China Tax amp Investment Express

China Tax Center

Issue No 2015001 9 January 2015

China Tax amp Investment Express (CTIE) brings you the latest tax and business announcements on a weekly basis CTIE provides a synopsis of each announcement including a weblink that leads you to the full content of the announcement (in Chinese) Please feel free to contact your Ernst amp Young client service professionals for further assistance if you find the announcements have an impact on your business operations

This CTIE does not replace our China Tax amp Investment News which will continue to be prepared and distributed to provide more in-depth analyses of tax and business developments in China If you wish to access these previous issues of CTIE and China Tax amp Investment News please contact us

Tax circulars

Notice regarding the public opinion solicitation on the ldquoRevised Draft of the Law of the Peoplersquos Republic of China (PRC) on Tax Collection and Administration (Discussion Draft)rdquo

Synopsis

The Law of the PRC on Tax Collection and Administration (hereinafter referred to as the ldquoLawrdquo) as the basic procedural law in tax matters of the country was introduced in 1992 and became effective on 1 January 1993 The Law was subsequently amended several times and the existing Law became effective from 1 May 2001 On 7 June 2013 a discussion draft of a new revision of the Law ie ldquoAmendment to the Law (Discussion Draft)rdquo was announced by the Legislative Affairs Office of the State Council for the purpose of seeking public opinion One and a half years later the State Council launched the second round of public opinion solicitation on another version of the revised Law On 5 January 2015 the Legislative Affairs Office of the State Council announced the ldquoRevised Draft of the Law (Discussion Draft)rdquo (hereinafter referred to as ldquoDraft Lawrdquo) seeking another round of public opinion The Draft Law consisting of 139 articles in 11 chapters added in 45 new articles and made major supplements and adjustments to the existing Law which include

Added new provisions to strengthen the tax administration on natural persons

Improved the system for protecting taxpayersrsquo rights

Further regulated tax collection and administration acts

Conformed to relevant laws

Improved the content in dispute resolution mechanism The solicitation of public opinion will be closed on 3 February 2015 Taxpayers are encouraged to express their opinions on the Draft Law by submitting their comments through the web writing emails or letters to the Legislative Affairs Office of the State Council

2 China Tax amp Investment Express

We will release a new edition of China Tax amp Investment News to discuss the Draft Law in greater detail so please stay tuned You may click this link to access full content of the Draft Law httpwwwchinalawgovcnarticlecazjgg20150120150100397930shtml

Notice regarding the ldquoAdministrative Measures on Value-Added Tax (VAT) and Consumption Tax (CT) Refund for Development of Hengqin and Pingtan (Trial)rdquo (SAT Announcement [2014] No 70) Synopsis Pursuant to Caishui [2014] No 51 (ldquoCircular 51rdquo ie Notice regarding certain VAT and CT policies for development of Hengqin and Pingtan) on 19 December 2014 the State Administration of Taxation (SAT) announced the ldquoAdministrative Measures on VAT and CT Refund for Development of Hengqin and Pingtan (Trial)rdquo (hereinafter referred to as the ldquoTrial Administrative Measuresrdquo) through SAT Announcement [2014] No 70 (ldquoAnnouncement 70rdquo) Same as Circular 51 the Trial Administrative Measures shall also become effective once relevant customs supervisory facilities are checked and officially operated (please refer to CTIE2014025 for details of Circular 51) Key features of Announcement 70 are as follows

Items Provisions

Scope of commodities subject to VAT and CT refund under the Trial Administrative Measures

Commodities (including water steam electricity and fuel gas) sold to HengqinPingtan from domestic areas are deemed as exported (hereinafter referred to as ldquodeemed export commoditiesrdquo)

Enterprises responsible for the VAT and CT refund

The following enterprises may apply for the VAT and CT refund for their purchase of the deemed export commodities

Enterprises completed their registration formalities in HengqinPingtan (hereinafter referred to as ldquopurchasersrdquo)

Enterprises engaging in utility and gas that completed their registration formalities in HengqinPingtan (hereinafter referred to as ldquopowerutility suppliersrdquo)

Recognition of eligibility for VAT and CT ldquorefundexemptionrdquo (hereinafter referred to as the ldquorecognitionrdquo)

