Forms for Business Establishment in the Mainland
The main categories of business for foreign investors in the Mainland are set out in the following paragraphs. Hong Kong investors shall follow the arrangements as for foreign investors.
Representative Office (RO)
RO can engage in non-profit generating activities that are related to the business of its foreign parent enterprise and business-related market research, exhibition, promotional activities, liaison activities. ROs cannot operate business directly and they do not have legal person status.
To set up a RO in Guangdong, application could be made to the market regulation authority. A Business Registration Certificate and a Representative Certificate will be issued after the application has been approved. The RO should then proceed with registration procedure.
Individually Owned Stores
One of the preferential treatments under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) states that Hong Kong permanent residents with Chinese nationality may, in line with relevant laws, regulations or administrative rules of the Mainland, establish individually owned stores in all provinces, municipalities, or autonomous regions in the Mainland without being subject to approval procedures applicable to foreign investments, excluding franchising operation, and their identity authentication requirements are waived. There is no limit on the number of employees, or the size of its business space. The permissible business scope of sole proprietorship of Hong Kong residents covers retail, restaurants, computer services, advertising, clinic, economic and trade consulting, and management consulting services, etc.
For more information, please refer to the website of the Guangdong Administration for Market Regulation (Chinese version only):http://amr.gd.gov.cn/
Foreign Invested Enterprises (FIE)
On 15 March 2019, the Second Session of the Thirteenth National People's Congress passed the Foreign Investment Law of the People's Republic of China (hereinafter referred to as the "Foreign Investment Law"). The Foreign Investment Law came into effect on 1 January 2020. Meanwhile, the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures, the Law of the People's Republic of China on Foreign-funded Enterprises, and the Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures were repealed. According to the Foreign Investment Law, a foreign invested enterprise refers to an enterprise that is wholly or partly invested by a foreign investor and registered within the territory in accordance with the Mainland laws. The types of enterprises that foreign investors can incorporate in the Mainland are mainly foreign-invested limited liability company, foreign-invested joint stock company, Hong Kong, Macao, and Taiwan limited liability company, and Hong Kong, Macao and Taiwan joint stock company.
For foreign invested enterprises established before the implementation of the Foreign Investment Law (such as Chinese-foreign joint venture, Chinese-foreign cooperative enterprise, wholly foreign-owned enterprise, foreign-invested partnership enterprise, hereinafter referred to as "existing foreign invested enterprises"), within 5 years after the implementation of the Foreign Investment Law, the organisational form and structure can be adjusted in accordance with the Company Law of the People’s Republic of China, the Partnership Enterprise Law of the People's Republic of China, and other laws, and the change of registration can be processed in accordance with the law, or the original organisational form and structure can be kept unchanged.
Starting from 1 January 2025, for the existing foreign invested enterprises that have neither adjusted their organisational form or structure, etc. nor applied for change of registration, the market regulation authorities will not process their applications for other registration matters, and will disclose the relevant circumstances.
Meanwhile, after the adjustment of the existing foreign invested enterprises’ organisational form and structure, the original joint venture or cooperative partners can continue the equity transfer method, income distribution method, and residual property distribution method as agreed in the contract.
For more information about the Foreign Investment Law, please refer to the website of the Mainland Government:
https://en.ndrc.gov.cn/policies/202105/t20210527_1281403.html
Pre-approval for Setting up Foreign-Invested Companies
The Mainland implements the market access negative list system for foreign investments. The Foreign Investment Law, which came into effect on 1 January 2020, stipulates that foreign investment shall be subject to a system of pre-establishment national treatment plus negative list management. The pre-establishment national treatment refers to the treatment given to foreign investors and their investments no worse than that for domestic investors and their investments during the investment admittance stage; and the negative list refers to special administrative measures for foreign investment accessing to specific sectors. The Mainland grants national treatment to foreign investments which outside the negative list. For Hong Kong, Macao and Taiwan investments, provisions are similar to that of the Foreign Investment Law.
The Special Administrative Measures (Negative List) for the Access of Foreign Investment (2021) came into effect on 1 January 2022, in which the items restricted to foreign investors have been reduced from 33 in 2020 to 31 in 2021. Meanwhile, the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2020) was abolished.
The Special Administrative Measures (Negative List) for the Access of Foreign Investment in Pilot Free Trade Zones (2021) came into effect on 1 January 2022, in which the items restricted to foreign investors were reduced from 30 in 2020 to 27 in 2021. Meanwhile, the Special Administrative Measures (Negative List) for the Access of Foreign Investment in Pilot Free Trade Zones (2020) was abolished.
The National Development and Reform Commission and the Ministry of Commerce jointly issued the Notice on Market Access Negative List (2022 Edition) on 25 March 2022 to implement the management requirements of "One National List" and propose that all types of market entities can have access to the industries, sectors and businesses which fall outside the List on a level playing field in accordance with the law, and no separate administrative approval for market access can be established in violation of the law. The List containing 117 prohibited and permitted items has been effective since the date of publication of the List. Among these items, there are 111 permitted items, including agriculture, forestry, animal husbandry, fisheries, mining, manufacturing, electricity, heat, gas and water production and supply, construction, wholesale and retail, transportation, warehousing and postal services, accommodation and catering, information transmission, software and information technology services, finance, real estate, leasing and business services, scientific research and technology services, water conservancy, environmental and public facilities management, residential services, repair and other services, education, health and social work, culture, sports and entertainment, the permitted items in the Catalogue of Investment Projects Approved by the Government (2016 Edition) (except those specifically for foreign investment and overseas investment), the permitted items in the Catalogue of Prohibited Access to the Internet Market, and other items in a total of 21 areas. International conventions to which China is a party, bilateral and multilateral treaties signed with other countries, and relevant arrangements with Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan shall be implemented in accordance with the relevant provisions.
