China Regulatory Brief: Tax Breaks for Service Outsourcing, Deposit Insurance, and Relaxed Fees for Nursing Homes

December 1, 2014 Posted by China Briefing Reading Time: 4 minutes

International Service Outsourcing Enterprises to Receive VAT Exemption

On November 26, Chinese Premier Li Keqiang held an executive meeting of the State Council in which it was determined to increase tax and financial support for the international service outsourcing industry. According to the meeting, international service outsourcing enterprises shall either receive a value-added tax (VAT) exemption or zero-rated VAT. Also, the meeting determined to increase the number of service outsourcing “model cities” and expand the number of high-tech service enterprises able to enjoy a 15 percent corporate income tax (CIT) rate. The country is now making efforts to support service outsourcing enterprises and build up an advanced international-level outsourcing industry platform.

Shanghai Free Trade Zone Launches Pilot Scheme for Sino-Foreign Law Firms

On November 18, the Shanghai Free Trade Zone (FTZ) officially launched a pilot scheme allowing eligible foreign and Chinese law firms to enter into a joint operation or establish an agreement to mutually dispatch lawyers as foreign/Chinese legal consultants, in a move to further liberalize the legal services industry and promote cooperation between Chinese and foreign law firms. It should be noted that the chief representative and/or person in-charge of a law firm may not be appointed as a legal consultant to another firm. Also, it is stipulated that at a minimum, either the foreign law firm should have a representative office (RO) in the Shanghai FTZ or the Chinese law firm (or its branch) should be established in the FTZ.

China Launches RMB 500,000 Deposit Protection Scheme

On November 30, the People’s Bank of China (PBOC) released an opinion-seeking draft of its “Deposit Insurance Regulations,” which proposed a coverage ceiling of RMB 500,000 (12 times the Chinese GDP per capita) for Chinese bank depositors. According to the PBOC and China’s State Council, 99.63 percent of depositors will be covered under the RMB 500,000 maximum payout. Compensation for deposits exceeding this amount should be made from the bank’s liquidation assets. The new Regulations are expected to support small and medium-sized banks and deepen the country’s financial sector reforms.

China Relaxes Administrative Fees for Nursing Homes and Hospitals

The Ministry of Finance (MOF) and National Development and Reform Commission (NDRC) jointly released the “Announcement on Relaxing Administrative Fees for Nursing Homes and Medical Institutions (Cai Shui [2014] No.77)” in a bid to promote the development of the elderly care and medical industries. The Announcement exempts administrative fees (e.g., land registration fees and termite prevention fees) for the construction of non-profit nursing homes and hospitals. Further, administrative fees shall be halved for for-profit nursing homes and hospitals. The Announcement will take effect on January 1, 2015.

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