s contingency aid offer to Chinese companies. Topics covering everything from how to be prepared for and manage this disruptive and emergency, policies and subsidies related to FDI, to the role of the technology in the era, were discussed.
Headed by the president of AmCham South China, Harley Seyedin, and with the participation of Thomas Wong, Partner at CW CPA, and Victor Herrera, as the main presenter on behalf of CW, the webinar further enhanced our relationship with American companies in South China. This translates into a greater network of knowledge and advice to all foreign companies established in Mainland China.
For CW, actively participating in these open discussions means our firm’s commitment with our clients and all those companies running business in Mainland China, sharing valuable information and being able to provide the right services with the highest standards of quality and performance.
The American Chamber of Commerce in South China (AmCham South China) is a non-partisan, non-profit organization dedicated to facilitating bilateral trade between the United States and the People’s Republic of China. AmCham South China represents more than 2,300 corporate and individual members, and provides dynamic, on-the-ground support for American and International companies doing business in South China.
Written by Victor Manuel Herrera, Latin Department, CW CPA
In late April, CW had the pleasure to deliver a series of webinars in Mexico, sharing insights, experience and knowledge on how to overcome business challenges during COVID-19. With more than 100 people registered for the webinars and many more watching the video recordings, these webinars resulted from the collaborative efforts with our strategic business partners such as InvestHK and COMCE Sur.
COVID-19 landed in Latin America on 26 February 2020 when Brazil confirmed its first case. Mexico confirmed its very first case on 28 February in Mexico City. Since then, governments across the region – including Mexico – have taken an array of actions to protect their citizens and reduce the spread of COVID-19.
With the new coronavirus spreading rapidly across all Latin American countries, the seeming difficulty to stop the spread of coronavirus and the travel restrictions imposed by some governments in the region, it is difficult for LATAM businesses to successfully stay afloat in these times.
In the next coming months, our Latin Department will continue organizing more webinars on various topics relating to the latest government measures in battling against COVID-19 and helping our clients in Latin America steer clear of any policy uncertainty.
- InvestHK is a government department of foreign direct investment in Hong Kong, having a vision to strengthen Hong Kong’s status as the leading international business location in Asia. Its mission is to attract and retain foreign direct investment which is of strategic importance to the economic development of Hong Kong.
- COMCE is one of the main organizations dedicated to promoting foreign trade, foreign investment and the development of technology in Mexico. It has more than 50 years of experience in foreign trade promotion and represents around 2,000 exporting companies which carry out approximately 80% of total exports in Mexico.
Written by Victor Manuel Herrera, Latin Department, CW CPA
The epidemic of COVID-19 in Mainland China has been slowing down. Before work resumption, you should know how to properly handle the situation from the administrative and human resources perspective. Special attention should be paid to the local administrative rules regarding the work resumption.
To answer some of the most common concerns, our CW China Consulting Team would like to draw your special attention to the following points:
- Related Government Documents:
- The Ministry of Human Resources and Social Security of the People’s Republic of China issued the Notice on Properly Handling Labor Relations During The Prevention And Control Of Pneumonia Epidemic Of New Coronavirus Infection on 24 January 2020.
- The State Council of the People’s Republic of China announced on 26 January 2020 that the Lunar New Year and Spring Festival holiday would be extended to 2 February, across the country. The holiday week was originally from 24 January to 30 January.
- Guangdong Province and some other cities or provinces have formally required enterprises (except those organizations involved in providing basic services for residents and those involved in combating the spread of the virus) not to resume work prior to 10 February 2020.
- Labor Relationship:
- If the employee had already applied for annual leave prior to the announcement of the holiday extension, it is recommended to deal with this situation on the principle of benefiting the employee.
- If one of your employees gets infected with the Coronavirus Disease 2019 (COVID-19), and he/she is either at home or in hospital, by law they are classified as being under medical treatment, and your company is unable to terminate the labor relationship with this employee.
The labor contract between the employer and the employee shall be extended automatically until the medical treatment or quarantine is over.
Enterprises shall pay remuneration to employees during the above-mentioned period.
If the labor contract expires during this period, the period shall be extended to the expiration of the medical treatment period, the expiration of the medical observation period, the expiration of the quarantine or the termination of the emergency measures taken by the government.
- Some employees may be unable to return to work or may be unwilling to return to work. The company should review the statement or application provided by the employees. If it is reasonable, the company should allow the employees to self-isolate, and both parties can negotiate and arrange work at home, use annual leave, personal leave and other ways to deal with, according to the actual situation.