For the complete lists, please refer to the following Mainland government websites:
Setting up FIE: General Approval Process
According to the Notice on Implementing the Foreign Investment Law and Doing a Good Job in the Registration of Foreign-Invested Enterprises, issued by the State Administration for Market Regulation in 31 December 2019, effective from 1 January 2020, “one-stop services” for the business recordation of formation and industrial and commercial registration of foreign-funded enterprises shall no longer be provided. When applying for the formation or modification registration of a foreign-funded enterprise, an applicant shall complete the initial report and modification report of foreign investment. The submission of a foreign investment information report is not an essential requirement for the registration of a foreign-funded enterprise. The registration authority shall no longer conduct a review of any foreign investment information report. An applicant may continue to complete the foreign investment information report after filing an application for business registration. Foreign investors or foreign-funded enterprises should submit annual reports “integrating multiple reports into one” through the national enterprise credit information publicity system.
When applying for registration of a foreign-invested enterprise, an applicant shall have the subject qualification certificate or identity certificate of the foreign investor notarized by the notary agencies of its home country and certified by the mainland embassy (consulate) in that country before submitting to the registration authority.
The subject qualification certificate or identity certificate of investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan shall be notarized by local notary agencies in accordance with special provisions or agreements. The identity certificate of natural person investors in the Hong Kong Special Administrative Region and the Macao Special Administrative Region refers to local permanent resident identity cards, passports, residence permits for Hong Kong and Macao residents issued by the Mainland’s public security department, and Mainland travel permits issued by the Mainland’s entry-exit administration authorities; residence permits for Hong Kong and Macao residents and Mainland travel permits do not need notarization.
Generally, after obtaining approval from the in-charge market regulation authorities, FIEs could obtain business license, arrange for injection of registered capital, engrave company seals with public security bureaux, open bank accounts and perform relevant registrations with relevant government authorities, including taxation, foreign exchange administration, customs, and other related government authorities. From 1 October 2015, newly established enterprises are no longer required to perform registration with tax, statistical or finance bureaus, or obtain tax registration, organisation code, financial registration certificates after obtaining business licenses with unified social credit code issued by administrative authorities for industry and commerce. From 1 October 2016, newly established enterprises are no longer required to obtain social insurance register certificates and statistics registration certificates after obtaining business licenses with unified social credit code issued by administrative authorities for industry and commerce. For details of foreign-invested enterprise registration and incorporation procedures, please refer to the following Mainland government websites.
For certain industries, foreign investors should apply for certificates/licenses as required by relevant authorities before applying for foreign investment approval with the commerce authority.
Please note that the above general introduction of FIE set-up procedure in Guangdong is for reference only, and should not substitute legal or professional advice. For more information and advice on local practice, investors could visit the website of the Department of Commerce of Guangdong Province: https://qykb.gdzwfw.gov.cn/qcdzhdj/, or seek advice from qualified law firms or other professional consulting agencies. Normally, professional consulting agencies could provide services on FIE set-up, which may cover the drafting of Articles of Association, submission of application documents for FIE establishment, negotiation with local government authorities, etc.
Requirements on Registered Capital of FIEs
Total investment of a FIE refers to the total amount of funds required to run the company, i.e. the total amount of capital for infrastructure construction and working capital that is commensurate with the FIE's production scale. Registered capital of a FIE refers to the total amount of capital registered with the market regulation authorities for the purpose of establishing the FIE, i.e. the total amount of capital subscribed to by foreign investors. Investors are liable for FIE's debts by their capital contribution. According to the Notice on Issuing the Scheme for the Registration System Reform of Registered Capital issued by the State Council on 7 February 2014, the registration conditions for registered capital were relaxed unless otherwise stipulated in the laws, administrative regulations and decisions of the State Council on the minimum amounts of registered capital in particular industries.
For details of the Notice on Issuing the Scheme for the Registration System Reform of Registered Capital, please refer to the website of the Mainland Government (Chinese version only):
http://www.gov.cn/zwgk/2014-02/18/content_2611545.htm
The commerce authority has the discretion to determine whether to approve the establishment of a FIE having regard to the registered capital of the FIE and its operation scale. For specific requirements for total investment amount and registered capital of a FIE, investors can seek advice from qualified law firms or professional consulting agencies or communicate with the local in-charge commerce authority and market regulation authority.