Purchasers that have not completed the record filing of foreign trade operators (对外贸易经营者备案登记) should complete the recognition within 30 days upon the date of their first purchase of deemed export commodities which are related to their operation Submission of registration forms of foreign trade operators (对外贸易经营者备案登记表) and approval certificates are not required for the recognition

Powerutility suppliers should complete the recognition within 30 days upon the date of their first purchase of the deemed export water steam electricity and fuel gas Submission of customs registration certificates registration forms of foreign trade operators and the approval certificates are not required for the recognition

Other than the above situations purchasers and powerutility suppliers should complete the recognition according to Article 3 of SAT Announcement [2012] No 24 (ldquoAnnouncement 24rdquo ie Notice regarding the issuance of ldquoAdministrative Measures on VAT and CT Collection for the Export of Goods and Servicesrdquo) (Please refer to CTIE2012021 for details of Announcement 24)

2 China Tax amp Investment Express

We will release a new edition of China Tax amp Investment News to discuss the Draft Law in greater detail so please stay tuned You may click this link to access full content of the Draft Law httpwwwchinalawgovcnarticlecazjgg20150120150100397930shtml

Notice regarding the ldquoAdministrative Measures on Value-Added Tax (VAT) and Consumption Tax (CT) Refund for Development of Hengqin and Pingtan (Trial)rdquo (SAT Announcement [2014] No 70) Synopsis Pursuant to Caishui [2014] No 51 (ldquoCircular 51rdquo ie Notice regarding certain VAT and CT policies for development of Hengqin and Pingtan) on 19 December 2014 the State Administration of Taxation (SAT) announced the ldquoAdministrative Measures on VAT and CT Refund for Development of Hengqin and Pingtan (Trial)rdquo (hereinafter referred to as the ldquoTrial Administrative Measuresrdquo) through SAT Announcement [2014] No 70 (ldquoAnnouncement 70rdquo) Same as Circular 51 the Trial Administrative Measures shall also become effective once relevant customs supervisory facilities are checked and officially operated (please refer to CTIE2014025 for details of Circular 51) Key features of Announcement 70 are as follows

Items Provisions

Scope of commodities subject to VAT and CT refund under the Trial Administrative Measures

Commodities (including water steam electricity and fuel gas) sold to HengqinPingtan from domestic areas are deemed as exported (hereinafter referred to as ldquodeemed export commoditiesrdquo)

Enterprises responsible for the VAT and CT refund

The following enterprises may apply for the VAT and CT refund for their purchase of the deemed export commodities

Enterprises completed their registration formalities in HengqinPingtan (hereinafter referred to as ldquopurchasersrdquo)

Enterprises engaging in utility and gas that completed their registration formalities in HengqinPingtan (hereinafter referred to as ldquopowerutility suppliersrdquo)

Recognition of eligibility for VAT and CT ldquorefundexemptionrdquo (hereinafter referred to as the ldquorecognitionrdquo)

Purchasers that have not completed the record filing of foreign trade operators (对外贸易经营者备案登记) should complete the recognition within 30 days upon the date of their first purchase of deemed export commodities which are related to their operation Submission of registration forms of foreign trade operators (对外贸易经营者备案登记表) and approval certificates are not required for the recognition

Powerutility suppliers should complete the recognition within 30 days upon the date of their first purchase of the deemed export water steam electricity and fuel gas Submission of customs registration certificates registration forms of foreign trade operators and the approval certificates are not required for the recognition

Other than the above situations purchasers and powerutility suppliers should complete the recognition according to Article 3 of SAT Announcement [2012] No 24 (ldquoAnnouncement 24rdquo ie Notice regarding the issuance of ldquoAdministrative Measures on VAT and CT Collection for the Export of Goods and Servicesrdquo) (Please refer to CTIE2012021 for details of Announcement 24)

