MOFCOM Released the Measures for the Undertaking Concentration Examination   Nov. 27 2009

China's Ministry of Commerce (MOFCOM) released on November 27, 2009 the Measures for the Undertaking Concentration Examination (Measures), which shall take effect as of January 1, 2010.

Under the Measures, undertakings which are involved in the concentration are allowed to make their statement and averment on the relevant declaration issues in written form via letters or fax to the MOFCOM. The MOFCOM shall make reference to such statement and averment. The MOFCOM is eligible to seek feedbacks from the relevant governmental departments, guilds, undertakings, consumers or individuals according to its needs.

Besides, the MOFCOM shall inform the undertakings involved in the concentration, their competitors, parent and subordinate companies and other relevant enterprises to participate in the hearing.

 

商务部发布经营者集中审查办法 2009年11月27日

中国商务部2009年11月27日公布《经营者集中审查办法》（办法），自2010年1月1日起实施。

根据办法，在审查过程中，参与集中的经营者可以通过信函、传真等方式向商务部就有关申报事项进行书面陈述、申辩，商务部应当听取当事人的陈述和申辩。商务部可以根据需要征求有关政府部门、行业协会、经营者、消费者等单位或个人的意见。

同时，商务部举行听证会，可以通知参与集中的经营者及其竞争者、上下游企业及其他相关企业的代表参加。

 

Foreign Enterprises Encouraged to Found Partnership Enterprises in China   Dec. 02 2009

China encourages the foreign enterprises or individuals with advanced technology and management experiences to found partnership enterprises in the territory of China, so as to accelerate development of such industries as modern service industry.

Under the Administrative Measures for Partnership Enterprises Established by Foreign Enterprises or Individuals in the Territory of China (Measures) which the General Office of the State Council released on December 2, 2009 and will take effect as of March 1, 2010, foreign enterprises or individuals must contribute funds with the exchangeable foreign currencies and the Renminbi which they acquire in line with law.

The Measures also stipulated that if the partnership enterprises invested by foreigners are dismissed, they shall conduct liquidation in accordance with the Partnership Enterprise Law of the People's Republic of China. Liquidators must cancel the registration to the registration authorities within 15 days since conclusion of the liquidation.

 

中国鼓励外国企业在华设立合伙企业 2009年12月2日

中国鼓励具有先进技术和管理经验的外国企业或者个人在中国境内设立合伙企业，促进现代服务业等产业的发展。

根据国务院办公厅2009年12月2日发布、自2010年3月1日开始实施的《外国企业或者个人在中国境内设立合伙企业管理办法》（办法），外国企业或者个人用于出资的货币应当是可自由兑换的外币，也可以是依法获得的人民币。

根据办法，如果外商投资合伙企业解散，应当依照《中华人民共和国合伙企业法》的规定进行清算。清算人应当自清算结束之日起15日内，依法向企业登记机关办理注销登记。

 

China to Tighten Control over Electronic Management of Rebates (Tax Exemption) on the Exported Goods   Dec. 02 2009

China's Legislative Affairs Office of the State Council released on December 1, 2009 the Circular on Seeking Opinions on the Electronic Management of Rebates (Tax Exemption) on the Exported Goods (Draft for Comment) for public comments.

Under the Draft for Comment, export enterprises must report, in a faithful manner, the relevant electronic data concerning the rebates (tax exemption) on the exported goods to the taxation authorities. The authorities must inform the export enterprises of the results of examination and disposal of the electronic data.

The public-input process is scheduled to conclude on December 15, 2009.

