China Regulatory Brief: Dividends Tax Exemption Scheme, Business Scope Registration Rules

September 14, 2015 Posted by China Briefing Reading Time: 4 minutes

China Cuts IIT on Dividend Income for Long-term Shareholders

According to the notice jointly released by China’s Ministry of Finance (MOF) and the State Administration of Taxation (SAT), Chinese investors holding a stock for more than one year will be exempted from individual income tax (IIT) on dividends income temporarily starting September 8, 2015. Previously, investors needed to pay a five percent IIT on their dividends income. The notice also clarified that those who have held a stock for one month or less will have to pay 20 percent of the dividend they receive as income tax when they sell the stock. Investors who have held a stock for over one month to one year will have to pay a 10 percent dividend tax when they sell the stock. This move is made to promote long-term investment in China, following a stock market rout since mid-June.

China’s AIC Issues New Business Scope Registration Rules

The State Administration for Industry & Commerce (AIC) has recently issued China’s new enterprises’ business scope registration rules, which will take effect on October 1, 2015. According to the new regulations, if the company’s sponsor changes from a domestic investor to a foreign investor, the company will be required to change/register its business scope again with the local AIC. Similarly, enterprises need to change their business scope if their sponsor changes from a Chinese individual to a foreign investor. Investors also need to note that the business scope of a branch office may not exceed that of its parent company.

Reminder: Mid-Autumn Festival and China’s National Day Holiday Schedule

Employers running business in China might have noticed that China’s Mid-Autumn Festival (September 27, Sunday) and National Day (October break) are coming soon. According to the national holiday schedule released by the State Council, although the Mid-Autumn festival is on Sunday this year, employees won’t have compensated leave days due to its proximity to National Day holiday. The National Day holiday starts from October 1 to October 7 (seven days in total), and October 10 (Saturday) is an official work day. Employees who work during the holiday will be paid three times their normal salary. A complete schedule for China’s 2015 national holiday can be found in our previous article here.

China to Implement Updated Drug Production License

On September 9, the China Food and Drug Administration (CFDA) announced its decision to implement an updated 2016 version of the Production/Manufacturing License and the Pharmaceutical Preparations Manufacturing License. Drug manufacturing/production enterprises and medical institutions are required to go through check and inspection procedures with the local CFDA and obtain the relevant license before January 1, 2016. The valid period of the license is five years and enterprises need to submit an application form to renew the license at the close of these five years. The new license can be found on the CFDA website here.

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