Policy

Circular of the Ministry of Commerce on Delegation of the Authority to Examine and Approve the Estab

Date Jan 28 2010 14:44:46

Shang Zi Han [2009] No. 8

Competent commercial departments of provinces, autonomous regions, municipalities directly under the Central Government, separately planning cities, Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu, Xi''an and Xinjiang Construction Corp.,

For the purpose of fully carrying out the outlook on scientific development and the spirits of the 2 nd Plenary Session of the 17 th CPC Central Committee, further deepening the reform of administrative system and changing the functions of governments to improve works on examination and approval of foreign investment and promote investment facilities, the adjustment to the power to examine and approve the establishment of investment enterprises by foreign investors is herein notified as follows:

Article 1 Items concerning the establishment and alteration of an investment company with registered capital of or less than USD100mn by foreign investors (exclusive of those with one-time increase of capital over USD100mn) shall be subject to the examination and approval of the competent commercial department of provinces, autonomous regions, municipalities directly under the Central Government, separately planning cities, Xinjiang Production & Construction Corp and sub-provincial cities (including Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi''an) at the place where the investment company makes registration and no competent commercial department at provincial level may delegate the authority of examination and approval or entrust other departments.

Article 2 Items concerning subsequent alteration of an investment company established upon approval of the MOFCOM (exclusive of those with one-time increase of capital over USD100mn or changes of investors) shall be subject to the examination and approval of the competent commercial department at provincial level.

Article 3 When examining and approving any application of foreign investors, the competent commercial department at provincial level shall strictly comply with relevant provisions of the Provisions on Establishment of an Investment Company by Foreign Investors (Decree of the MOFCOM [2004] No.22) and the Supplementary Provisions on Establishment of an Investment Company by Foreign Investors (Decree of the MOFCOM [2006] No.3) on conditions for the qualifications of foreign investors, registered capital, capital contribution form, businesses and requirements on application documents, and take counsel with the tax bureaus, administrations for industry and commerce and administrations for foreign exchange at provincial level at the place where the company is located whether there is any practice of violation of provisions by the foreign investors and their investment companies in China. Those in violation of applicable provisions shall not be approved to establish an investment company.

Article 4 A foreign investor (legal representative) shall issue a written commitment (format of which is attached below) that its/his application submitted complies with the requirements of relevant laws and regulations and relevant materials and the signature of the legal representative or his attorney are true, accurate, complete and valid.

Article 5 The investment scope of any investment company is not allowed to involve any industry under restriction and prohibition of foreign investment or macro-regulation. If the investment scope involves any industry under the category where foreign investment is allowed by special provisions, the competent commercial department at provincial level shall obtain the consent of national competent department of the industry according to relevant procedures.

Article 6 The investment projects of an investment company shall conform to relevant laws, regulations and industrial policies and specific investment projects shall be separately applied for approval according to relevant procedures of the state. The enterprise invested by an investment company or jointly invested with other investors, for example, an enterprise with the percentage of foreign exchange investment by the foreign party (an investment company and other overseas investors) no less than 25% of the registered capital of the enterprise, may enjoy the treatment for foreign investment enterprises.

Article 7 Upon approving the application of foreign investors, the competent commercial department at provincial level shall fill the filing form of investment company information (including three forms for newly-established enterprise, alteration and enterprise invested with format attached below respectively) through the “Administration System for Examination and Approval of Foreign-Invested Enterprises” in a timely manner, and submit the printed filing form (with official stamp of local commercial department), approval documents (with format attached below) and approval certificates (copy) to the MOFCOM (Foreign Investment Department) in written form for filing.

Article 8 Upon approval of the competent commercial department at provincial level, an investment company shall report the situations of its operation and invested enterprise through the “Network for Administration of Foreign-Invested Enterprise” ( http://fic.wzs.mofcom.gov.cn/ ) in a timely manner at the meantime and go through network access procedures when receiving the approval certificate. It is encouraged to join the Executive Committee of Foreign Investment Companies of China Association of Enterprises with Foreign Investment.

Article 9 The Circular shall be implemented on the date of promulgation.

Annexes: 1. Investment Company Approval Document Format (omitted)

2. Written Commitment of Foreign Investor (Legal Representative) (format) (omitted)

3. Filing Form for Establishment of Investment Company, Filing Form for Alteration and Filing Form for the Enterprise Invested

Ministry of Commerce

March 6, 2009

Measures for the Administration on the Establishment of Partnership Business by Foreign Enterprises

Date Jan 28 2010 14:44:03

Article 1 For the purpose of regulating the establishment of partnership business by foreign enterprises or individuals in China and facilitating foreign enterprises or individuals to invest in China in the form of partnership to expand foreign economic cooperation and technical exchanges, the Measures herein shall in accordance with the Partnership Business Law of the People’s Republic of China (hereinafter referred to as the Partnership Business Law) be formulated.

Article 2 The establishment of partnership business by foreign enterprises or individuals in China in the Measures herein refers to the establishment of partnership businesses by 2 or more foreign enterprises or individuals, and foreign enterprises or individuals and Chinese natural person, legal person and other organizations in China.

