Blog - Full Content with Sidebar

Foreign Investment Law breathes a sigh of relief for HR-services

January 6, 2020

In order to achieve the objectives of the Foreign Investment Law (FIL), which came into effect on 1 January 2020, the Ministry of Human Resources and Social Security of the PRC has undertaken amendments to three particular departmental regulations as follows:

Regulations on the Administration of The Sino-foreign Joint Venture talent intermediary agencies, Interim Provisions on the Establishment and Administration of Sino-foreign joint venture sin-foreign cooperative employment agencies

As a consequence of these changes, the restrictions on foreign investment in human resources services have been removed, which is in line with the principle of equal treatment of domestic and foreign investors.

Overview of the three main changes

1. Cancellation of the requirement that both Chinese and foreign investors must have over three years of experience when applying for the establishment of foreign-funded talent intermediaries and employment agencies.

2. Cancellation of the requirement that a foreign investor’s capital contributions shall proportionally not be less than 25% and that a Chinese investor’s capital contributions shall proportionally not be less than 51% in any JV entity.

3. Cancellation of the restriction on setting up wholly foreign-owned HR-services companies.

restrictions on foreign investment in HR services have been removed, which is in line with the principle of equal treatment to foreign investors.

In addition, the three newly revised regulations further lower the threshold for the approval of foreign-invested HR-services companies and simplify the approval process. The approving authority for the establishment of foreign-funded talent intermediaries and employment agencies will be downgraded from the provincial level to the county level or above.

The provisions that foreign-funded intermediary institutions and employment agencies must be approved by the Ministry of Commerce have been removed.

The provisions regarding the establishment of branches of foreign-funded talent intermediaries and employment agencies, changes in registered capital, share transfers, shareholder changes, etc. must be approved again by the initially examining authority have also be removed.

Useful link:

MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

foreign funded talent intermediary agency, foreign investment in HR service, HR service, talent market in China

Implementation Regulation on Foreign Investment Law of the PRC

January 4, 2020

Implementation Regulation on Foreign Investment Law of the PRC was officially promulgated on December 31, 2019, to be effective from January 1, 2020. Let’s see what we got here:

A. Main content

The regulation stresses the principles of promoting and protecting foreign investments in China.

1. Equal treatment of investors no matter whether they are Chinese or foreign.

a) Equal application of technical standards with regards to all parties and equal participation in government procurement for all entities.

b) Strengthening of openness and transparency of foreign investment policies. The formulation of related documents involving foreign investment shall be subject to a review of legality.

Implementation Regulation on Foreign Investment Law of the PRC stresses the principles of promoting and protecting foreign investments in China.

2. Investment protection

a) No more restrictions on funds remitted into or out of China in accordance with the law, such as capital contributions, profit repatriations etc.

b) Strengthening of the protection of intellectual property rights of foreign investors.

c) Local governments shall abide by the policy commitments. “policy commitments” refers to the written commitments made by local governments, within their statutory authority, on the support policies, preferential treatment and facilities applicable to foreign investors. Local governments may not breach their contracts on the grounds of administrative adjustment, change of government, adjustment of institutions or functions, and replacement of relevant administrative personnel being in charge etc.

In fact, many of the above measures have already been stipulated in the Government’s Regulations on the Optimization of the Business Environment published on 22 October 2019.

B. The following issues have been further clarified

(2) The “foreign investors” specified in the Foreign Investment Law also include investors from Hong Kong, Macao and Taiwan

(3) In a particular section, the Regulation stipulates the liability of government agencies and their staff for violating the law, and to extend liability to “the government and relevant departments and their staff”.

C. Still unsolved issues

1. The foreign investment safety review system still needs to be refined in terms of matters being subject of review, the examination criteria, the examination procedures and last but not least the time limit etc2. The new Foreign Investment Law provides that “foreign investment” includes investment activities indirectly carried out by foreign investors in China, however it does not specify whether the VIE （variable interest entity）structure is covered by the new law or not, nor does this regulation.As a matter of fact, the legitimacy of the VIE structure is related to the fate of many red-chip structure enterprises, its legal characterization and how to deal with the structure gives rise to a lot of attention by investors. It seems that investors may need to wait for the lawmaker to come up with separate provisions to clarify this.

Useful link:

State Administration for Market Regulation

foreign direct investment, foreign investment, foreign investment law, Foreign investment law in China

First Case of Gay Marriage Registration in China

January 4, 2020

On June 23, 2015, Sun Wenlin, who initially had planned to stay single, went to the Furong District Civil Affairs Bureau in Changsha City with his boyfriend Hu MinLiang to register their marriage on the first anniversary of their acquaintance.