中国拟加强出口货物退免税电子化管理 2009年12月2日

中国国务院法制办公室2009年12月1日发布《出口货物退（免）税电子化管理办法（征求意见稿）》，广泛征求意见。

根据该意见征求稿，出口企业应当如实向税务机关申报出口货物退（免）税的相关电子数据。税务机关应当及时向出口企业反馈出口退（免）税电子数据审核情况和处理结果。

该意见征求过程拟于2009年12月15日结束。

MOF and SAT Stipulate Relevant Issues on Real Estate Tax and Urban Land Use Tax   Dec. 03 2009

Chinas Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly released the Circular on Relevant Issues of Real Estate Tax and Urban Land Use Tax (Circular) in order to improve the policy concerning real estate tax and urban land use tax. The Circular will be implemented since December 1, 2009.

The Circular regulates a number of issues concerning real estate tax. Under the Circular, units and individuals taxable that use property of other units without paying rents shall pay real estate tax based on the residual value of the property. As for the real estate with property pawned, the pawnee shall pay real estate tax based on the residual value of the property. The leaseholder in a financial lease contract of real estate shall pay real estate tax based on the residual value of the property since the coming month starting from the very day agreed in the contract.

The circular also provides for the issues on the urban land use tax of the land for underground structure. Urban land use tax shall be collected for the land for independent construction of underground structures where it is taxable in accordance with relevant regulations.

 

财政部、国税局明确房产税城镇土地使用税有关问题 2009年12月3日

为完善房产税、城镇土地使用税政策，日前，财政部、国家税务总局联合发布了《关于房产税城镇土地使用税有关问题的通知》。《通知》自2009年12月1日起执行。

 

《通知》明确了一系列房产税相关问题。根据《通知》，无租使用其他单位房产的应税单位和个人，依照房产余值代缴纳房产税。产权出典的房产，由承典人依照房产余值缴纳房产税。融资租赁的房产，由承租人自融资租赁合同约定开始日的次月起依照房产余值缴纳房产税。

 

《通知》还对地下建筑用地的城镇土地使用税问题做了明确规定，对在城镇土地使用税征税范围内单独建造的地下建筑用地，按规定征收城镇土地使用税。

Issues Concerning Submitting Taxation Certificates for External Payment for Service Trade Specified   Dec. 04 2009

China's State Administration of Foreign Exchange (SAFE) and State Administration of Taxation (SAT) jointly released the Circular on Specifying Relevant Issues on Submitting Taxation Certificates for External Payment for Service Trading (Circular) in order to make external transfer more convenient for institutions and individuals both home and abroad.

Under the Circular, domestic institutions and individuals need not handle and submit Tax Certificates for External Payment under Trade in Services, Incomes, Current Transfers and Some Capital Account Items (Tax Certificate), when they pay foreign exchange fund for the following items.

Also stipulated in the Circular is that where qualified foreign institutional investors externally pay profit from investment and where foreign investors who lawfully obtain A-shares of domestic listed firms purchase and remit foreign exchange with the funds from reduction of their negotiable shares of the listed firms and dividend incomes, they shall apply for the Tax Certificate to the competent state taxation authorities and local taxation authorities and submit the Tax Certificate issued and sealed by competent state taxation authorities and local taxation authorities to the local Administration of Foreign Exchange or the appointed bank.

 

服务贸易等项目对外支付提交税务证明有关问题得到明确 2009年12月4日

为进一步便利境内外机构和个人对外付汇，日前，国家外汇管理局、国家税务总局联合发布了《关于进一步明确服务贸易等项目对外支付提交税务证明有关问题的通知》。

 

《通知》规定，境内机构或个人对外支付下列项目外汇资金，无需办理和提交《服务贸易、收益、经常转移和部分资本项目对外支付税务证明》。

 

《通知》还明确，合格境外机构投资者对外支付其投资收益以及依法取得境内上市公司A股股份的境外投资者减持A股上市公司流通股份及分红所得资金的购汇汇出时，应向主管国税机关和地税机关申请办理《税务证明》，并按规定向所在地外汇局或外汇指定银行提交由主管国税机关和地税机关出具并签章的《税务证明》。

Electronic Commercial Bill of Exchange to be Regulated   Dec. 09 2009

People's Bank of China (PBOC) provided the Measures for the Administration of the Business of Electronic Commercial Bill of Exchange (Measures) recently, so as to regulate the electronic commercial bill of exchange business and guarantee the legal rights and interests of parties involved in electronic commercial bill of exchange business.