Requirements on Leasing Operating Premises
In leasing operating premises, investors should pay attention to the following issues:
For more information, please refer to the website of the Guangdong Administration for Market Regulation(Chinese version only):
http://amr.gd.gov.cn/
Labour Laws and Regulations in the Mainland
The Labour Contract Law of the People’s Republic of China came into effect on 1 January 2008, and regulates employment relationships establishment, execution, performance, revision, dissolution or termination of labour contracts between enterprises/various types of organisations and employees within the Mainland. In 2012, the Standing Committee of the National People's Congress passed the amendment of the original Labour Contract Law. The amended Labour Contract Law came into effect on 1 July 2013.
The Labour Contract Law requires employers to establish employment relationships and enter into written labour contracts with employees within one month from the date when the employee begins to work. In case the employer fails to enter into a written labour contract with the employee within one year after commencement of the employment, an employment contract with indefinite terms would be deemed to have been established with the employee. In such case, the employer should pay the employee double salary on a monthly basis since the expiration of the first month of the employment to the expiration of the one year period.
On 1 July 2021, the Ministry of Human Resources and Social Security issued the Guidelines for Conclusion of Electronic Labour Contracts for those employers and employees who are willing to enter into electronic labour contracts by consensus for reference, so as to ensure that the electronic labour contracts are true, complete, accurate, and not tampered with.
For more information about the Labour Contract Law of the People’s Republic of China, please refer to the website of the Mainland Government:
http://english.www.gov.cn/archive/laws_regulations/2014/08/23/content_281474983042501.htm
For more details of the Guidelines for Conclusion of Electronic Labour Contracts, please refer to the website of the Mainland Government (Chinese version only):
http://www.mohrss.gov.cn//xxgk2020/fdzdgknr/zcfg/gfxwj/ldgx/202107/t20210709_418119.html
Things to Note when Hiring Employees
Recruitment methods between FIEs and ROs are different. According to the Labour Law of the People’s Republic of China which took effect on 1 January 1995 (recently amended on 29 December 2018), the Labour Contract Law of the People’s Republic of China which took effect on 1 January 2008 (recently amended on 28 December 2012) and other laws or regulations, employers can hire staff from the local workforce based on their operational needs, as well as determine their own organisation structures and human resources. Recruitment can be carried out through different channels, such as engaging authorised professional agencies, posting advertisements on media, etc.
ROs are required to employ Mainland employees through licensed labour dispatch agencies under labour dispatch arrangement. A RO must sign a service contract with a labour dispatch agency and the labour dispatch agency would establish employment relationship with the Mainland employees.
In the past, Hong Kong, Macao and Taiwan residents were required to obtain a work permit for working in the Mainland. According to the Notice on Matters concerning the Employment of Hong Kong, Macao and Taiwan Residents in the Chinese Mainland issued by the Ministry of Human Resources and Social Security on 23 August 2018 and other relevant regulations, as from 28 July 2018, Hong Kong, Macao and Taiwan residents are no longer required to obtain the "Taiwan, Hong Kong and Macao Work Permit" for employment in the Mainland. Hong Kong, Macao and Taiwan residents can use valid identity documents such as residence permits for Hong Kong, Macao and Taiwan residents, mainland travel permits for Hong Kong and Macao residents, and mainland travel permits for Taiwan residents for purposes associated with various human resources and social security services. Business licenses, labour contracts (employment contracts), wage payment records, or social insurance payment records can be used as proof of employment in the Mainland.
For more information about the Notice on Matters concerning the Employment of Hong Kong, Macao and Taiwan Residents in the Chinese Mainland, please refer to the website of the Mainland Government (Chinese version only):
http://www.mohrss.gov.cn/jycjs/gongzuotongzhi/201808/t20180828_300019.html
According to the Regulation on the Promotion of the Development of Individually Owned Stores which came into effect in November 2022, permanent residents of Hong Kong Special Administrative Region and Macau Special Administrative Region with Chinese nationality and residents of Taiwan may, in accordance with the relevant regulations, apply for registration as individually owned stores. Individually owned stores should consciously fulfill the legal obligations in terms of labour and employment, production safety, etc.
For more information about the Regulation on the Promotion of the Development of Individually Owned Stores, please refer to the website of the Mainland Government (Chinese version only):
https://www.gov.cn/zhengce/content/2022-10/25/content_5721592.htm
Salary and Welfare
Working Hours and Salary
The employers could determine their salary and benefit package for their employees. However, salary and benefits paid to employees shall not be lower than the minimum wages set by national and local governments. According to their management needs, the employers could establish employee incentive plans, such as performance bonus and stock options, to attract talents. Salary shall be paid at least on a monthly basis in local currency. Detailed payment date can be agreed upon and documented in the employment contract.
FIEs and other employers should follow requirements about the working hour prescribed by labour laws in the Mainland. Employees subject to standard working hour system shall work for no more than 8 hours a day and no more than 40 hours a week. For posts that meet relevant criteria, employers could choose to adopt a special working hour system after obtaining approval from the relevant authorities in accordance with local regulations.
The employers should deduct the Individual Income Tax (IIT) before making salary payments to employees, and filing tax with relevant tax authorities during tax filing period after salary payment.
Social Security and Housing Provident Fund
The Social Security Law of the People’s Republic of China (recently amended on 29 December 2018) which took effect on 1 July 2011 has established a basic social security system, including basic pension, basic medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance. For any employees being employed in the Mainland, employers should be responsible for contributing to social security on their behalf. The employers' social security contribution, together with the employees' personal contribution, makes up the employees' social security benefits.