Although the marriage certificate is just a piece of paper, in critical moments, one can use such a piece of paper to prove that both individuals mentioned are a couple instead of mere strangers, and thus each have the right to sign as a family member on behalf of each other, for example the notice of a critically ill person.

Marriage also involves some practical benefits such as inheritance of property and the like. ” If you want to become a family member of someone with whom you don’t have a blood relationship, you can only achieve that by getting married.” Sun Wenlin quipped, “We can’t adopt each other.”

Unlike the average person, Mr. Sun believes that gay marriage is legal in China, but just no one does it. He looked through the Marriage Law six times and couldn’t find a single word banning or prohibiting gay marriage. Mr. Sun believes that marrying his lover is his “natural human right”. However, the local Civil Affair Bureau refused to grant them a certificate of marriage, on the grounds that “only one man and one woman can marry each other”.

As a result, Mr. Sun sued the Civil Affairs Bureau. The case was accepted by a local court on 5 January 2016. Mr. Sun’s attorney said at the time that the first gay marriage registration case in China could be filed, whether successful or not, was of historical significance.

Most people believed at the time that surely they were going to lose the case. Mr. Sun and his lawyer, however, did not think so. Mr Sun said the original text of the Marriage Law does not refer to the concept of “one man and a woman” but rather to the principle of “monogamy”. He felt that “monogamy” does not only mean “a man and a woman”, but also “a man and a man” or “a woman and a woman”, only such a law can be considered non-discriminatory”.

Wang Zhenyu, a lawyer who has represented several sexual minority cases, believes that “marriage registration” is an act of “administrative confirmation” rather than an act of “administrative license”, and hence a right of “confirmation” rather than “authorization”. Any marriage should be registered in the absence of a legal prohibition.

First Case of Gay Marriage Registration in China

After one extension, the case was finally scheduled for a public hearing on 13 April 2016. The court hearing, which lasted two and a half hours, appeared to have gone through all the processes seriously, with several arguments between the claimant and defendant. The arguments include the administrative inaction of the defendant’s, illegal working procedures, etc. Before the court hearing, Mr. Sun prepared more than 30 questions, including the status of “spouse of a gay person”, but did not have the opportunity to ask. The lawyer asked the defendant：”Do you discriminate against homosexuals?” and was interrupted by the judge, “This question is irrelevant and does not need to be answered.”

The Court pronounced that China’s relevant marriage laws and regulations clearly state that the subject of marriage refers to both men and women who meet the legal conditions for marriage. Sun and Hu are both men, their application for marriage registration clearly does not comply with the related provisions. Sun Wenlin and Hu Bright’s claims cannot be granted.

As a consequence, they both lost the case. The verdict made no mention of the trial debate, “Looks like it was written in advance,” Sun said, adding that at the moment he heard the verdict, he felt “disgusted” that heterosexual-led laws were enacted that did not protect the rights of gays or other sexual minorities.

But they still held a wedding ceremony on May 17, 2016. On the same day in 1990, the World Health Organization removed homosexuality from the International Classification of Diseases (ICD), which was no longer considered to be a mental illness.

Ministry of Civil Affairs of the People’s Republic of China

Gay marriage in China, gay marriage registration case, homosexual marriage, homosexual marriage in China

New Pilot Cross-Border E-Commerce Zones

December 31, 2019

On December 24, 2019 The State Council approved the establishment of “Pilot Cross-Border E-Commerce Zones” in 24 new Chinese cities.

Those cities are the following: Shijiazhuang, Taiyuan, Chifeng, Fushun, Hunchun, Suifenhe, Xuzhou, Nantong, Wenzhou, Shaoxing, Wuhu, Fuzhou, Quanzhou, Ganzhou, Jinan, Yantai, Luoyang, Huangshi, Yueyang, Shantong, Foshan, Luzhou, Haidong, and Yinchuan.

According to the approval, these new pilot zones should replicate and promote successful practices adopted by the existing three batches of e-commerce pilot zones, and further achieve the following:

introduce exemptions on value-added tax and consumption tax for retail and exported goods;
actively explore business opportunities and innovate;
promote industrial transformation and its upgrading;
brand building;
promote international trade liberalization;
facilitation and industry innovation;
promote the healthy development of cross-border e-commerce throughout the country;
explore new experiences and new practices; and
promote a high-quality trade development.