3 China Tax amp Investment Express

Items Provisions Application for VAT and CT refund

VAT and CT refund for purchasers Purchasers are required to complete the export tax refund filing with their state tax bureaus in charge within the VAT filing periods from the month following the completion of customs declaration procedures for the deemed export commodities (the date as indicated on the customs declaration form) till the end of April of the next year Overdue tax refund applications shall be declined VAT and CT refund for powerutility suppliers Powerutility suppliers are required to complete the export tax refund filing with their state tax bureaus in charge within the VAT filing periods from the month following the purchase of production related water steam electricity and fuel gas to HengqinPingtan (the date as indicated on the special VAT invoices obtained) till the end of April of the next year Overdue tax refund applications shall be declined However before the lodge of formal export tax refund filing the purchasers and powerutility suppliers are required to perform a preliminary export tax refund filing (ldquopreliminary filingrdquo) with their state tax bureaus in charge Where the purchasers or the powerutility suppliers fail to complete the preliminary filings due to missing informationinconsistent data before the export tax refundexemption filing deadline the purchasers and powerutility suppliers should follow Article 41 of SAT Announcement [2013] No 61 (ldquoAnnouncement 61rdquo ie Notice regarding adjustment of measures on the declaration of export tax refundexemption) (Please refer to CTIE2013040 for details of Announcement 61)

Other provisions

Purchasers are required to account the purchase amount and input VAT for deemed export commodities separately

Deemed export commodities to be used on commercial real estate projects are not eligible for the VAT and CT refund Any refunded taxes in this regard shall be clawed back

Issues related to VAT and CT refund conducted by purchasers that have not been clarified in the Trial Administrative Measures shall refer to the prevailing tax regulations on deemed export goods

Effectiveness The Trial Administrative Measures shall become effective once relevant customs supervisory facilities are checked and officially operated The enforcement of VAT and CT refund policies in the Trial Administrative Measures shall refer to the exportation date as indicated in the customs declaration form for an export tax refund issued for deemed export commodities or issuance date of special VAT invoices for deemed export water steam electricity and fuel gas

Our observations On 11 June 2014 the Ministry of Finance (MOF) General Administration of Customs (GAC) and SAT jointly released Circular 51 to specify the VAT and CT policies for HengqinPingtan Circular 51 specifies that commodities shipped to HengqinPingtan from domestic areas are eligible for VAT and CT export refund policies The Trial Administrative Measures were issued as implementation measures of Circular 51 to specify various related issues such as the recognition requirements documentation requirements and procedures of export tax refund filing Relevant enterprises are suggested to get familiar with Circulars 51 and the Trial Administrative Measures to enjoy tax refundexemption policies If in doubt consultations with professionals would be helpful 1 According to Article 4 of Announcement 61 where the purchasers or the powerutility suppliers fail to complete a preliminary

filing due to missing informationinconsistent data before the export tax refundexemption filing deadline enterprises shall submit the following documents to the state tax bureaus in charge before the due date

Reporting form for missing information in export tax refundexemption documents (ldquoreporting formrdquo) and relevant electronic data

Export tax refundexemption filing documents You may click this link to access full content of Announcement 70 httpwwwzjtaxgovcnpub1331003000004zxwj201412t20141230_431139html

You may click this link to access full content of Circular 51 httpszsmofgovcnzhengwuxinxizhengcefabu201406t20140618_1100977html

You may click this link to access the full content of Announcement 24 httpwwwzjtaxgovcnpubjjqgsswxcssztcktszc201309t20130925_248174html

You may click this link to access the full content of Announcement 61 httpwwwchinataxgovcn2013n1586n1593n1737n1743c476818contenthtml

4 China Tax amp Investment Express

Notice regarding certain opinions on promoting the unified registration of the business license organization code certificate and tax registration certificate (Shuizongfa [2014] No 152) Synopsis On 18 December 2014 the SAT released Shuizongfa [2014] No 152 (ldquoCircular 152rdquo) setting out certain opinions on promoting the reform of three-in-one certificate system (ie three certificates including the business license organization code certificate and tax registration certificate are combined into one certificate) The basic strategy for the reform of the three-in-one certificate system involves the promotion of ldquojoint handling and issuance of three certificatesrdquo (ie the administrative authority for industry and commerce qualify supervision authority state and local tax authorities shall jointly handle the application and issuance of the business license organization code certificate and tax registration certificate) exploration of ldquoone combined certificate with three codesrdquo (ie the administrative authority for industry and commerce qualify supervision authority state and local tax authorities shall jointly allot codes (赋码) and issue to the applicant one certificate which combines the functions of business license organization code certificate and tax registration certificate and contains the business license registration number organization code number and tax registration number) and final realization of ldquoone combined certificate with one coderdquo The pilot of the three-in-one certificate system shall be deployed by relevant departments of the State Council Before the formal launch of ldquoone combined certificate with one coderdquo transitional ldquojoint handling and issuance of three certificatesrdquo and ldquoone combined certificate with three codesrdquo can be implemented Promoting the three-in-one certificate system is an important move to implement the reform of registered capital registration system offer convenience for market players and release market impetus Circular 152 requires tax authorities at the local level to formulate procedural guidelines promoting information sharing and cooperation with relevant departments on the interconnection and intercommunication of registration information to increase work efficiency of tax authorities and facilitate taxpayersrsquo business registration process You may click this link to access full content of Circular 152 httpwwwchinataxgovcnn810341n810755c1426214contenthtml