For Hong Kong residents, employers should make contribution to the social security scheme for them. Pursuant to the Interim Measures for Participation in Social Insurance by Hong Kong, Macao and Taiwan Residents in the Mainland, effective from 1 January 2020, regulations were made on the participation in social insurance by Hong Kong, Macao and Taiwan residents who work, live or attend school in the Mainland, and it specifies that Hong Kong, Macao and Taiwan residents who participate in social insurance is entitled to social insurance benefits. Specific regulations are as follows:
For more details of the Interim Measures for Participation in Social Insurance by Hong Kong, Macao, and Taiwan Residents in the Mainland, please refer to the website of the Mainland Government (Chinese version only):
http://www.mohrss.gov.cn/xxgk2020/gzk/gz/202112/t20211229_431769.html
According to the Administrative Regulations on the Housing Provident Fund promulgated by the State Council, employers and employees are required to contribute housing provident fund for employees. For more details of the Administrative Regulations on the Housing Provident Fund please refer to the website of the Mainland Government (Chinese version only):
http://www.gov.cn/zhengce/2020-12/26/content_5574273.htm
For other labour related laws and regulations, please refer to the website of the Human Resources and Social Security Department of Guangdong Province (Chinese version only):
https://hrss.gd.gov.cn
Foreign investors who have set up FIEs or ROs would generally be subject to the following types of China tax: Corporate Income Tax, Withholding Tax, Value Added Tax, Consumption Tax and local surcharges, Stamp Duty, Urban Land Use Tax, Property Tax, Deed Tax, Land Appreciation Tax, Customs Duties, etc. Hong Kong investors shall follow the arrangements as for foreign investors. For more information about taxation, please call 12366 the hotline of loacal taxation administrations.
Corporate Income Tax (CIT)
Overview
Enterprises incorporated in the Mainland (such as FIEs) or foreign enterprises incorporated according to the laws of other jurisdiction but have effective management located in the Mainland should pay CIT in the Mainland on their world-wide income. The applicable CIT rate is 25%. With respect to foreign enterprises that have no permanent establishment or fixed place of business in the Mainland, or have permanent establishment or fixed place of business in the Mainland but the income derived from the Mainland is not effectively connected with the permanent establishment or fixed place of business, they would be subject to a Withholding Tax (WHT) on their Mainland-sourced income. The statutory WHT rate is 10%, which could be reduced by applicable tax treaties between the Mainland Government and other national governments.
CIT Taxable income is assessed based on an enterprise's profit, but not necessarily equal to its accounting profit. It is the net amount of the annual gross income less non-taxable income and tax-exempt income, and after deducting applicable costs and expenses and offsetting the net operating loss carried over from previous years.
CIT is calculated on an annual basis and within each tax year, taxpayers should perform provisional CIT filings on a monthly or quarterly basis. The tax year of CIT taxpayers is the calendar year (January 1 to December 31). The provisional CIT filing should be performed within 15 days after the end of each month/quarter. Taxpayers should perform annual CIT filings and settle the CIT due/refund within 5 months from the end of each calendar year.
Value-added Tax (VAT), Consumption Tax (CT) and Local Surcharges
Value Added Tax (VAT)
Entities and individuals shall pay VAT under the regulations if they are engaged in sales of goods, provision of processing, repairs or replacement services, import of goods, sales of services, intangible assets or real estate property in the Mainland.
Prevailing VAT rates were effective from 1 April 2019, and VAT rates applicable to major businesses are as follows:
General taxpayers
Taxable items | Tax rate (%) |
Sales or import of goods, provision of processing, repairs or replacement services, tangible movable property leasing | 13% |
Real estate leasing, sales of real estate, construction services, transportation services, transfer of land use rights, etc. | 9% |
Postal service, telecommunication services, financial services, modern services, life-support services, sales of intangible assets (transfer of land use rights excluded), etc. | 6% |
Export of goods | 0% |
For small-scale taxpayers, sales is the total consideration received plus other charges, and VAT is calculated and paid at 3% of sales by simple taxation approach.
Consumption Tax (CT)
CT is imposed on top of VAT for the sale of 14 specific kinds of consumer products. According to the Tentative Regulations on Consumption Tax of the People’s Republic of China (amended in 2008 and came into force since 1 January 2009), the 14 kinds of products subject to CT include: cigarettes, wine and alcohol, cosmetics, gasoline, luxury cars, golf balls and equipment, yachts, luxury watches, etc. CT payable is calculated on the basis of sales amount and/or the sales volume/quantity depending on the product item concerned. From 1 December 2014, CT is no longer imposed on small-displacement motorcycles with a cylinder capacity of less than 250 ml (exclusive), automobile tires, leaded gasoline for cars and alcohol.
Starting from 1 February 2015, battery and coatings shall be subject to CT in order to promote energy conservation and environmental protection. CT of 4% will be levied on the sale price (before VAT) at the point of production, processing and import of battery and coatings.
From 10 May 2015, the ad valorem rate for wholesale of cigarette is increased from 5% to 11% plus unit rate of RMB 0.005 per cigarette. Since then, consumption tax laws and regulations on cosmetics, luxury cars, cigarettes and other consumer goods have been amended for several times.
