FOREIGN DIRECT INVESTMENTS
The 2020 edition of the Negative List of Foreign Investment Access released.
On 23 June 2020, the National Development and Reform Commission and the Ministry of Commerce respectively issued the Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) and the Special Management Measures (Negative List) for Foreign Investment Access in Pilot Free Trade Zones (2020 Edition), effective as of 23 July 2020. The national negative list of foreign investment access has been reduced from 40 to 33, and the negative list of foreign investment access in pilot free trade zones has been reduced from 37 to 30. The main changes include the following:
- In the pharmaceutical industry, the prohibition on foreign investment in traditional Chinese medicines prepared in ready-to-use forms will be removed.
- In the education sector, wholly foreign-owned vocational education institutions with schooling are allowed to be established.
- In the financial sector, the restrictions on the ratio of foreign shares in securities companies, securities investment fund management companies, futures companies and life insurance companies will be removed.
- In the infrastructure sector, the provision that the construction and operation of urban water supply and drainage networks with a population of more than 500,000 must be controlled by Chinese investors will be removed.
- In the manufacturing sector, the restrictions on foreign shares in commercial vehicle manufacturing will be removed, and the provisions prohibiting foreign investment in radioactive mineral smelting, processing and nuclear fuel production will be removed.
- In the agricultural sector, the proportion of Chinese shares shall not be less than 34% on breeding of new wheat varieties and seed production.
China to tighten regulations on cosmetics business.
On 29 June 2020, The Regulations on Supervision and Administration of Cosmetics (hereinafter referred to as the “New Regulations”) was officially promulgated and will take effect on 1 January 2021.
Compared to the existing regulations, the new regulations have stepped up to tighten the administration and supervision of market players in the cosmetics industry. Highlights include:
- The new regulations clearly stipulate the types of new raw materials that need to be put on record and registered, as well as the specific procedures, the materials submitted, and the review period.
- Reclassify the categories of cosmetics.
- It further clarifies the responsibilities and obligations of relevant personnel, and their legal liability of noncompliance.
- The new regulations put forward requirements for the actual effect of efficacy components and raise higher expectations on cosmetics producer’s management and research and development.
- The new regulation has increase penalties for violations and committed drive serious offenders out of the market.
Personnel entering Guangdong Province at Guangdong Macao port will no longer be subject to centralized isolation from 15 July 2020.
Since 6:00 a.m. on July 15, personnel entering Guangdong Province from Guangdong and Macao ports will no longer be subject to centralized isolation for 14 days of medical observation, except for those diagnosed with COVID-19, suspected to be infected, having had close contacts with patients, showing signs of fever or respiratory symptoms, or having been visited by overseas personnel within 14 days prior to arrival in Guangdong province. Pre-entry preparations include: (1) Completion of nucleic acid testing. (2) Application for “Macao Health Code” and “YueKang Code”.
Personnel who enter the Guangdong province through Macao can only conduct activities in nine cities, namely Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, Zhaoqing.
For Macao residents who work or live in Guangdong province and mainland China residents who come back to Guangdong province after visiting Macao, their movements are limited to Guangdong province.
The People’s Bank of China to Launch Two Year Trials for Large-sum Cash Management.
The People’s Bank of China recently issued the “Notice of the People’s Bank of China on the launch of Large-amount Cash Management pilot project”, in which it has decided to carry out the pilot project in Hebei Province, Zhejiang Province, and Shenzhen from July 2020.
In all the pilot areas, cash transactions of 500,000 yuan or more in business accounts will be monitored and regulated.
For personal accounts, Hebei, Zhejiang and Shenzhen have set regulation thresholds at 100,000 yuan, 300,000 yuan and 200,000 yuan, respectively. Residents the pilot areas will need to provide information about the source of deposits or the purpose of withdrawals for transactions over the threshold.
Financial institutions should make sure personal deposits or withdrawals exceeding the threshold amount are traceable and associated with serial numbers of physical cash.
Greater Bay Area – “Cross-border Financial Management Link” is about to be implemented.
To support the development of Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”) and facilitate cooperation between mainland China and Hong Kong as well as Macao, on 29 June, the People’s Bank of China, the Hong Kong Monetary Authority, and the Macao Monetary Authority decided to launch a “Cross-border Financial Management Link” program in the GBA .
“Cross-border Financial Management Link” facilitates cross-border investments of individual residents of GBA in financial products sold by the Banks in GBA. Mainland residents in GBA may open special investment accounts with banks in Hong Kong and Macao to purchase eligible investment products sold by these banks. Residents of Hong Kong and Macao can open special investment accounts with mainland banks in the mainland GBA cities to purchase eligible wealth management products sold by mainland banks.
Shenzhen issues guidelines on applying individual income tax subsidies in the Greater Bay Area.