Article 3 The establishment of partnership business by foreign enterprises or individuals in China should abide by the Partnership Business Law, other relevant laws, administrative regulations and rules and related industrial policies for foreign investment.

The legitimate rights and interests of foreign enterprises or individuals shall be protected by law while establishing partnership businesses in China.

China shall encourage foreign enterprises or individuals with advanced technologies and management experience to establish partnerships in China to boost the development of the modern service industry and other industries.

Article 4 The currency utilized by foreign enterprises or individuals for contribution should be the foreign currency that can be freely exchanged as well as the Renminbi earned by law.

Article 5 In the event of the establishment of partnership business by foreign enterprises or individuals in China, the representatives designed or the agent jointly entrusted by the whole copartners should apply to the local industrial and commercial administration authorized by the administrative department for industry and commerce under the State Council (hereinafter referred to as the enterprise registration organ) for registration of establishment.

The documents prescribed in the Measures of the People’s Republic of China for the Registration of Partnership Enterprises and the explanation qualified for the industrial policies for foreign investment should be submitted to the enterprise registration organ while applying for establishment registration.

In the event approving to register, one enterprise registration organ should simultaneously notify the information related to registration to the competent commerce department at the same level.

Article 6 In the event the registration for partnership enterprises set up by foreign enterprises or individuals in China (hereinafter referred to as foreign investment partnership enterprise) alters, they should apply for alteration to the enterprise registration organ by law.

Article 7 In the event one foreign investment partnership enterprise is dismissed, liquidation should be done in accordance with the Partnership Business Law, and the liquidator should handle the cancellation of registration in the enterprise registration organ by law within 15 days upon the end of liquidation.

Article 8 In the event foreign copartners withdraw from one foreign investment partnership enterprise while the enterprise continues to operate, application for alteration should be filed to the enterprise registration organ according to law.

Article 9 In the event one foreign investment partnership enterprise alters or cancels registration, the enterprise registration organ should simultaneously notify the information involved in altering or canceling registration to the competent commerce department at the same level.

Article 10 In the event the Measures herein fails to provide for the other administrative issues for the registration of one foreign investment partnership enterprise, it should be subject to the Measures of the People’s Republic of China for the Registration of Partnership Enterprises and relevant provisions of the state.

Article 11 The establishment of partnership enterprises by foreign enterprises or individuals in China involves such issues as financial accounting, taxation, foreign exchange, customs and personnel entry and exit, it should be handled according to relevant laws, administrative regulations and relevant provisions of China.

Article 12 In the event foreign enterprises or individuals join while Chinese natural person, legal person and other organizations set up partnership enterprises in China, it should be subject to relevant provisions in the Measures herein and go through the enterprise registration organ for the application for registration alteration.

Article 13 In the event the establishment of partnership enterprises by foreign enterprises or individuals in China involves the investment project that shall be checked and approved by the government, approval formalities for investment project shall be handled according to relevant provisions of China.

Article 14 In the event China has other provisions for the establishment of partnership enterprises by foreign enterprises or individuals in China with investment as the main business, it should be subject to the provisions.

Article 15 The establishment of partnership enterprises by the enterprises or individuals from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan should be subject to the Measures herein.

Article 16 The Measures herein shall come into effect as of March 1, 2010.

the State Council of the People’s Republic of China

2009-11-25

Circular of the State Administration of Taxation on Strengthening Administration of Enterprise Incom

Date Jan 28 2010 14:43:21

State and local taxation bureaus of provinces, autonomous areas, municipalities under the Central Government and separately planning cities,

For the purpose of regulating and strengthening the administration of enterprise income tax on the non-residential enterprises’ equity transfer, relevant issues is, in accordance with the Income Tax Law of the People’s Republic of China and its Implementing Regulations, the Tax Administration and Collection Law of the People’s Republic of China and its implementing Details, the Circular of the State Administration of Taxation on Printing and Distributing the Provisional Measures for the Administration of Source-Based Withholding of Enterprise Income Tax on Non-Resident Enterprises (Guo Shui Fa [2009] No. 3) and the Circular of the Ministry of Finance and the State Administration of Taxation on Issues Concerning the Enterprise Income Tax Treatment on Enterprise Reorganization (Cai Shui [2009] No. 59), hereby notified as follows:

Article 1 The equity transfer income herein refers to the income made by non-resident enterprises transferring the equity of Chinese resident enterprises (exclusive of stocks of Chinese resident enterprises purchased to sell in the public securities market).

Article 2 In case a withholding agent fails to withhold or has no way to fulfill the withholding obligation, a non-resident enterprise should go to the competent taxation administration (the taxation organ is responsible to levy and collect the resident enterprise income tax) where Chinese resident enterprise to which equity has been transferred is domiciled to apply and report to pay the enterprise income tax within 7 days upon the equity transfer as prescribed in the contract and agreement (where a transferor gains the equity transfer income in advance, it shall be calculated according to the date of actually gaining the equity transfer income). For the resident enterprise that fails to report as it is on schedule, it shall be treated in accordance with relevant provisions in the tax levy and collection law.