On 12 June 2021, the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation jointly issued the Announcement of Consumption Tax Levy on Importing some Refined Oil Products, which came into effect from 12 June 2021. For details of the levy, please refer to the website of the Mainland Government (Chinese version only):
http://www.gov.cn/zhengce/zhengceku/2021-05/14/content_5606475.htm
In order to better play the role of consumption tax to guide healthy consumption, from 1 November 2022, electronic cigarette has been included in the scope of consumption tax as a new sub-category under the tobacco tax heading. The tax will be levied at the production (import) and wholesale stages and will be calculated by adopting the ad valorem method, with the tax rate of 36% for production (import) stage and the tax rate of 11% for wholesale stage.
On 30 June 2023, the Ministry of Finance and the State Administration of Taxation issued the Announcement on the Implementation of the Consumption Tax Policy of Certain Refined Oil Products, which includes 17 types of chemical products such as petroleum ether, crude white oil and light white oil etc. in the oil products tax line.
For details, please refer to the website of the Mainland Government (Chinese version only):
https://www.gov.cn/zhengce/zhengceku/2021-05/14/content_5606475.htm
Tax Surcharges
Urban Maintenance and Construction Tax (UMCT), Education Surcharge (ES) and Local Education Surcharge (LES) are calculated according to the actual payment of VAT and CT (hereinafter referred to as "the Two Taxes"), which are filed and paid together. The calculation is based on the actual payment of the Two Taxes multiplied by the tax rates respectively.
The Law of the People’s Republic of China on Urban Maintenance and Construction Tax (hereinafter referred to as “UMCT Law”) was passed at the 21st Session of the 13th National People’s Congress Standing Committee on 11 August 2020. The UMCT Law has been implemented since 1 September 2021. In particular, the UMCT Law has stipulated that no UMCT will be levied on the VAT and CT arising from importing goods or the entities and individuals outside the territory of the Mainland providing repair and replacement services, other services and intangible assets to the entities and individuals in the Mainland.
For more details of the UMCT Law, its tax calculation, and preferential policies, please refer to the following websites of the Mainland Government:
Tax Policies for Cross-border E-commerce Retail Imports and Exports
To build a fair market for competition and to promote healthy development of cross-border e-commerce retail imports, the imported commodities from cross-border e-commerce retail (Business to Customer, i.e., B2C) shall be subject to Customs Duty (CD), import-level VAT and CT. The taxpayers shall be the individuals purchasing the imported B2C commodities. The dutiable values of imported commodities shall be their actual transaction prices including the retail prices of the goods and accompanying freight and insurance expenses. E-commerce enterprises, enterprises engaging in e-commerce trading platform or logistics enterprises may act as the withholding agents.
Applicable Tax Treatments
Amount of the B2C Import Transaction (threshold: RMB5,000 per transaction and RMB 26,000 per year individually) | Applicable Tax Treatments |
Not exceeding the threshold | CD rate is 0% on a provisional basis. Import-level VAT and CT shall be imposed with a 30% reduction on a provisional basis, i.e., import-level VAT and CT exemption will no longer be available. |
Exceeding the threshold (including single inseparable commodity with a dutiable value exceeding RMB 26,000) | Taxes shall be imposed in full amount according to the general trade mode. |
Customs Duties
Consignee of imported goods, consignor of export goods, owner of entry articles are taxpayers of Custom Duties. All goods permitted to be imported into or exported out of and all articles allowed to enter the Mainland shall be subject to payment of Customs Duties unless otherwise specified by the State Council. Customs duties shall be levied in accordance with the Regulations of the People's Republic of China on Import and Export Tariffs, 2017 Revised edition. The tariff items, tariff heading numbers and tariff rates as prescribed in the Customs Import and Export Tariffs of China and the Import Tariff Rates of the People’s Republic of China for Entry Articles are formulated by the State Council.
Customs duties on imported articles and duties collected on behalf of the customs during the import stage shall be combined into import duties, which shall be collected by the Customs in accordance with the law. To comply with relevant World Trade Organization (WTO) requirements, tariff rates of imported goods have gradually been reduced since 2002. Tariffs on import and export goods shall be collected on an ad valorem basis, on unit tax basis or other methods prescribed by the State. The formula for calculating ad valorem duties is: tax payable = customs value × tariff rate; the formula for calculating on unit tax basis is: tax payable = quantity of goods x unit tax.
With State Council’s approval, starting from 1 July 2018, the preferential rates for the import tariffs for daily consumables, such as skin care products, suits, short boots and diapers, have been reduced according to the Announcement of the Customs Tariff Commission of the State Council on Reducing Import Tariffs on Nondurable Consumer Goods. For more details, please refer to the website of the Mainland Government (Chinese version only):
http://www.gov.cn/xinwen/2018-06/01/content_5295388.htm
On 27 April 2021, the Customs Tariff Commission of the State Council issued the Announcement on Adjusting Tariffs on Certain Steel Products, which specifies the implementation of zero import provisional tariff rate on pig iron, crude steel, recycled iron and steel raw materials, ferrochrome and other products. For more details of the Announcement, please refer to the website of the Mainland Government (Chinese version only):
http://gss.mof.gov.cn/gzdt/zhengcefabu/202104/t20210428_3694144.htm
Stamp Duty (SD)
On 10 June 2021, the 29th Meeting of the Standing Committee of the 13th National People's Congress passed the Stamp Tax Law of the People's Republic of China (hereinafter referred to as the "Stamp Tax Law"), which came into force on 1 July 2022.