Notice regarding certain policies for the pilot promotion of trade diversity in Suzhou Industrial Park Integrated Free Trade Zone (SIP FTZ) and Chongqing Lianglu-Cuntan Free Trade Port Area (CFTA) (Caiguanshui [2014] No 65)

Synopsis Pursuant to Guohan [2014] No 125 (ldquoCircular 125rdquo ie Approval regarding adjustments of tax policies in SIP FTZ and CFTA to promote trade diversity) the MOF GAC and SAT jointly released Caiguanshui [2014] No 65 (ldquoCircular 65rdquo) on 19 December 2014 to specify tax policies related to the pilot run in SIP FTZ and CFTA to encourage trade diversity Under the pilot run the following tax policies shall apply to business activities related to trading logistic or simple processing for circulation purposes in specific areas in the existing SIP FTZ and CFTA (hereinafter referred to as the ldquofunctional areasrdquo) Entrance of commodities

Except where otherwise specified in the prevailing laws regulations or policies commodities shipped to functional areas from overseas or customs supervisory zones shall be bonded

Non-bonded commodities are allowed to be transmitted to the functional areas Departure of commodities

Non-bonded commodities shipped to the functional areas from other domestic areas shall be subject to an export tax refund when they are exported physically

Transfer of commodities

Bonded commodities shipped to the functional areas from overseas or customs supervisory zones to be sold in the functional areas shall continue to be bonded Bonded commodities to be sold in other domestic areas shall be subject to import level taxes according to their statuses while they are shipped into the functional areas In addition these commodities are also subject to VAT for their domestic sales

Other than bonded commodities other commodities sold in the functional areas or sold to other domestic areas shall be subject to VAT as domestic sales Where the commodities sold to domestic areas contain bonded commodities those bonded commodities shall also be subject to import level taxes according to their statuses while they are shipped into the functional areas

5 China Tax amp Investment Express

Other provisions

Tax exemption policies for importation of equipment facilities or materials for capital constructions imported to SIP FTZ and CFTA shall no longer apply to the functional areas

Qualifying enterprises in the functional areas shall be recognized as general VAT taxpayers Circular 65 shall become effective once relevant territories of the functional zones are determined and the required customs supervisory facilities are checked and officially operated The above mentioned tax policies may be extended to other integrated free trade zones and port areas Enterprises operating in the relevant customs supervisory zones should get familiar with tax policies as prescribed in Circular 65 If in doubt consultations with professionals would be helpful You may click this link to access full content of Circular 65 httpwwwxmbiogovcnzhuantiview-103474-1html

Notice regarding export tax refund policies for products made with precious metals and gems (Caishui [2014] No 98) Synopsis To improve export tax refund policies and enhance the relevant risk control management on 9 December 2014 the MOF and SAT jointly released Caishui [2014] No 98 (ldquoCircular 98rdquo) to specify the export tax refund policies for products made with precious metals and gems as main raw materials Key features of Circular 98 are Products with 80 or above raw material costs representing the prescribed precious metals and gems listed in Circular 98 which are exported by export enterprises or other entities shall be subject to the VATCT policies applied to the raw material with the highest proportion in the total costs of such products according to the HS code of the raw material Circular 98 became effective on 1 January 2015 and revoked Item 6 of Paragraph 2 under Article 9 of Caishui [2012] No 39 (ldquoCircular 39rdquo ie Notice regarding VAT and CT policies for the export of goods and services) as well as its attachment 9 at the same time (Please refer to CTIE2012021 for details of Circular 39) You may click this link to access full content of Circular 98 httpszsmofgovcnzhengwuxinxizhengcefabu201412t20141226_1172567html