Article 3 Equity transfer income herein refers to the balance of the equity transfer price deducted the equity cost price.

Equity transfer price herein refers to the amount in the forms of cash, non-currency assets or rights and interests by a transferor by transferring equity. If the share-held enterprise has the profits that has not been distributed or funds drawn after taxation and the amount a equity transferor transfers to which the shareholder owns the earning right shall not be deducted from the equity transfer price.

Equity cost price herein refers to the contribution actually paid by a transferor to a Chinese resident enterprise while investing to be shareholder or the equity transfer amount actually paid by a transferor to the former transferor of the equity while purchasing the equity.

Article 4 The calculation of equity transfer income shall be subject to the currency with which a non-resident enterprise invests in a Chinese resident enterprise that is transferred equity or purchases the equity from the former investors to compute equity transfer price and equity cost price. In case the same non-resident enterprise conducts multiple investments, it shall be subject to the currency with which it invests capital for the first time to compute the equity transfer price and equity cost price to use the method of weighted mean to compute equity cost price; in case currencies for multiple investments are inconsistent, it shall be subject to the currencies of the first investment calculated on the basis of exchange rates of the day when each investment is made.

Article 5 In case the actual tax burden of the country (region) where one equity-transferred overseas holding company is domiciled is lower than 12.5% or no tax is levied on the income of its overseas residents while an overseas investor (actually controller) indirectly transfers the equity of a Chinese resident enterprise, it should within 30 days upon the signing of the equity transfer contract offer to the competent taxation administration where an equity-transferred Chinese resident enterprise is domiciled the following documents:

(1) Equity transfer contract or agreement;

(2) Relations of an overseas investor and its transferred overseas holding company in capital, business and purchase and sale;

(3) Statuses of production and operation, personnel, finance and properties of the overseas holding company with equity transferred by an overseas investor;

(4) Ties of the overseas holding company with equity transferred by an overseas investor and a Chinese resident enterprise in capital, business and purchase and sale;

(5) Explanations for reasonable commercial purpose of the establishment of an equity-transferred overseas holding company by an overseas investor; and

(6) Other related documents required by the taxation administration.

Article 6 In case an overseas investor (actually controller) makes indirect transfer of the equity of a Chinese resident enterprise in the forms including abusing organization without reasonable commercial purpose to dodge the obligation of paying enterprise income tax, the competent taxation administration may reconfirm the quality of the equity transfer trading in accordance with the economic substance after reporting to the State Administration of Taxation for the examination and approval to negate the existence of the overseas holding company serving as taxpayer.

Article 7 In case a non-resident enterprise transfer the equity of a Chinese resident enterprise to its related party but the transfer price is disqualified for the principle of independent trading with due taxable income lessened, the taxation organ has the right to make adjustments in accordance with reasonable approaches.

Article 8 In case an overseas investor (actually controller) concurrently transfer the equity of domestic or multiple overseas holding companies, the equity-transferred Chinese resident enterprise should submit the whole transfer contract and part contracts related to the enterprise to the competent taxation administration. Where there are no part contracts, the equity-transferred Chinese resident enterprise should provide detailed documents of holding companies with equity wholly transferred to the competent taxation administration to accurately divide the transfer prices of domestic equity-transferred enterprise. Where no accurate division is made, the competent taxation administration has the right to choose reasonable method to make adjustments on transfer prices.

Article 9 In case a non-resident enterprise gaining the equity transfer income meets the conditions of special reorganization as prescribed in the Cai Shui [2009] No. 59 document with special taxation treatment chosen, it should submit written archival materials to the competent taxation administration to prove that it meets the conditions of special reorganization and thereafter be examined and approved by the taxation organ at the provincial level.

Article 10 The Circular shall enter into effect as of January 1, 2008. Please report to (the International Taxation Department of) the State Administration of Taxation timely the problems in the implementation of the Circular.

State Administration of Taxation
December 10, 2009

Announcement No.9, 2009 of Ministry of Commerce

Date Jan 28 2010 14:42:21

Ministry of Commerce of the People’s Republic of China and Ministry of Commerce of The U.S signed Exchange Letters between China and U.S on Problems of Scene Interview with the Validated End-User, based on which ministries of commerce of both countries are to cooperate in terms of the undertaking of VEU authorizing system in China. According to the VEU authoring system, American exporters are allowed to directly export specified duel-use articles to foreign end-users with authorization of VEU without export licensing.

For purpose of making concerted efforts to administrating end-users of China, as from release of this announcement, all Chinese end-uses such as domestic enterprises, institutional units and administrative units that plan to apply VEU authorization directly or through American exporters and re-exporters must go through registration formalities with Ministry of Commerce. Please refer to website of Ministry of Commerce (http://www.mofcom.gov.cn)for relevant affairs. Chinese end-uses that have already submitted applications of VEU authorization in advance of releases of this announcement must go through registration formalities in 60 days as from release of this announcement. Those who fall to go through registration formalities in line with relevant regulations will have no opportunity to attend the VEU scene interview.

Ministry of Commerce
Feb 10, 2009