Details about how to establish and operate these cross-border e-commerce zones shall be worked out by the respective provincial governments

Useful link:

MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

Cross-Border E-Commerce Zones, E-commerce

A Woman’s Body is Her Own Business- Recent Reproductive Case in China

December 25, 2019

Egg freezing, also known as mature oocyte cryopreservation, is an effective way to preserve a woman’s fertility and allows her to have a child in the future. However, one hospital in China was sued by Ms. Xu because the hospital refused to provide egg freezing for her as a single woman. The court hearing was scheduled on Dec 23, 2019 in Beijing.

According to Ms. Xu, on November 14, 2018, she went to the Beijing Maternity Hospital to attend a consultation on the issue of having her eggs frozen. As a result, it was confirmed that both her body and the eggs are healthy after relevant medical examinations. However, her request to have her eggs frozen was rejected, and she was told by the hospital that egg freezing for single women is not allowed according to relevant regulations.

Ms. Xu believes, as an adult woman over 30 years, she has the right to freeze her current eggs, which are best suited to ensure her fertility. She stated: “I’m an average single woman, but single women can have a lot of choices to reproduce. ” Though realizing it’s not easy, Ms. Xu decided to do something to fight for the right for herself and for all the women who share the same fate as her.

Without egg freezing or other assisted reproductive tech, single women over 35 are likely to lose the chance of raising children for the rest of their lives

She sued the hospital in local courts. Since March of 2019, Ms. Xu has been rejected three times in different courts for trying to file a lawsuit in connection with a “medical contract dispute”. In September this year, she changed the cause of action to “general personality right” and this time, the court accepted her lawsuit.

1. Human Assisted Reproductive Technology Code (“HARTC”) developed by former Minister of Health in 2001 has made regulatory restrictions on egg freezing of single women, hospital has to comply with this HARTC.

2. Egg freezing technology for single women is not mature enough.

3. Single women wanting to have children will cause educational issues.

4. If egg freezing for single women is allowed and widely carried out, female childbearing age will be delayed further.

5. There are also ethical issues involved, such as surrogacy.

Obviously, Ms. Xu doesn’t agree with these arguments. She thinks egg freezing for single women does not mean that the child will be born in a single-parent family，as single women probably will get married in the future. In addition, married couples may also have the problem of educating children in single-parent families as a result of an increasing divorce rate.

Whatever the reason is, it’s not good enough to restrict a woman’s right to decide when and how to raise a child herself.

“My case actually represents the needs of many single women. “In Xu’s view, “egg freezing” is more like an insurance policy, “With this insurance, if I change my idea in the future, there is also an opportunity to re-make my choice.”

It’s a biological rule that women have a shorter reproductive period than men. However, in modern society, a woman’s marriage is generally delayed. Even married women have to postpone giving birth to a baby because of competition in promotion or their personal plans for career development, etc. It seems that egg freezing provides women with a choice regarding the timing of giving birth to baby.

The HARTC issued by the former Ministry of Health states: “The implementation of human assisted reproductive technology to couples and single women who do not comply with the national population and family planning regulations and regulations is prohibited.” However, this provision not only has no legal basis, but also conflicts with existing laws in China, such as:

Article 51 of the Law on the Protection of Women’s Rights and Interests states: “Women have the right to have children in accordance with the relevant provisions of the State, as well as the freedom not to have children.”

Article 25 of the Marriage Act also provides that: “children born out of wedlock have the same rights as children born in wedlock and no one shall be subjected to harm or discrimination.”

Article 17 of the Population and Family Planning Act provides for the “right of citizens to have children”, which clearly includes single women and is not limited to couples in marriage.

Although these are some general provisions on the reproductive rights of single women in Chinese legislation. But according to the principal of “A citizen can do anything which is not prohibited by law”, as long as it does not hurt the public interest, people have the liberty to choose the life they want to live, we believe that single women (or unmarried women) deserve the right to freeze their eggs.

Furthermore, according to the current “Basic Standards and Technical Specifications for Human Sperm Banks” in China, the conditions for self-preservation are explicitly mentioned as “reproductive insurance” for the purpose of keeping sperm for future births, and there is no need to be married. To allow single men to freeze sperm on the one hand, and to prohibit single women from freezing their eggs on the other hand, is blatant gender discrimination.

In reality, many excellent women do not want to rush into marriage if they haven’t found their “Mr. Right” yet. However, the optimal age for women to give birth is before the age of thirty-five. For women who have not yet found their “Mr. Right” at the age of 35, they are likely to lose the chance of raising children for the rest of their lives, without resorting to egg freezing or other assisted reproductive technologies.