You may click this link to access full content of Circular 39 httpszsmofgovcnzhengwuxinxizhengcefabu201206t20120620_661213html

Notice regarding the 2014 first batch of charitable social organizations eligible for the deduction of charitable donations for income tax purposes (Caishui [2014] No 69) Synopsis

Pursuant to Caishui [2008] No 160 (ldquoCircular 160rdquo ie Notice regarding issues related to the deduction of charitable donations for income tax purposes) and Caishui [2010] No 45 (ldquoCircular 45rdquo) which supplemented Circular 160 on 24 November 2014 the MOF SAT and Ministry of Civil Affairs jointly released Caishui [2014] No 69 (ldquoCircular 69rdquo) announcing the first batch of charitable social organizations (hereinafter referred to as ldquoCSOsrdquo) that are eligible for income tax deduction of charitable donations for the year 2014 (Please refer to CTIE2010028 for details of Circular 45) Circular 69 also confirms that China Charities Aid Foundation for Children is eligible for income tax deduction of charitable donations for the year 2012 while Association for Relations Across the Taiwan Straits is eligible for the deduction of charitable donations for income tax purposes for the year 2013 According to the Corporate Income Tax (CIT) Law in general a companyrsquos charitable donations to approved CSOs are deductible for CIT purposes up to 12 of its total annual profits calculated in accordance with PRC Accounting Standards For individuals charitable donations to approved CSOs are fully deductible for Individual Income Tax purposes

6 China Tax amp Investment Express

You may click this link to access full content of Circular 69 httpwwwmcagovcnarticlezwgktzl20141220141200750214shtml

You may click this link to access full content of Circular 160 httpwwwgovcnzwgk2009-0123content_1213899htm

You may click this link to access full content of Circular 45 httpszsmofgovcnzhengwuxinxizhengcefabu201008t20100802_331101html

Notice regarding tax collection and administration issues related to the adjustment of the per unit rates of CT on refined oil (Shuizonghan [2014] No 567)

Notice regarding the further adjustment of CT collection and administration issues on refined oil (SAT Announcement [2014] No 71)

Notice regarding certain issues related to the adjustment of CT returns (SAT Announcement [2014] No 72)

Synopsis

Pursuant to the latest adjustment of CT policies for refined oil and other consumption products the SAT released a series of circulars to address the related CT collection and administration issues

Circulars Issuance date

Effective date

Key features

Shuizonghan [2014] No 567 (ldquoCircular 567rdquo ie notice regarding tax collection and administration issues related to the adjustment of the per unit rates of CT on refined oil)

28 November 2014

28 November 2014

Circular 567 specifies the transition arrangements for the CT filing related to refined oil for November 2014 according to Caishui [2014] No 94 (ldquoCircular 94rdquo ie Notice regarding the increase of per unit rates of CT on refined oil) and SAT Announcement [2014] No 65 (ldquoAnnouncement 65rdquo ie Notice regarding certain CT issues related to refined oil) (please refer to CTIE2014049 for details of Circular 94 and Announcement 65)

Reiterates the forms to be completed for the CT filing for November 2014 as prescribed in Announcement 65

Specifies the connection of various forms as prescribed in Announcement 65 Where the tax bureaus in charge find that the data input in the forms are not matching the forms shall be returned to taxpayers for amendment

Upon verification tax bureaus in charge shall accept the CT filing for CT related to refined oil for November 2014 and collect the CT payment Forms filed in paper as prescribed in Announcement 65 shall be filed for record

Key features of the related circulars are as follows (please click the circular no in the table below to access full content of the respective circulars)

7 China Tax amp Investment Express

Circulars Issuance date

Effective date

Key features

SAT Announcement [2014] No 71 (ldquoAnnouncement 71rdquo ie Notice regarding the further adjustment of CT collection and administration issues on refined oil)

26 December 2014

13 December 2014

Announcement 71 specifies the ongoing CT filing arrangements related to the adjustment of CT policies for refined oil as specified in Circular 94 and Caishui [2014] No 106 (ldquoCircular 106rdquo ie Notice regarding the further increase of the per unit rates of CT on refined oil) (please refer to CTIE2014051 for details of Circular 106)