According to the Stamp Tax Law, units and individuals that have written taxable vouchers and conducted securities transactions within the territory of the Mainland are taxpayers of SD and shall pay SD in accordance with the provisions of this law. Units and individuals that submit taxable vouchers for domestic use outside the Mainland shall pay SD in accordance with the provisions of this law.
For more details of the Stamp Tax Law, please refer to the website of the Mainland Government (Chinese version only):
http://www.gov.cn/xinwen/2021-06/11/content_5616922.htm
Deed Tax (DT)
The Deed Tax Law of the People’s Republic of China (hereinafter referred to as “DT Law”) was passed at the 21th Session of the 13th National People’s Congress Standing Committee on 11 August 2020. The DT Law has been implemented since 1 September 2021.
According to the DT Law, any transfer of the ownership of the land or housing within the territory of the Mainland by the entities and individuals shall, as taxpayers of the DT, pay the DT in accordance with this Law. The basis for the calculation of DT shall be as follows:
Where the transaction price or the difference between the prices under an exchange declared by a taxpayer is obviously low with no reason, the competent tax authority shall check and ratify it in accordance with the Law of the People's Republic of China on the Administration of Tax Collection.
The DT rates range from 3% to 5%. Specific applicable deed tax rates shall be proposed by the People's Government of each province, autonomous region or municipality directly under the Central Government within the range of tax rates as provided above, and be reported to the Standing Committee of the People's Congress at the local level for approval, and then be reported to the Standing Committee of the National People's Congress and the State Council for record. Each province, autonomous region or municipality directly under the Central Government may, in line with the procedures prescribed above, determine differential tax rates for the transfer of ownership of housing with different subjects, in different regions and of different types.
For details of the DT Law, please refer to the following website of the Mainland Government (Chinese version only):
https://www.gov.cn/xinwen/2020-08/11/content_5534196.htm
For other tax related laws and regulations, please refer to the website of the Guangdong Provincial Tax Service, State Taxation Administration (Chinese version only):
https://guangdong.chinatax.gov.cn
Application for Tax Treaty Relief under the Mainland-Hong Kong Tax Arrangement
The Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (hereinafter referred to as "Mainland-Hong Kong Tax Arrangement") and its first Protocol came into effect in December 2006. Subsequently, the two parties agreed and signed the second, third, fourth and fifth protocol of the Mainland-Hong Kong Tax Arrangement in June 2008, May 2010, April 2015 and July 2019. According to the Mainland-Hong Kong Tax Arrangement, to enjoy preferential tax treatment of the arrangement, qualified Hong Kong tax residents, who obtained dividends, interests, royalties and/or capital gains from transfer of property from the Mainland China, could apply for pre-approval with the relevant Mainland tax authorities for eligibility of preferential tax arrangements. For the Mainland-sourced dividends, interests, royalties and capital gains derived by Hong Kong people who are not eligible for preferential treatment under Mainland-Hong Kong Tax Arrangement, it would be subject to WHT at the standard rate of 10%.
Dividends | Interests | Royalties | Capitals gains | |
Applicable WHT rates under Mainland-Hong Kong Tax Arrangement (Note) | 5% | 7% | 7% (Royalties derived from aircraft and ship leasing businesses shall be subject to the preferential rate at 5%) |
If certain conditions are met, tax can be levied on the other party |
Note: The lower rates would be applicable if the recipient of relevant passive income qualifies necessary requirements, and it is entitled to the preferential tax treatments under the Mainland-Hong Kong Tax Arrangement.
To simplify the implementation of the Mainland-Hong Kong Tax Arrangement, the competent tax authorities of the Mainland and Hong Kong have negotiated and reached an agreement. The Certificate of Hong Kong Tax Resident Status issued by the Hong Kong competent authority to a Hong Kong tax resident for a particular calendar year may serve as proof of its Hong Kong tax residency for that calendar year and the two succeeding calendar years for claiming the benefits under the Mainland-Hong Kong DTA. If there have been any changes resulting in failure to meet any condition of the residency status, the resident would no longer be entitled to the benefits under the Mainland-Hong Kong DTA since the date of the change.
The major types of intellectual property in the Mainland include trademarks, patents, copyrights, business secrets, geographical indications, etc. In the Mainland, there are relevant laws and regulations including the Trademark Law, the Patent Law, the Copyright Law, the Anti-Unfair Competition Law, etc., which provide for the protection of IP rights, sanction of IP rights infringement and settlement of IP rights disputes.
On 28 May 2020, the Third Session of the 13th National People's Congress passed the Civil Code of the People's Republic of China (hereinafter referred to as the “Civil Code”), which was officially implemented on 1 January 2021. There are 51 articles in the Civil Code relating to IP rights.
