China Regulatory Brief: Upgraded Food Business License, New Investment Promotion Policies in the FTZs

September 7, 2015 Posted by China Briefing Reading Time: 4 minutes

China Further Supports the Innovative Development of the FTZs

On August 27, China’s Ministry of Commerce (MOFCOM) issued the “Opinions on Supporting the Innovative Development of the Pilot Free Trade Zones (FTZs),” which aims to promote foreign trade and lower the entry barriers for foreign investors. The Opinions consists of 26 investment promotion policies and lifts the restrictions on certain industries, such as:

Foreign investors are newly allowed to set up a wholly foreign-owned enterprise (WFOE) to engage in the construction and operation of gas stations.
Foreign investors are permitted to set up wholly foreign-owned pawnshops in the FTZs.
Relax the restrictions on the qualification of the foreign investors looking to apply for a Direct Sales License. Previously, a three-year operational experience of direct selling in foreign countries was required for the application of the license.

Further, the Opinions have decided to gradually expand certain preferential policies that are implemented in the Hangzhou Cross-border E-commerce Zone to the four FTZs in China.

China Reboots its Levy of VAT on Fertilizers

On August 28, the State Administration of Taxation and the Ministry of Finance (MOF) jointly announced that China would reboot its levy of value-added tax (VAT) on fertilizers starting September 1, 2015. Specifically, A VAT rate of three percent will be levied on the stock fertilizers sold by the VAT general taxpayers based on the VAT simplified calculation method. Note that under the simplified calculation method, no input VAT is deductible and a uniform three percent levying rate applies:

VAT payable = Sales volume x VAT levying rate (i.e., 3%)

Meanwhile, the export of fertilizers will be deemed as domestic sales and thus will need to pay VAT at three percent as well.

China to Upgrade Food Business License

On September 1, the State Food & Drug Administration (SFDA) announced that the Food Distribution License and the Catering License will no longer be issued separately. Instead, the local SFDA will issue a special Food Trading/Operation License to enterprises seeking to engage in China’s food business. Earlier this year, the Chinese government released its harshest Food Safety Law in China so far. More details about the key changes to the food safety regulations that foreign firms should be aware of can be found in our previous article here.

Employers not Allowed to Terminate Employees during the Medical Treatment Period

On August 17, the Shanghai Municipal Government released a circular to clarify the length and the standard of a “medical treatment period.” According to the Circular, a medical treatment period refers to the period of time during which the employee is unable to work and receives medical treatment as a result of diseases or injuries that are not sustained at work. The circular stipulates that employers shall not therefore terminate the labor contract during this period. The medical treatment period shall be three months if it is the first year that the employee works in the company; one month will be added to the medical treatment period for each subsequent year worked by the employee with the employer. The maximum medical treatment period shall not exceed 24 months.

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