Under the Measures, parties of bill of exchange must have the organization codes of the People's Republic of China to handle the electronic commercial bill exchange business. Legal persons and other organizations excluding principals and financial institutions must open accounts in the access providers to handle electronic commercial bill exchange business.

It is also outlined by the Measures that the electronic commercial bill of exchange is the one payable at a fixed date, and the payment term shall not exceed 1 year since the day the bill is issued.

电子商业汇票业务管理有法可依 2009年12月9日

为规范电子商业汇票业务，保障电子商业汇票活动中当事人的合法权益，中国人民银行出台了《电子商业汇票业务管理办法》。

《办法》规定，票据当事人办理电子商业汇票业务应具备中华人民共和国组织机构代码。被代理机构、金融机构以外的法人及其他组织办理电子商业汇票业务,应在接入机构开立账户。

《办法》还明确，电子商业汇票为定日付款票据。电子商业汇票的付款期限自出票日起至到期日止，最长不得超过1年。

SAT Extends Period to Claim Input VAT Deduction   Dec. 07 2009

The Chinese State Administration of Taxation published a notice (Circular 617) on 9 November 2009 that extends the period to obtain an input VAT credit from 90 to 180 days. The circular takes effect 1 January 2010.

税务总局延长进项税额扣除的索赔期 2009年12月7日

2009年11月9日中国国家税务总局公布通知（通知617号），延长索赔期，90至180天内获得进项税额。通知于2010年1月1日生效。

According to the rules that allow general VAT payers to recover input VAT incurred on domestic purchases or imports, VAT deduction vouchers (i.e. VAT special invoices, transportation invoices, etc.) must be verified by the tax authorities before input VAT can be credited against output VAT for the relevant period. Since 2003, general VAT payers have been required to submit a VAT special invoice or other deduction voucher to the in-charge tax authorities for verification within 90 days of the date the voucher is issued. Otherwise, input VAT may not be credited against output VAT, leading to an irrecoverable VAT cost. In the past, some taxpayers have lost the benefit of an input VAT credit because of the short time frame. Circular 617 was issued to resolve this problem.

Invoice for domestic purchases

Circular 617 provides that a special VAT invoice, standard invoice for qualifying transportation services and standard invoice for motor vehicles sales issued to a general VAT payer on or after 1 January 2010 must be submitted to the tax authorities for verification within 180 days from the date the invoice is issued, and the invoice must be used to claim an input VAT credit within the VAT filing period in the month following the month the invoice is verified.

Certificate for import of goods

Import VAT is paid to the Customs authorities and, once paid, the Customs authorities will issue a tax completion certificate that can be used to support a claim for an input VAT credit. Unlike in the case of special VAT invoices, the “verify first, deduct later” practice applies only to general VAT payers in pilot areas (i.e. Hebei, Henan, Guangdong and Shenzhen). For input VAT incurred on the import of goods, general VAT payers that are required to use the “verify first, deduct later” policy must apply to the competent tax authorities to have a VAT payment certificate issued by Customs on or after 1 January 2010 verified within 180 days of the date the certificate is issued. General VAT payers that are not required to apply this policy must report the input VAT credit for a VAT payment certificate issued on or after 1 January 2010 to the tax authorities by the end of the first VAT filing period following the 180-day period after the certificate is issued. Both periods are extended from 90 to 180 days.

Lost vouchers

If a general VAT payer loses its special VAT invoice or import VAT certificate, the taxpayer can submit supplementary supporting documentation within 180 days from the date the invoice or certificate is issued. The documentation can be used to claim an input VAT credit once the tax authorities have examined and approved the documents.