On 2 July 2020, Shenzhen issued the Notice on implementing the Preferential Policies of Individual Income Tax in the Greater Bay Area of Guangdong province, Hong Kong and Macao, and the Guidelines for the Application for Subsidies of Individual Income Tax for 2019 for high-end talents and talents in short supply.
Eligible applicants will be granted subsidies according to the difference of individual income tax burden between the mainland and Hong Kong. And the subsidies will be exempted from individual income tax.
China announced new tax policies to support film businesses.
In order to support the development of film and other industries, the relevant tax policies are announced as follows:
- From 1 January 2020 to 31 December 2020, the income obtained by taxpayers in providing film projection services shall be exempted from VAT.
- The longest period for loss carried forward of film industry enterprises in 2020 will be extended from 5 years to 8 years.
- From 1 January 2020 to 31 December 2020, the construction fee of cultural undertakings will be exempted.
Written by China Consultancy Team, CW CPA
Six months after the human-to-human transmission of the COVID-19 virus was confirmed, economic recovery has begun in countries in the Asia Pacific region. As of today, most of the economies in this region have emerged from confinement and commercial activities have been gradually resumed. Thanks to their previous experience with SARS, these countries appear to have managed to control health crisis in a short period of time. Just a few weeks ago, the first online edition of the Canton Fair was held, meanwhile several countries are exploring the possibility of opening “travel bubbles” to allow the traffic of businessmen and tourists.
In the case of Mexico and other countries of the American continent, the peaks of the epidemic are barely being reached, so it will take at least another three months to significantly reduce the number of infections. Therefore, it is very likely that for the rest of 2020, travel restrictions will continue to be
imposed, and it is practically impossible to make trips abroad to participate in specialized events and business meetings.
Despite the fact that technology has played a key role during confinement, many aspects of business cannot be carried out through a computer. Facing this new reality, commercial representatives have become an important ally in an international business strategy.
WHAT DO COMMERCIAL REPRESENTATIVES DO?
As the name indicates, a commercial representative represents a company, public entity or an individual who hires him/her, to carry out tasks of marketing and promotion of products or services. One of the major requirements for being a commercial representative is that in addition to having interest in the country that the company locates, he/her must have necessary skills for efficient communication at the local level, that is, a broad knowledge of the language and business culture.
Job duties carried out by a commercial representative include direct contact with the company’s clients or suppliers, contact with potential clients, representation in negotiations, presentations at specialized events, participation in trade fairs, and identification of business opportunities.
WHAT ARE THE ADVANTAGES OF HAVING A COMMERCIAL REPRESENTATIVE?
In addition to the significant reduction in travelling cost, a commercial representative can carry out sales activities, promotion of the brand, identification of potential clients, participation in specialized fairs, informal and formal meetings, and mapping of trends in our sector. This allows the
company to save time and resources, which should otherwise be taken from other areas of the company.
Cities like Hong Kong offer an ideal business environment to establish a Commercial Representation. On one hand, it is possible to establish a company without having a physical presence in the city, in addition to the fact that the tax system allows us to carry out purchase and sale operations through our company with a minimum of taxes. On the other hand, Hong Kong has a privileged location in Asia, from here you can travel to the entire continent, and is the center of a large number of international corporate and specialized trade fairs, allowing a significant reach of clients.
WHAT ARE THE MAIN ASPECTS TO CONSIDER WHEN RECRUITING A COMMERCIAL REPRESENTATIVE?
In addition to his/her knowledge and experience at a local level, it is important that the Representative knows the services and products in detail, so that he can offer the best solution to our clients.
On the other hand, it is very important to sign a collaboration agreement specifying the needs of our business, the economic terms of representation, confidentiality and the intellectual property clause, to ensure that our project and clients are in good hands.
As of today, no country has an exact date of returning to “normalcy”. In fact, various analyses indicate that the world will continue to face the waves of COVID-19 during the rest of 2020 and 2021. Now more than ever, it is necessary to rethink our internationalization strategies, identifying actions that represent lower costs and better results. Therefore, a commercial representative / commercial representation can offer a short- and medium-term solution for our internationalization projects.
IF YOU WOULD LIKE TO KNOW MORE ABOUT COMMERCIAL REPRESENTATION SERVICES IN ASIA, DO NOT HESITATE TO CONTACT US.
Written by Susana Muñoz Enríquez, Managing Director in GBA LatAm Trade and Investment Advisors
Established in October 2019, the Portugal-Hong Kong Chamber of Commerce and Industry (“PHKCCI”) is a non-profit private organization that aims to promote trade, economics and cultural relations between Portugal and Hong Kong, providing a platform for companies and individuals to learn more about Portugal and Hong Kong and to find new business opportunities.
CW CPA is proud to be invited as a Supporting Member of the PHKCCI and was graced by the visit of Goncalo Frey Ramos, Vice President of PHKCCI in early 2020, sharing with the PHKCCI the objective of encouraging business cooperation between Portugal and Hong Kong.
