China Regulatory Brief: Company Domicile Registration Requirements & Unified Business License

August 17, 2015 Posted by China Briefing Reading Time: 4 minutes

Shanghai FTZ Allows Enterprises to use Law Firms as Business Domicile

On August 13, the Market Supervision Bureau of Shanghai Pudong New Area announced its decision to further implement the “Shanghai Municipal Administrative Measures on Company Domicile Registration (Hu Fu Ban Fa [2015] No.15)” and allow enterprises to use law firms that are located within the Shanghai Free Trade Zone (FTZ) as domicile for their business registration. As a majority of foreign investors looking to enter the Chinese market tend to entrust a local law firm to handle the business registration procedures, the new policy will enable investors to complete the business registration procedures without first having their own domicile in China. Such law firms will be allowed to provide other registration services including registration agent services, entrepreneurship guidance, outsourced secretarial services and legal aid.

Zhejiang Releases Tax Risk Management Guideline for Outbound Affiliated Party Fee Payments

Recently, China’s Zhejiang local tax bureau released its “Guideline for Tax Risk Management of Fees paid to Overseas Affiliated Parties” to provide detailed interpretation and implementation rules of the Announcement 16, which was released by the State Administration of Taxation (SAT) on March 18. While the Announcement 16 outlines a number of transfer pricing transactions which would no longer be eligible for tax deductions, the Guideline includes specific examples of the non-deductible outbound payments contained in Announcement 16. It also contains details of four high-risk arrangements which are utilized by non-resident enterprises to avoid being subject to Chinese taxation, such as creating multiple service contracts solely for purposes of avoiding a permanent establishment in China. The Guideline is expected to help taxpayers self-assess their tax positions and prepare for questions and challenges from tax authorities.

RMB Falls Sharply as China Improves Exchange Rate Formation System

On August 11, The People’s Bank of China (PBoC) announced that, before the market opens, the China Foreign Exchange Trade System would be based on the closing rate of the inter-bank foreign exchange rate market on the previous day, the supply and demand in the market, and the price movement of major currencies. Following the central bank’s decision to improve its “central parity system,” China’s currency fell sharply in value to 6.2298 against the US dollar, compared to 6.1162 on the previous day. The move is expected to better reflect market development in the exchange rate between the Chinese RMB against the US dollar. China’s Central Bank has again cut the guiding rate for the national currency, a day after Tuesday’s record 1.9 percent devaluation. Though the PBoC called it a “one-off depreciation,” economists suspect that this could be just the beginning of a longer-term slide in the exchange rate.

Guangdong FTZ Issues the Nation’s First Unified Business License

On August 10, the Guangzhou Nansha New Area, Guangdong Free Trade Zone (FTZ) issued the nation’s first unified business license to import & export enterprises. The unified business license contains a so-called “business registration code” to replace the current three codes for company registration. This means enterprises will be no longer required to obtain the Tax Registration Certificate and the National Organization Code Certificate with different departments. Import & export enterprises may also use the business license directly for custom clearance. However, the new license hasn’t been fully implemented within the zone yet. The Chinese government is looking to implement the unified business license nationwide within this year.

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