Summary

If the taxpayer fails to have a special VAT invoice or deduction voucher verified or does not claim the input VAT credit within the required time period, input VAT may not be credited against output VAT. Taxpayers should be aware of this policy and ensure that their VAT internal controls and compliance management are sufficient, so that supporting deduction vouchers can be submitted to the tax authorities for verification within the 180-day period, enabling the taxpayer to recover input VAT.

China issues rules allowing foreign enterprises and individuals to establish partnerships   Dec. 02 2009

China’s State Council formally issued the long-awaited Administrative Measures for Foreign Enterprises and Individuals to Establish Partnerships in China (Decree No. 567 of the State Council, hereafter “Measures”) on 2 December 2009. The promulgation of the Measures is the most significant development in this area since the Partnership Law was introduced in 2006 (“Partnership Law”). The Measures, which become effective 1 March 2010, basically allow foreign investors more alternatives for structuring investments in China. Until now, foreign investors generally have had to set up investments in the form of wholly foreign-owned enterprises, equity joint ventures or cooperative joint ventures.

 

国务院发布通知，允许外国企业和个人建立伙伴关系 2009年12月2日

中国国务院于2009年12月2日正式下发了期待已久的外国企业和个人在中国建立伙伴关系的管理办法，（国务院第567号法令，以下简称“办法”）。

税收伙伴关系 - 该办法规定，外国合作伙伴关系有关的税务问题应遵循现行适用税率的规则和条例。

Salient points

• The Measures allow a partnership to be established by (i) two or more foreign enterprises or individuals; or (ii) a foreign enterprise(s) or individual(s) and a Chinese individual(s), enterprise(s) or other organization(s) (hereinafter “foreign partnership”). The Measures also allow foreign enterprises and individuals to become partners in a partnership formed by Chinese individuals, enterprises or other organizations.
• The establishment of a foreign partnership only requires registration with the local branch of the State Administration of Industry and Commerce.
• There are no minimum capital requirements for a foreign partnership.
• Foreign partnerships that make investments in special projects or industries that do require special approval should be pre-approved by the relevant authorities.
• The setting up of a foreign partnership whose main business is to make investments may be subject to other rules and regulations.

Observations

Partnership capital – It is interesting that the Measures specifically require that cash capital contributions to a foreign partnership by a foreign enterprise or individual should either be in freely convertible currency or legitimately obtained Renminbi (“RMB”). The Measures do not specifically mention in-kind contributions by foreign partners as capital to a foreign partnership, whereas the Partnership Law specifically states that partners in a domestic partnership may make in-kind contributions as capital to the partnership.

General partner and limited partner – The Measures do not address whether the foreign investor can be a general partner or a limited partner in a foreign partnership. Article 3 of the Measures states that the Measures should generally follow the Partnership Law, which allows different types of partners (general vs. limited) and partnerships (limited partnership or special general partnership).

Using a foreign partnership to make investment – In light of the recent flurry of activities and press reports around major global venture capital and private equity fund players launching RMB-denominated investment funds in China or expressing an interest in doing so, many firms are exploring ways to set up such investment funds in the form of a partnership and are hoping the Measures will resolve the uncertainties relating to direct participation in investment funds set up in the form of a partnership.

At this stage, it may be premature to conclude that the Measures provide clear guidance on this issue because, according to article 14 of the Measures, the setting up of a foreign partnership whose main business activity is to make investment should follow the other rules and regulations applicable to investment. The wording of article 14 is ambiguous and may lead to different interpretations. One possible interpretation is that investors may need to await further guidance specifically addressing the use of foreign partnerships for investment purposes and, until that guidance is issued, foreign partner direct participation in such foreign partnerships is not allowed. This interpretation would seem to be in line with the official Q&A press release on the Measures published on the government’s website (see link below), which appears to grant discretion to the government to introduce further guidance in respect of using a foreign partnership as a vehicle to set up an investment fund. Alternatively, one could interpret article 14 to mean that, in the absence of any rules specifically stating otherwise, a foreign partnership may make direct investments. The latter interpretation may be more in the nature of wishful thinking than a viable alternative interpretation since this is generally not a widely accepted method used by the administrative or judicial authorities in interpreting Chinese laws.