- An employee who is reluctant to return to work without reasonable cause is considered absent from work and should be dealt accordingly with the company’s employee handbook.
- If an employee has to take care of his/her children whose classes have been suspended or is pregnant considering that her health and safety will be in jeopardy, the employee and the employer shall negotiate in time to adjust the working hours, working methods, job duties, salary, etc.
- Allowance and Bonus Problems:
- For handling the payment of allowances and bonuses, the regulations in the employee handbook or the terms of the labor contract should be followed. In this regard, the clarification should be provided for allowances and/or bonuses that are fixed, or whether the allowance is based on the actual amount provided by the employees.
CW is glad to assist your company to prepare for the resumption of work. You need not worry about the administrative work involved. If you have any queries, please do not hesitate to contact Ms. Phenix Zheng of our China Consulting Team at firstname.lastname@example.org.
Written by Galo Rodrigo, Latin Department, CW CPA
2020 is destined to be remembered as a turbulent period in the human history. The outbreak of COVID-19, which is declared by WHO as a global pandemic, is impacting the world’s social and economic environment profoundly. As the first country hit by the epidemic, China is taking aggressive measures slowing down the spread of the coronavirus.
China nowadays is responsible for 17% of the world’s economy and drives 30% of the world’s GDP growth, taking a much higher stake compared to during the SARS epidemic period in 2003. Since mid-February when the outbreak in China reached its peak, the Chinese government has already started making plans to restart the economy by a series of economic and financial policies.
First and foremost, to save the small businesses from running out of cash, China’s central bank has injected RMB 1.2 trillion ($174 billion) into the market and reduced the interest rate for commercial lenders to 2.5%. The State Council also ordered large state-owned banks to increase lending to small businesses by at least 30 percent in the first half of 2020. At the same time, the central government encouraged local governments to draft up support policies to help small businesses pay less, including phased tax cuts, postponed payments, deduction and waiver of social insurance fees, as well as discounts in utilities fees.
Under the waves of economic stimulus, businesses in China are racing to find silver linings in the looming presence of economic slowdown. Supermarkets, traditional food markets, restaurants, gyms, and those used to rely on physical space are adapting to new business models for online sales. Many restaurants recently received takeout orders that have accounted for 90% of the business. Hema (盒马), a fresh food retailer, has seen a surge of online orders during the epidemic and has recruited more than 1,500 employees from over 30 suspended catering companies. The logistics industry, although largely impacted by the travel ban, is still busy arranging daily deliveries to the local communities. Some health clubs and gyms are aiming at online marketing to enhance customer relationship by streaming teaching videos. Online education, internet medical treatment and online office solutions are also developing rapidly.
In the space of just a few weeks, business owners have, of necessity, begun to transform their businesses in a digital way. Some may struggle, and hopefully most will make it through. Take a moment to remember how JD.COM became one of the biggest online retailers in China. During SARS outbreak in 2003, Mr. Richard Liu, the founder of JD.COM, suffered RMB 8 million in less than a month. When the company had only 3 months’ of cashflow available to burn, he closed his brick-and-mortar shop and launched a retail shop online, which evolved to JD.COM today.
All of that said, there are also sound reasons to be concerned about how small companies can survive the COVID-19 outbreak when China’s economic landscape is much different from that during SARS. Just before the COVID-19 made its entry on the stage, the country’s economy was already slowing with multiple consumer sectors suffering weak demand, rising labor costs, growing debt and rapid aging. During the coronavirus outbreak, the closure of businesses has inevitably caused many companies to suffer huge sunk costs such as rent, salaries, inventories, etc. Even when the outbreak is over, the public needs time to overcome the fear of activities that require social interaction. Businesses have legitimate reasons to be uncertain about sustaining profitability.
Regardless, one thing is clear – the coronavirus is staying with us for a while. Businessmen may be restricted from traveling to close deals by shaking hands. But they are not restricted from looking for new business opportunities through innovation and change. China will continue to roll out policies to stimulate the economy along with the measures to contain the outbreak. It is advisable to study these policies carefully, as the government policy is usually a good compass pointing to the direction of the country’s next economic focus. Funds and incentives are available in the development of strategic sectors. When the outbreak is over, China will accelerate the recovery by rewarding those who stick around.
Written by Delilah Li, China Consultancy Team, CW CPA
Given the current situation of the COVID-19 epidemic around the world, we have been receiving questions about handling special workplace situations.