The biggest benefit of egg freezing and other related assisted reproductive techniques is to help this group of women to extend the window of their reproductive capability and help them fulfill their desire to become a mother. In addition, many women are capable of raising children on their own. We also have to respect their right of choosing to raise children differently.

In fact, in China, many single women have the need to freeze their eggs, there are many professional medical institutions which have the technology to provide such services. But some single women have to choose to freeze their eggs overseas (which is much more expensive and cumbersome), just because domestic regulations prohibit single women to do so.

On the other hand, according to recent statistics, the population of newborn babies in China is falling rapidly, despite the policy of removing restriction for a second child of the average Chinese family. Some experts are worried about the declining population in the near future and are calling for incentives to encourage young women to have more children.

Why then deny healthy and capable women the right to have a child in the first place – even if it’s brought about by reproductive medicine?

assisted reproductive tech, assisted reproductive tech in China, single mom, single women raising children

Draft of VAT Law of PRC, What's Your Comment?

December 16, 2019

On November 27^th, 2019, the Ministry of Finance and the State Administration of Taxation have released the draft of a Value added Tax Law of the People’s Republic of China for public comments.

As a matter of fact, China has gone through a series of reforms in its VAT collection practice. This law will be a consolidation of undertaken reforms, while maintaining the overall tax framework and level of current taxation.

The highlights:

1. Who Should pay

Entities and individuals that engage in taxable transactions in China with a revenue reaching the VAT threshold and consignees of imported goods are taxpayers of VAT.

The VAT threshold is 300,000RMB of quarterly sales.

2. Computation method

VAT shall be computed and paid under the general tax computation method, except where the government stipulates that the simple tax computation method applies.

With regards to the general tax computation method, the tax payable shall be the balance of the output tax deducting the input tax.

However, for the simple tax computation method, the tax payable shall be the revenue times a levy rate, and the input tax shall not be offset. Currently, the simple tax computation method only applies to small scale taxpayers, or generally speaking, entities whose annual revenue is less than 5 million RMB. （You may check our previous post for more info：General Taxpayer or Small Scale Taxpayer?）

3. Tax rate

The applicable tax rate for the sale of goods, processing, repair and maintenance services, movable property, rental and import of goods is 13%; the applicable tax rate for sales of transport, postal service, telecommunication, construction, real estate rental, transfer of land use rights, sale or import of agricultural products is set at 9%;

the applicable tax rate for sale of services, intangible assets and financial commodities is kept unchanged at 6%.

The levy rate of VAT for simple tax computation is 3%.

This new VAT law will be a consolidation of undertaken reforms, while maintaining the overall tax framework and level of current taxation.

4. Imported goods

For imported goods, the tax payable is computed based on the composite assessable price and the applicable tax rate. The computation formulas are as follows:

Composite assessable price = Price for Customs Duty Consumption Tax

Taxable Amount = Composite Assessable Price × Tax Rate

Though it’s just a draft for comments, however most of the provisions are already implemented in practice. As a consequence, there should neither be many surprises nor adjustments necessary for businesses once the new law officially comes into effect.

However, if you have any comments, you can provide your comments through the “Information Solicitation System” on the homepage of the website of the Ministry of Finance of the People’s Republic of China or through the “Information Solicitation System” on the homepage of the website of the State Taxation Administration before 26^th of Dec, 2019.

In our opinion, the new law will be promulgated in early January of 2020, unless something unexpected happens. We will see.

VAT for importing goods into China, VAT in China, VAT law, VAT law in China, VlT rate

How Much IIT a Foreigner Have to Pay in China

December 13, 2019

The new Individual Income Tax law of PRC has come into effective for almost one year, but how to calculate the tax payable still remain a problem, particularly for foreigners working in China.

This post will address some main issues related:

1. A foreigner could be a“resident individuals”

individuals who do not have a domicile in China but have resided in China for 183 days or more cumulatively within a tax year, shall be deemed as resident individuals.

2. How a foreigner pay IIT as a resident individual

1. Where the foreigner resides in China for 183 days or more cumulatively per tax year for less than six consecutive years.

his/her income from all salaries shall be subject to individual income tax, except for the portion of salaries paid by an overseas employer.

2. Where the foreigners resides in China for 183 days or more cumulatively per tax year for more than six consecutive years.

his/her income from salaries derived in China and overseas shall be subject to individual income tax.

3. Computation of tax payable

Tax payable over all comprehensive income shall be subject to individual income tax annually, the formula for computation of tax payable is as follows:

Tax payable for annual comprehensive income = (annual salary – deduction – special deduction – special additional deduction – other deductions determined pursuant to the law) × applicable tax rate – quick deduction.