For more details of the Civil Code, please refer to the website of the Mainland Government (Chinese version only):
https://www.gov.cn/xinwen/2020-06/01/content_5516649.htm
In order to further enhance the capability and level of IP rights protection of Chinese enterprises, the China National Intellectual Property Administration issued the Guidelines on Intellectual Property Protection of Enterprises on 22 April 2022. The Guidelines elaborate on how enterprises would carry out IP rights protection in various aspects and stages of operation, ranging from strategic planning, human resources, financial management, marketing, product research and development, production and supply chain to legal management, and provide strategic advice to enterprises in respect of IP rights risk prevention and control and efficient dispute handling.
For the details of the Guidelines, please refer to the website of the Mainland government authority (Chinese version only):
https://www.cnipa.gov.cn/art/2022/4/22/art_2431_174919.html
On 28 May 2024, the China National Intellectual Property Administration issued the Guidelines on Intellectual Property Government Service Matters(The Second Edition). The Guidelines contain detailed explanation on the acceptance conditions, document requirements, processing procedures, examination period, examination progress query, supervision and evaluation of various kinds of patent and trademark cases in detail.
For the details of the Guidelines on Intellectual Property Government Service Matters(The Second Edition), please refer to the website of the Mainland Government authority (Chinese version only):
https://www.gov.cn/zhengce/zhengceku/202406/content_6959662.htm
Patent Application
A patent application is a must for obtaining a patent. To apply for a patent for an invention, the application is to be filed with the China National Intellectual Property Administration (local IP authorities do not perform the function of examination and granting of patents). Before filing a patent application, one should first confirm the relevant information including whether the content of the invention is patentable, which type of patent (invention, utility model, design) can be applied for, and whether there is any identical or similar patents applied before (and this can be achieved by conducting a general patent search in the public database of the China National Intellectual Property Administration, or by conducting a professional search through a patent search center). If necessary, one may sign an agency agreement with a professional patent agency to entrust the latter to file patent application, provide the agency with background information about the invention or entrust the agency to conduct patent search, and introduce the content of the invention in details to ensure that the agency has a full understanding. It is worth noting that foreigners, foreign enterprises or other foreign organizations without permanent residence or business establishments in the Mainland should entrust patent agencies which are established according to the patent law to handle patent applications and other patent matters in the Mainland.
For different types of patents, different supporting documents are required to support the applications. After the examination and approval of the Patent Office of the China National Intellectual Property Administration, the relevant fees shall be paid and the patent certificate will be issued accordingly. The examination time for different types of patents varies, with the examination time for invention patent application in general around three years, utility model patent application around one year, and design patent application around six months.
In order to eliminate abnormal patent applications which are not aimed at innovation protection, and to regulate the order of patent applications, the China National Intellectual Property Administration released the Notice of Continuously and Strictly Regulating Patenting Behaviors on 25 January 2022. The Notice identifies eight measures with a view to continue to combat rigorously abnormal patent application behaviors. These measures include improving the information communication mechanism, strengthening the precise management of patent application behaviors, improving the active verification and reporting mechanism, enhancing the governance of the hierarchy and classification, strengthening the governance of key violations, strengthening the collaborative governance of departments, strengthening the credit supervision in the field of patent application, and strengthening the supervision of patent agency behaviors.
For relevant details, please refer to the website of the Mainland government authority (Chinese version only): http://www.cnipa.gov.cn/art/2022/1/25/art_75_172922.html
For more information about patent applications in the Mainland, please consult professional agency or visit the website of the Mainland government (Chinese version only):
http://www.cnipa.gov.cn/
For more information about Patent Cooperation Treaty (hereinafter referred to as "PCT”) patent applications, please refer to the website of the Mainland government (Chinese version only):
https://www.cnipa.gov.cn/20181203135517574944.pdf
http://ipr.mofcom.gov.cn/zhuanti/PCT/PCT_index.html
For details of the application for international registration of The Hague for Designs, please refer to the website of the Mainland government authority (Chinese version only):
https://www.cnipa.gov.cn/art/2022/4/25/art_74_175158.html
Application for Trademark Registration
The application for trademark registration is also a must to obtain the trademark right. Mainland applicants can file trademark applications on their own, or entrust the lawfully established trademark agency to deal with the same. Applicants of Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan should entrust the lawfully established trademark agency to file trademark applications. Foreign applicants should also entrust the lawfully established trademark agency to file trademark applications. Trademark registration application should be filed with the China National Intellectual Property Administration, and relevant documents including the application form, trademark design, photocopy of the identity documents (note: a natural person needs to submit photocopy of the business licence of the individually owned stores and photocopy of the operator’s identity card, whereas a legal person needs to submit the business licence) should be submitted.
Trademark applications can be filed either in paper form or online. The China National Intellectual Property Administration will publish the trademark after a preliminary examination, and if no objection is raised within three months after the publication or the objection is not established, the trademark shall be formally registered and protected by law. It takes about a year for a trademark to be registered from the date of filing the application to the time of approval. Trademark renewal application can be filed within 12 months before the expiry date.