Creditable CT amount for refined oil

Where taxpayers obtain gasoline diesel fuel oil naphtha and lubricant (hereinafter referred to as the ldquotaxable productsrdquo) through purchase importation or manufacturing consignment arrangements the CT paid for those taxable products can be credited for their further production The creditable CT amount shall be calculated according to the special VAT invoices import CT payment demand notes (《海关进口消费税专用缴款书》) or tax payment notes for withholding purposes (《税收缴款书(代扣代收专用)》)

Taxpayers should establish stock reports of refined oil (sample can be found in Attachment I of Announcement 71) as supporting for CT credit through purchase importation or manufacturing consignment arrangements of taxable products

Arrangements for CT filing for refined oil

For CT filing for refined oil on or after December 2014 the updated CT return for refined oil (ie Attachment II of Announcement 71) should be used instead of the former CT return for refined oil as attached in Guoshuihan [2008] No 1072 (ldquoCircular 1072rdquo ie Notice regarding reinforcement of CT administration and collection on refined oil) Various changes are made in the updated CT return which include merging the rows for leaded gasoline and unleaded gasoline etc

Taxpayers should manually complete the stock reports of refined oil for the period from 29 November 2014 to 12 December 2014 and file the same to their tax bureaus in charge as supplements to CT return for refined oil for December 2014

Announcement 71 took retroactive effective on 13 December 2014 and revoked Attachment VI of Guoshuifa [2006] No 49 (ldquoCircular 49rdquo ie Notice regarding the adjustment and improvement of CT policies) as well as Attachment of Circular 1072 at the same time

SAT Announcement [2014] No 72 (ldquoAnnouncement 72rdquo ie Notice regarding certain issues related to the adjustment of CT return forms)

26 December 2014

26 December 2014

Announcement 72 specifies the following adjustments on CT filing according to Caishui [2014] No 93 (ldquoCircular 93rdquo ie Notice regarding the adjustment of CT policies) (please refer to CTIE2014049 for details of Circular 93)

Updates Attachment II (ie CT return for liquor and ethanol) of Guoshuihan [2008] No 236 (ldquoCircular 236rdquo ie Notice regarding certain issues related to the use of CT returns) by renaming its title as ldquoCT return for liquorrdquo removing the row related to ldquoethanolrdquo and revising the relevant explanatory notes The updated return is re-announced in Announcement 72 as its Attachment I

Updates Attachment V (ie CT return for other consumption products) of Circular 236 by amending the relevant contents related to motorcycles and automobile tires The updated return is re-announced in Announcement 72 as its Attachment II

Announcement 72 became effective on its promulgation date and revoked Circular 236 at the same time

8 China Tax amp Investment Express

Relevant taxpayers should study the above mentioned circulars to ensure full compliance You may click this link to access full content of Circular 567 httpwwwah-n-taxgovcnhsgswwzcjd201412t20141202_2163702html

You may click this link to access full content of Announcement 71 httpwwwchinataxgovcnn810341n810755c1437914contenthtml

You may click this link to access full content of the Interpretation of Announcement 71 from the SAT httpwwwchinataxgovcnn810341n810760c1437959contenthtml

You may click this link to access full content of Announcement 72 httpwwwchinataxgovcnn810341n810755c1437988contenthtml

You may click this link to access full content of the Interpretation of Announcement 72 from the SAT httpwwwchinataxgovcnn810341n810760c1438009contenthtml

Notice regarding authorizing the State Council to temporarily adjust certain administrative approval

items prescribed in laws in China (Guangdong) Pilot Free Trade Zones (GD PFTZ) China (Tianjin) Pilot Free Trade Zones (TJ PFTZ) China (Fujian) Pilot Free Trade Zones (FJ PFTZ) and the expanded area of China (Shanghai) Pilot Free Trade Zones (SH PFTZ) Synopsis To further deepen economic reform and accelerate the functional transformation of government authorities on 28 December 2014 the Standing Committee of the 12th National Peoplersquos Congress announced a decision (ldquoDecisionrdquo) regarding authorizing the State Council to temporarily adjust certain administrative approval items (excluding investments subject to special access control) prescribed in the following laws in GD PFTZ TJ PFTZ FJ PFTZ and SH PFTZ (please click the title below to access full content of the respective laws)

Law of the PRC on Foreign Investment Enterprises (ldquoFIEsrdquo)

Law of the PRC on Chinese-Foreign Equity Joint Ventures (ldquoEJVsrdquo)