4. Year-end bonus

Before 1 January 2022，year-end bonus will not be treated as “comprehensive income” such as salary, or monthly bonus. This bonus shall be apportioned over 12 months for tax computation purpose, with no deduction, and subject to the Monthly Tax Rate Table for computation of tax payable; this tax computation method can only be applied once within a calendar year.

The computation formula shall be as follows :

Tax payable = [ × applicable tax rate – quick deduction] × 12

5. Allowances and subsidies and special additional deduction

Before 1 January 2022, a foreigner may choose to claim deduction for eight allowances and subsidies such as: housing allowance, child education fee, language training fee etc, instead of claiming special additional deduction. After 1 January 2022, only special additional deduction available.

However, for special additional deduction, including children’s education, continuing education, medical treatment for major illness, housing loan interest or housing rent, support for the elderly, will be deducted as per provision.

Quick Computation Chart for Individual Income

Grade	Annual taxable income	Tax rate (%)	Quick Deduction
1	Income of RMB 36,000 or less	3	0
2	The part of income in excess of RMB 36,000 to 144,000	10	2520
3	The part of income in excess of RMB 144,000 to 300,000	20	16920
4	The part of income in excess of RMB 300,000 to 420,000	25	31920
5	The part of income in excess of RMB 420,000 to 660,000	30	52920
6	The part of income in excess of RMB 660,000 to 960,000	35	85920
7	The part of income in excess of RMB 960,000	45	181920

Applicable to yearly comprehensive income

Example A:

David’s yearly salary: 360000RMB, allowance is 120000RMB, the taxable income is 360000—60000-120000=180000RMB， tax payable=180000*20%-16920=19080RMB

Example B:

David get a year-end bonus, which is 50000RMB,

50000/12=4166.67

Tax payable=(4166.67*10%-210)*12=2103.34RMB

Useful link:

State Taxation Administration

IIT in China, residential individual, tax deduction

Optimization of Business Environment

December 8, 2019

On Jan. 1, 2020, the Foreign Investment Law will come into effect. In addition, the Regulation on the Optimization of Business Environment will come into effect as well, which was promulgated on October 8, 2019. This is good news for people doing business in China.

Let’s look at some highlights of these new regulations:

1. The direct allocation of market resources and the direct intervention in market activities by the government will be reduced, minimizing institutional-oriented transaction costs.

2. The establishment of a unified, open, and modernized market system designed to promote the free flow of various production elements, and guarantee fair market competition, is expected to be accelerated.

3. China government shall further open up domestic (Chinese) business to the outside world and actively promote foreign investment, giving equal treatment to domestic-funded enterprises and foreign-invested enterprises.

China government determined to relax restrictions on market access and implements a national unified negative list system for market access.

4. Competent authorities will establish a punitive compensation system for infringement of intellectual property, improve the assistance mechanism for protecting intellectual property, and intensify the protection of intellectual property. They will also Improve the efficiency of trademark registration and the patent application review.

5. Enterprise registration rules, streamline of the formalities required for enterprise registration will be standardized. The reform of “separation of permits and business licenses” will be promoted.

For existing administrative permits, they will either cancel examination and approval of some permits or change the examination and approval procedure to record filing, or the business owner will have to promise that they are qualified (or will be qualified) within a certain timeframe, or optimize the examination and approval procedure, improve examination and approval efficiency, if the permits are still required. Except for specific areas stipulated by laws and administrative regulations, permits shall not be a prerequisite for enterprise registration.

6. Relaxes restrictions on market access and implements a national unified negative list system for market access.

Useful link:

MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

business environment, foreign-invested enterprises, IPR protection

Foreign Investment Law breathes a sigh of relief for HR-services

Implementation Regulation on Foreign Investment Law of the PRC

A. Main content

1. Equal treatment of investors no matter whether they are Chinese or foreign.

2. Investment protection

B. The following issues have been further clarified

C. Still unsolved issues

First Case of Gay Marriage Registration in China

New Pilot Cross-Border E-Commerce Zones

A Woman’s Body is Her Own Business- Recent Reproductive Case in China

Draft of VAT Law of PRC, What's Your Comment?

1. Who Should pay

2. Computation method

3. Tax rate

4. Imported goods

How Much IIT a Foreigner Have to Pay in China

1. A foreigner could be a“resident individuals”

2. How a foreigner pay IIT as a resident individual

3. Computation of tax payable

4. Year-end bonus

5. Allowances and subsidies and special additional deduction

Optimization of Business Environment

About Blog

China Law Help

Recent Posts

All Tags