China Regulatory Brief: CIT Incentives in Western China, Management Measures on Cosmetic Production

Enterprises to Enjoy CIT Incentives in Western China

The State Administration of Taxation (SAT) released an interpretation of the “Circular on Corporate Income Tax Issues for the Implementation of Catalogue of Encouraged Industries in Western China” on March 10. The SAT clarified that eligible companies engaged in industries newly added to the encouraged list of the “Catalogue of Encouraged Industries in Western China” may pay the corporate income tax (CIT) at a reduced rate of 15 percent. Such companies need to meet the following two requirements:

• The companies’ main business is included in the encouraged industries; and
• The companies’ main business income covers more than 70 percent of their total income. 

China Releases New Rules on Cross-border Related Party Transactions

On March 18, the State Administration of Taxation released a new circular regarding corporate income tax (CIT) issues on cross-border related party transactions, which took immediate effect. The new rules point out certain types of expenses paid by a Chinese company to its cross-border related party that will no longer be tax deductible.

Guangdong Encourages Hong Kong and Macau Investors to Set up Law Firms

The Guangdong Government recently published the 2015 Key Work Arrangement under the “Agreement on the Guangdong and Hong Kong Cooperation Framework.” The Arrangement covers certain fields such as the modern service industry, finance and e-commerce. Specifically, Mainland and Hong Kong law firms will soon be allowed to jointly set up partnerships and provide legal services for both Chinese and overseas companies in Guangdong. Previously, they were only permitted to do so in three areas: Nansha district in Guangzhou, Qianhai district in Shenzhen, and Hengqin district in Zhuhai. The Arrangement also encourages Hong Kong investors to set up medical institutions in the form of joint ventures and sole or cooperative proprietorships in Guangdong.                                                                                 

China Strengthens Management on Production of Cosmetics

China Food and Drug Administration (CFDA) recently released two draft regulations on the cosmetics production permits and inspections. The drafts have been made available to the public for comment. Enterprises that are engaged in cosmetics production need to apply to the CFDA for a permit and approval. When a company applies for such a permit, the CFDA will send an inspector to inspect the premises. Approved enterprises will then be granted a production permit, which is valid for five years. Also, production of cosmetics for special purposes such as hair dye and sunscreen need to obtain a separate approval with the CFDA. Further, cosmetics enterprises are required to have adverse reaction monitoring and product recall systems in place.

RELATED: Consumption Trends and Targeting China’s Female Consumers

Chinese Customs Launches Online Credit Platform

The Chinese Customs Office recently launched a new online platform to publish enterprises’ credit records, as well as import and export business information. The customs released the Decree No. 221 in March 2014, requiring that all the enterprises that make a customs declaration be registered with the customs. Meanwhile, these enterprises need to submit an annual report which includes all relevant registration information to their local customs office by the end of June each year. The year 2015 is the first year that enterprises need to file such customs annual reports. More details on the filing procedures will be released by the Guangzhou Customs by the end of April.

New IP Protection Center Established in Beijing

On March 18, the new intellectual property (IP) protection center of the Supreme Court was officially established in Beijing. Zhou Qiang, the president of the Supreme Court, stated that the center would mainly concentrate on patent and trademark infringements, as well as authorization cases. China has been making an effort in recent years to enhance the protection for IP rights. With the amended trademark law released and the new patent law coming soon, government protection of intellectual property is increasing. 

Tax, Accounting, and Audit in China 2015
This edition of Tax, Accounting, and Audit in China, updated for 2015, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who must navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.

Adapting Your China WFOE to Service China’s Consumers
In this issue of China Briefing Magazine, we look at the challenges posed to manufacturers amidst China’s rising labor costs and stricter environmental regulations. Manufacturing WFOEs in China should adapt by expanding their business scope to include distribution and determine suitable supply chain solutions. In this regard, we will take a look at the opportunities in China’s domestic consumer market and forecast the sectors that are set to boom in the coming years.

Annual Audit and Compliance in China
In this issue of China Briefing, we discuss annual compliance requirements for foreign-invested enterprises, including wholly-foreign owned enterprises, joint ventures and foreign-invested commercial enterprises, as well as the less demanding requirements for representative offices. We also highlight the most recent tax and legal changes that will significantly influence the way companies do business in China in 2014.

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