Law of the PRC on Chinese-Foreign Cooperative Joint Ventures (ldquoCJVsrdquo)

Law of the Protection of Investments by Compatriots from Taiwan Pursuant to the Decision record filings shall be conducted with the relevant authorities for the following items instead of administrative approval The adjustments shall be implemented on a trial basis within three years Relevant laws would be amended and improved according to feasible future practice original provisions shall be restored if the items can be proven not suitable for adjustments The Decision will become effective on 1 March 2015

No Type of enterprises Administrative approval items 1 FIEs Establishment 2 Change of major items (eg split and merger) 3 Operating period 4 EJVs Establishment

5 Extension of operation period 6 Dissolution 7 CJVs Establishment 8 Major changes of agreements contracts and articles of

association 9 Assign their rights and obligations under joint venture

agreements 10 Entrust others to operate and manage CJVs

11 Extension of operation period 12 Enterprises invested by Taiwan

compatriot Establishment

Business circulars

9 China Tax amp Investment Express

In addition the Decision also specifies the areas of GD PFTZ TJ PFTZ FJ PFTZ and expanded area of SH PFTZ Our observations The establishments of GD PFTZ TJ PFTZ and FJ PFTZ shall not be simple replications of SH PFTZ but will be complementary to one another Each of the pilot free trade zones shall be relied on their own regional advantages among which the GD PFTZ shall further seize the business opportunities of trade liberalization between Guangdong and Hong KongMacao under the framework of the Mainland and Hong KongMacao Closer Economic Partnership Arrangement the TJ PFTZ shall more focus on the radiation effect of Beijing Tianjin Hebei region and the Bohai-bay economic zone and the FJ PFTZ shall further promote the business cooperation between the Mainland and Taiwan Relevant companies and foreign investors intending to explore business opportunities in the aforesaid zones should study the Decision carefully In any case we will keep a close eye on any developments and keep you posted about any changes

You may click this link to access full content of the Decision httpwwwgovcnxinwen2014-1229content_2797793htm

Decision regarding the modification of the ldquoAdministrative Regulations of the PRC on Foreign-funded Banksrdquo

(State Council Order [2014] No 657)

Synopsis On 27 November 2014 the State Council announced a decision on modification of the ldquoAdministrative Regulations of the PRC on Foreign-funded Banksrdquo (hereinafter referred to as the ldquoForeign-funded Banks Decisionrdquo) through State Council Order [2014] No 657 (ldquoOrder 657rdquo) which became effective on 1 January 2015 Key changes made in the Foreign-funded Banks Decision are as follows

Requirement of minimum operation fund allocated from head offices of wholly-foreign-owned banks and China-foreign investment banks to their branches is removed

One of the requirements for the majority shareholder or sole shareholder of wholly-foreign-owned banks ie the shareholder should have established its representative office in the PRC for at least two years is removed

One of the requirements for the majority foreign shareholder or sole foreign shareholder of China-foreign investment banks ie the shareholder should have established its representative office in the PRC is removed

A foreign bank that intends to establish branches in the PRC is no longer required to have its representative office in the PRC for at least two years beforehand

Loosen the criteria for foreign-funded banks to engage in RMB businesses

Before lodging the application for undertaking RMB businesses the foreign-funded banks should be operated in the PRC for at least one year instead of at least three years

The requirement that the foreign-funded banks must be profitable for two consecutive years before lodging the application is removed

Our observations There is no doubt that the issuance of the Foreign-funded Banks Decision would greatly promote the development of foreign-funded banks as

Removing the minimum amount of operation funds allocated by head offices shall allow the foreign-funded banks to improve their cash flow planning and increase their motivation to set up branch offices in the PRC

Removingloosening certain criteria for establishment of foreign-funded banks shall attract greater investments in banking

Loosening criteria for foreign-funded banks to engage in RMB businesses shall allow more foreign-funded banks to expand their business opportunities and overall increase the competitiveness of foreign-funded banks

The Foreign-funded Banks Decision provides more flexible administrations over the investment and operation of foreign-funded banks Even though domestic banks may be adversely affected by the business expansion of foreign-funded banks they would still benefit from enhancement of the overall service quality and improvement of sector efficiency due to more diverse expertise Relevant investors and foreign-funded banks should be aware of the changes made in the Foreign-funded Banks Decision You may click this link to access full content of Order 657 httpwwwgovcnzhengce2014-1220content_2795314htm