On 18 June 2020, the PHKCCI organized the webinar “Hong Kong and Portugal: Access to Third Markets – to the Greater Bay Area and Portuguese Speaking Countries” chaired by Bernardo Mendia, President of the PHKCCI. Kemelly Vera, Advisor of CW CPA, and Luis Bravo, Director of Bison Bank, were invited as speakers. They highlighted the benefits of doing business in Hong Kong and Portugal.
Following the webinar, Bernardo Mendia was interviewed by China’s largest news agency, Xinhua News Agency, and published in its Portuguese version, acknowledging the integration of Guangdong-Hong Kong-Macau Greater Bay Area (GBA) would bring opportunities and advantages for foreign companies in Hong Kong.
“For foreign companies, entering Hong Kong will mean entering in nine Chinese mega-cities and the Macao Special Administrative Region simultaneously,” said Bernardo. “The greater the integration of the region, the greater the advantages for entrepreneurs.”
Bernardo also mentioned, during the interview, that both Portugal and Hong Kong are gateways to large markets with common advantages such as legal, fiscal and financial regimes that are friendly to foreign investment, a broad command of the English language by their citizens, good transport and telecommunications, freedom of capital flow and qualified human resources. These factors attract entrepreneurs to develop their business in both places.
Bernardo hopes that companies in Portugal and Hong Kong will look for business complementarities and establish partnerships with mutual gains to build the necessary trust for lasting cooperation.
Interview article published in Xinhua Portuguese: http://portuguese.xinhuanet.com/2020-06/26/c_139168842.htm
Link to the webinar (in English): https://www.youtube.com/watch?v=8twnj5AOSrw
(If you wish to join the PHKCCI, please contact Kemelly Vera by email at email@example.com.)
Written by Ivo Pang, Intern of Latin Department, CW CPA
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.
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.
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 a 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.
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
Among 108 global cities, Shenzhen was ranked 11th in the Global Financial Centers Index (GFCI) 27 Report published by the Z/Yen from the United Kingdom and the China Development Institute from Shenzhen.
The index evaluates thoroughly and ranks the world’s major financial centers in terms of business environment, human resources, infrastructure, development level and reputation.
As mainland China’s first-tier cities, Beijing, Shanghai, Shenzhen and Guangzhou have entered the top 20 in the world. Shenzhen came first among mainland Chinese cities in the Greater Bay Area and has played its special role. Shenzhen is expected to be a marketplace for innovation capital, with its advantages concentrated in the capital market, innovation investment and the service provision for the “Belt and Road”.
In additional, the GFCI questionnaire revealed that, Shenzhen was the 6th most mentioned city in terms of prospects over the next two to three years and was considered the 6th most competitive location for fostering a FinTech industry.
Written by Toby Wong, China Consultancy Team, CW CPA
In an unprecedented fashion, Shenzhen is currently striving to become a world-class new-type smart-city benchmark by increasing digitalization in social governance. In 2019, Shenzhen was ranked first among Chinese cities in terms of smart city development, according to the Information Research Center of the Chinese Academy of Social Sciences. It superseded the others, such as Hangzhou, Shanghai, Beijing and Guangzhou, with flying colours, having earned a comprehensive score of 77.4 points and been awarded a prize for taking the lead in smart city construction. How did Shenzhen achieve such a result?
The Shenzhen government has invested substantial resources to upgrade its smart city and digital government construction. In order to achieve this goal, Shenzhen is learning from other world-class cities to form a sound data management and security system, rapidly expanding the use of applications of big data, artificial intelligence, 5G and blockchain, and opening a new space in the digital world by promoting the integration of technologies, data and businesses across regions, systems, departments and industries.
With great determination and ambition, Shenzhen has been ready to face the challenges and opportunities of the digital era. Shenzhen plans to develop a new type of smart city operation and management system that is comprised of one city center, 11 district centers and numerous industrial centers. The Shenzhen Municipal People’s Government has also implemented a one-stop system that automatically reviews the applicants’ information of service items and approves their applications.
Regarding the livelihood, the information on personal documents, such as identity documents, driver’s licenses, social insurance, library and bank cards, will be integrated into one single account, through which residents can enjoy different types of services via fingerprint, facial recognition, identity card number or phone number. All such services will be consolidated on an official app.
Written by Toby Wong, 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:
- 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;
- Work in one of the nine GBA cities and pay taxes according to the IIT law; and
- 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
- 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:
- Application submitted to Human Resources and Social Security Bureau (HRSSB) and Science and Technology Bureau (STB).
- Assessment of “High-end Talent” by STB, and “Talent in Short Supply” by HRSSB.
- Examination of the application materials and approval of subsidy by Finance Bureau (assisted by STB, HRSSB and Taxation Bureau).
- 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.
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:
- 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