Partnership taxation – The Measures provide that foreign partnership-related tax matters should follow the prevailing applicable tax rules and regulations. Even though China does not currently have comprehensive partnership taxation rules (or foreign partnership tax rules), article 6 of the Partnership Law sets out the fundamental taxing principle, which simply states that each partner should separately pay income tax on its share of income derived from a partnership.

The Ministry of Finance and the State Administration of Taxation jointly issued a circular in December 2008 (Caishui [2008] No.159 (“Circular 159”), Notice on Issues Concerning the Income Tax Levied on Partners of a Partnership) that reconfirms the taxing principle outlined in the Partnership Law that individual and enterprise partners are subject to individual income tax and enterprise income tax, respectively, on income allocable from the partnership in which they are partners.

While clearly allowing flow-through tax treatment is a significant benefit and a reason to set up a foreign partnership, there are a number of important tax-related uncertainties and issues in the Measures that could create hurdles and will need to be resolved. For example, when a foreign partnership is allowed to make investments, will permanent establishment issues arise for the foreign partners as a result of investment in foreign partnership investment funds, what will the tax treatment of carried interests earned by a foreign general partner be, etc. In addition, it is not entirely clear how the foreign partners should pay tax on income received from the partnership. Circular 159 states that, where the partner is an enterprise, it will be subject to enterprise income tax. However, there is no guidance on how a foreign enterprise that is a partner would compute the tax and whether the after-tax profits would be subject to tax when the funds exit China. It is also unclear when a foreign partner sells its partnership interest, whether the undistributed after-tax profits would be added to the basis of the partnership interest when computing any gain or loss on the sale. Likely, the Chinese tax authorities may have to issue new rules governing the taxation on foreign partners to provide more clarification. And from a practical perspective, foreign investors will need to consider issues such as the foreign currency conversion of capital injected by foreign investors into a foreign partnership investment fund.

Overall, the Measures are welcomed, as they offer a new alternative investment vehicle for foreign investors in China, and, with the new rules becoming effective on 1 March 2010, the foreign partnership structure should be considered. Hopefully, the authorities will issue additional guidance that clarifies and resolves the outstanding issues.

China warns rich nations against "shirking responsibility" on climate change   Dec. 10 2009

BEIJING, Dec. 10 (Xinhua) -- China on Thursday warned that the rich nations should not "shift and shirk" responsibility on climate change, and urged them to provide developing countries with funds to deal with the global issue.

 

"According to the United Nations Framework Convention on Climate Change (UNFCCC), developed countries have responsibility to offer financial support to all developing countries on mitigating and adapting to climate change," Foreign Ministry spokeswoman told a regular news briefing.

"Funding is one of the key issues that will determine the success or failure of the Copenhagen conference. The offer of funds is the unshirkable responsibility of developed countries," said Jiang.

The UN Climate Change Conference, which opened Monday in Copenhagen, gathered representatives from 192 countries and aimed at mapping out a plan for combating climate change from 2012 to 2020.

Financial support is a key issue at the talks.

Reports has quoted Todd Stern, U.S. special envoy for climate change, as saying that the United States would contribute to a fund aimed at helping developing nations deal with climate change, but China would not be a recipient of financial aid as it had a booming economy and large foreign exchange reserves.

"We hope that developed countries can positively respond to reasonable requests and suggestions from developing countries, demonstrate political sincerity and fulfill their obligations rather than shift and shirk responsibility," said Jiang.

"We hope the relevant parties make efforts to make the Copenhagen conference achieve results acceptable to all sides," Jiang said.