10 China Tax amp Investment Express

Notice regarding the exemption of certain governmental funds for small and micro-sized enterprises

(Caishui [2014] No 122) httpwwwgovcnxinwen2014-1225content_2796627htm

Notice regarding the enforcement of the revised annual CIT returns (Shuizonghan [2014] No 596) httpwwwgxdsgovcnadminrootsitesiteportalgxshowPageportal[contentId=81511][categoryId=2270][categoryCode=001014009004]

Notice regarding the work plan for simplifying approval items regulating intermediary services and implementing online joint approval of enterprisesrsquo investment projects (Guobanfa [2014] No 59) httpwwwgovcnzhengcecontent2014-1229content_9369htm

Notice regarding the cancellation cessation of collection exemption of a batch of governmental administrative charges (Caishui [2014] No 101) httpwwwgovcnxinwen2014-1230content_2798598htm

Notice regarding the 2014 import volume and the 2015 annual import volume trigger level for certain agricultural products imported from New Zealand (GAC Announcement [2014] No 94) httpwwwcustomsgovcnpublishportal0tab49661info728643htm

Other business and tax related circulars recently announced by central government authorities

11 China Tax amp Investment Express

Contact us For more information please contact your usual EY contact or one of the following of EYrsquos China tax leaders

bull Walter Tong +86 21 2228 6888 waltertongcneycom

bull Henry Chan (Beijing) +86 10 5815 3397 henrychancneycom bull Alan Lan (Tianjin) +86 10 5815 3389 alanlancneycom

Office Tax Leaders

bull Samuel Yan (DalianShenyang) +86 10 5815 3226 samuelyancneycom

Service Line Tax Leaders

bull Andrew Choy (International Tax amp Transfer Pricing) +86 10 5815 3230 andrewchoycneycom

bull Paul Wen (Human Capital) +852 2629 3876 paulwenhkeycom

bull Robert Smith (Indirect Tax) +86 21 2228 2328 robertsmithcneycom

bull Becky Lai (Tax Policy) +852 2629 3188 beckylaihkeycom

bull David Chan (Transaction Tax) +852 2629 3228 davidchanhkeycom

bull Jane Hui +852 2629 3836 janehuihkeycom

Author ndash China Tax Center

Greater China Tax Leader

bull Lucy Wang (Qingdao) +86 10 5815 3809 lucy-cwangcneycom

bull Vickie Tan (ShanghaiWuhan) +86 21 2228 2648 vickietancneycom

bull Audrie Xia (Suzhou) +86 21 2228 2886 audriexiacneycom

bull Patricia Xia (Hangzhou) +86 21 2228 2878 patriciaxiacneycom

bull Chuan Shi (Chengdu) +86 21 2228 4306 chuanshicneycom

bull Rio Chan (GuangzhouXiamen) +86 20 2881 2878 riochancneycom

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About EY EY is a global leader in assurance tax transaction and advisory services The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over We develop outstanding leaders who team to deliver on our promises to all of our stakeholders In so doing we play a critical role in building a better working world for our people for our clients and for our communities EY refers to the global organization and may refer to one or more of the member firms of Ernst amp Young Global Limited each of which is a separate legal entity Ernst amp Young Global Limited a UK company limited by guarantee does not provide services to clients For more information about our organization please visit eycom copy 2015 Ernst amp Young China All Rights Reserved APAC No 03001576 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting tax or other professional advice Please refer to your advisors for specific advice eycomchina

EY | Assurance | Tax | Transactions | Advisory

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About EY EY is a global leader in assurance tax transaction and advisory services The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over We develop outstanding leaders who team to deliver on our promises to all of our stakeholders In so doing we play a critical role in building a better working world for our people for our clients and for our communities EY refers to the global organization and may refer to one or more of the member firms of Ernst amp Young Global Limited each of which is a separate legal entity Ernst amp Young Global Limited a UK company limited by guarantee does not provide services to clients For more information about our organization please visit eycom copy 2015 Ernst amp Young China All Rights Reserved APAC No 03001576 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting tax or other professional advice Please refer to your advisors for specific advice eycomchina

EY | Assurance | Tax | Transactions | Advisory

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