For details of the Madrid International Trademark System, please refer to the International Registration Section of the website of the Mainland government (Chinese version only):
https://sbj.cnipa.gov.cn/sbj/gjzc/
In order to standardise trademark examination and trial procedures and to ensure the uniform application of laws and consistent implementation of standards in all aspects of examination and trial of trademarks, the China National Intellectual Property Administration issued the Trademark Examination and Trial Guide (hereinafter referred to as the "Guide") on 2 December 2021, which came into force on 1 January 2022. The Guide is an important basis for trademark examination and trial, as well as a specific guide for the general public to file trademark registration applications and handle other trademark matters. The China National Intellectual Property Administration provides in the Guide the details about the necessity, the overall policy directive and the considerations for the formulation of the Guide, and the main contents of the Guide.
For more information about the Trademark Examination and Trial Guide, please refer to the website of the Mainland government authority (Chinese version only):
https://www.cnipa.gov.cn/art/2021/12/2/art_66_171840.html
In order to improve the trademark examination system, meet the different needs of market entities and enhance high quality development of the economy and the society, the China National Intellectual Property Administration issued the Measures for Fast-Track Examination of Trademark Registration Applications (for Trial Implementation) on 18 January 2022, which has come into force on the date of issuance. According to the Measures, fast-track examination for trademark registration applications can be requested if the applications fall into any of the following four categories: those applications involving the names of major project, major program, major scientific and technological infrastructure, major event, major exhibition, etc., at the national or provincial level and where there is an urgent need to obtain trademark protection; those applications which are directly related to the response to a particularly major natural disaster, a particularly major accident and disaster, a particularly major public health emergency, a particularly major social security event or other public emergency during the emergency period; those applications which are necessary for promoting the implementation of the outlines for building an intellectual property powerhouse in order to enhance the high quality development of the economy and society; or those applications which are of great and practical significance to safeguard national interest, social and public interest, or reinforce the strategies for major regional development.
For more information about fast-track examination of trademark, please refer to the website of the Mainland government authority (Chinese version only):
https://www.cnipa.gov.cn/art/2022/1/18/art_74_172820.html
On 8 May 2023, the China National Intellectual Property Administration issued the Work Programme on Systematic Treatment of Trademark Malicious Registrations for High-Quality Development (2023-2025), which aims to consolidate the results of the work on combating trademark malicious registrations in recent years, and to strengthen the enforcement against trademark malicious registrations in all fields. The Work Programme also shows the intensity and determination of the China National Intellectual Property Administration in combating trademark malicious registrations.
For details of the Work Programme on Systematic Treatment of Trademark Malicious Registration for High-Quality Development (2023-2025), please refer to the website of the Mainland Government authority (Chinese version only): https://sbj.cnipa.gov.cn/sbj/zcwj/202305/t20230508_27033.html
Copyright Registration
In general, an author automatically enjoys the copyright of a creative work when the work is completed, and the registration of copyright provides preliminary evidence which will help solve copyright disputes in relation to copyright ownership. In accordance with the relevant provisions of the Trial Measures for Voluntary Registration of Works issued by the National Copyright Administration, authors, other citizens, legal persons or unincorporated entities, as well as owners of exclusive rights and their agents who own the copyright may apply for registration of their works. Applicants who need to register their work can do so offline at the local copyright workstations or service centers, or register online by logging in the copyright service platforms or registration systems of the respective provinces or municipalities.
For details of the Trial Measures for Voluntary Registration of Works, please refer to the website of the Mainland government authority (Chinese version only):
https://www.ncac.gov.cn/chinacopyright/contents/12232/355641.shtml
On 7 May 2022, the China Copyright Protection Center issued the Notice on Online Registration of Works, announcing the implementation of online registration of works with effect from 10 May 2022. It is no longer required to submit or mail hardcopies of application materials to China Copyright Protection Center.
For details of the Notice on Online Registration of Works, please refer to the website of the Mainland Government authority (Chinese version only):
https://www.ccopyright.com.cn/index.php?optionid=998&method=view&optionid=998&auto_id=830
On 25 May 2023, the China Copyright Protection Center issued the Notice on Trial Run of Online Registration of Software Copyrights, announcing the online registration of software copyrights to be implemented on a trial basis starting from 1 June 2023. It is no longer required to submit or mail hardcopies of application materials of to China Copyright Protection Center.
For details of the Notice on Trial Run of Online Registration of Software Copyrights, please refer to the website of the Mainland Government authority (Chinese version only):
https://www.ccopyright.com.cn/index.php?optionid=998&method=view&optionid=998&auto_id=1005
Remedies for IP Rights Infringement
When an act of infringement on IP rights occurs, the IP rights’ holder or other affected parties may request an administrative remedy from the relevant administrative authorities (such remedy may include: ordering the infringing party to stop IP rights infringement activities, confiscating and destroying the goods and tools relating to the infringement, and imposing a fine), or file a lawsuit with the People’s Court and the latter may order the infringing party to stop IP rights infringement activities, destroy the goods and tools relating to the counterfeit and infringement and order compensation to the IP rights holder for the losses, eliminate the adverse effects of the infringement and make an apology. In the case of serious IP rights infringement, the infringing party may be held criminally liable in accordance with the law.
For more information about filing application for patent, trademark and copyright in the Mainland, please consult professional organizations or refer to the following websites of the Mainland government authorities:
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