China Regulatory Brief: Second Draft of Foreign NGOs Rules, New National Holiday Announced

May 18, 2015 Posted by China Briefing Reading Time: 4 minutes

China Announces New Public Holiday on September 3

On May 13, the Chinese government announced an additional national holiday on September 3 to celebrate the 70^th anniversary of the Allies’ victory over Japan. As is customary with Chinese holidays, the additional days that employees have off will be compensated by having to work on the weekend. September 3 and 4 (Thursday and Friday) will be holidays, but Sunday will be a working day. China’s full 2015 holiday schedule can be found here.

China Clarifies Rules on Salaries and Benefits to be Deducted before Tax

On May 8, the State Administration of Taxation (SAT) released a circular to clarify corporate income tax (CIT) settlement in and after the year 2014. The circular states that employee’s benefits, salaries and monthly allowances should be allocated to the category of “enterprise’s expenditure for salaries and wages” and are allowed to be deducted before tax.

China Releases the Second Draft of Foreign NGOs Rules

On May 13, the National People’s Congress released the second draft of the “Foreign NGO Law,” which is now open to public comment. The law clarifies that foreign NGOs (non-governmental organizations) which have been legally registered in foreign countries and have been operating for two years overseas are allowed to set up a representative office in China. Approval needs to be obtained from China’s State Council prior to the formal establishment of the representative office. Foreign NGOs that have not established a Representative Office in China but intend to conduct temporary activities in China need to obtain a License for Temporary Activities. They are also required to have a Chinese partner to conduct activities in China. As China continues to face social and environmental challenges, the government increasingly recognizes the role of NGOs in addressing such issues.

State Council Clarifies Issues about Local Regional Tax Incentives

On May 10, the State Council released a circular which states that the preferential policies offered by local governments to foreign companies will continue to be effective within the prescribed period. For preferential policies offered without a deadline, local governments are required to adjust the policies within a certain transition period. Previously signed subsidies and tax incentives between the governments and foreign companies will also continue to be effective. Any changes to the tax rates must be enacted in a law promulgated by the National People’s Congress (NPC). Earlier this year, the Chinese government required all the local governments to roll back their regional tax incentives to foreign investors, with the intention to create a fair market for both domestic and foreign enterprises.

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