In response to the uncertainties that disrupt the working life and company businesses, on 6 March 2020, our China Consulting Team (CCT) conducted a webinar in collaboration with the South China Branch of the French Chamber of Commerce and Industry in China (CCI France Chine). Speakers included our Legal Advisor, Lily Fan, and, Assistant Admin and HR Manager, Betty Pan. During the webinar, several human resource topics including employee wage calculations, employee assistance and labor relations amid the outbreak.
Written by Marant Caballero, Latin Department, CW CPA
CW participated on the 2nd edition of the China International Import Expo (CIIE) 2019
From 4 to 8 November 2019, several Latin Department colleagues traveled to Shanghai to attend the 2nd China International Import Expo (CIIE). David Barriga, our overseas consultant for South America, also attended the CIIE as part of a Colombian business delegation. This was the first time Colombia has an official booth in the CIIE. Other countries that participated in the 2nd edition included Argentina, Brazil, Chile, Mexico, Costa Rica, El Salvador from Latin America and Spain and Portugal from Europe.
During the CIIE, Gabriela Lenis and Raul Chan, our Latin Department business advisors, attended the “Economic and Trade Fair for China, Africa and Latin America Cooperation”, which had the objective of creating a platform for fostering the trade between the respective regions. Our team also visited various country pavilions and got in touch with companies which were interested in entering the Chinese market. In particular, among various industries, food and tourism occupied the largest expo areas which were our focus of visit.
Written by Marant Caballero, Latin Department, CW CPA
Macao advantages as a bridge between China and Lusophone countries
The Macao Special Administrative Region may only have gained worldwide prominence with the advent of the liberalization of the gaming industry (casino) less than two decades ago, but it is important not to devalue what was and still represents Macao: a trading post. Macao’s history as a colony dates back to the 18th century. XVI when it was voluntarily ceded by China to the Portuguese to facilitate trade. Since then, this peaceful coexistence between East and West has defined Macao, making it an attractive business hub given the region’s stability and uniqueness, which is currently celebrating its twentieth anniversary of its return to the Chinese administration.
That said, the connection with Portugal, or with Lusophony, has never been lost, which is noticeable in the fact that the Portuguese language remains one of the official ones (together with Chinese). As such, official documents are almost all bilingual, and Portuguese is still heard in various public and private services (although in this latter context English is also often an option).
Another noteworthy aspect has been China’s investment in Portuguese-speaking countries (PALOPs), which has been carried out directly or through Macao. Forum Macao, as it is known, is a China-funded organization that aims to facilitate trade cooperation with the PALOPs. Moreover, at the advent of the Macao International Fair (MIF), it is worth noting this and other events held in Macao to promote products from around the world and in, which various buyers participate.
For any business owner, the difference in tax burden is currently an important aspect of decision making. In Macao, given the considerable government revenue from gambling tax, corporate income tax is limited to only 12%. The same applies to the amount of profits after deduction of the exemption, which varies each year from MOP600,000 for the 2018 financial year, currently equivalent to about USD74,273. Also, there is no dividend tax, which means that net income is the amount the end-day investor takes home. Business taxation is divided into two groups of taxpayers, one of which is based on presumed income. To do so, the annual statement provided by the Finances must include the total amount of income and expenses – overall, Macao has a much easier bureaucracy. Likewise, the personal income tax is progressive up to a maximum of 12%. Since the employer is only required to withhold and pay social security contribution (which is not high). Besides, there is no value-added tax and Macao is considered a free port, there are no customs duties on imported products. Also, the Macao Government has entered into various double taxation agreements.
Another interesting aspect is the Mainland and Macao Closer Economic Partnership Arrangement (CEPA), which gives Macao companies privileged access to the interior of China, including the export of certain goods. types of products exempt from customs duties. Company formation in Macao is a relatively simple procedure open to any investor and can be done remotely. The subsequent opening of a bank account currently requires (depending on the requirements of KYC), in addition to the usual documents, proof of the existence of a (legitimate) business, final beneficiary and, in most banks, a personal journey in front of the counter.
It is therefore advisable to set up the company first, which may take up to 1 month (two weeks minimum for registration with the Conservatory), with a subsequent director traveling to Macao to handle the opening procedures of bank account. In this context (as anywhere), professional assistance can be a valuable help in saving time in making any investment in the region.
This text is only a basic guide and should not be taken as a reference for making investment decisions in Macao as the specifics of the case may translate into the application of different rules.
Written by Jose Alvares, Partner, CA Lawyers – Macao