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Investment Policies & Relevant Regulations
Q11: What's the difference
between VAT and Consolidated Industrial and Commercial Tax?
Consolidated Industrial and Commercial Tax is an old tax system
with too narrow tax items and duplicate taxation. It is disadvantageous
to fair competition between domestic enterp5rises and Foreign Invested
Enterprises with two different tax systems. The VAT now practiced
imposes tax on basis of added value, which overcomes the shortcoming
of Consolidated Industrial and Commercial Tax, standardizes the
tax system and equalizes the tax burden.
Q12: What's the provision
about the legal person of a foreign invested enterprise?
Chairman of the Board is the legal representative of the enterprise.
Q13: Can a foreign investor
remit abroad is share of profit from the foreign invested enterprise?
Yes, he can.
Q14: Shall a foreign
investor be levied on his share of profit form the foreign invested
enterprise?
He's exempt form the income tax because his share of profit from
the foreign invested enterpusie belongs to the profit after taxation.
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Q15: How does a foreign
management staff in a foreign invested enterprise pay personal income
tax?
The income of foreigners now working in China should be taxed. The
taxable income is monthly income with 4,000RMB reduction.
Q16: What preferential
policy can foreign investors enjoy if they reinvest the after-tax
profit got form the foreign invested enterprise?
Foreign investors can get refund of company income tax imposed on
the amount of reinvestment through application to and approval by
the tax bureau if they reinvest the after-tax profit in the high-tech
or export-oriented enterprises in China with at least five-year
operation period. For an ordinary manufacturing project, the refund
percentage is 40%.
Q17: Can a foreign
invested enterprise take out a loan from a bank in China and what's the interest
rate upon loans?
According to the needs of business, a foreign-invested enterprise
can apply for a loan of either foreign exchange or RMB form bank
inside China. The interest rate is promulgated by the People's Bank
of China.
Q18: How do the Chinese
and the foreign party share the loss in the joint venture?
The Sino-foreign joint inside China ratified by the Chinese government
is responsible corporation limited with the position of a legal-
person. The in vestment proportion shall be discussed and agreed
upon by both Chinese and foreign parties, who together share investment,
operation of the business, risks, profits and losses.
Q19: How is a dispute
solved between the two parties of either a Sino-foreign joint venture
or a Sino-foreign cooperative enterprise?
Any dispute that occurs in the explanation or implementation of
the joint ventures agreement, contract and Articles of Association
had better be solved through negotiation or conciliation. If negotiation
or conciliation fails, it can be brought to the court of arbitration
or administration of justice.
According to the written-agreement on arbitration, each party of
the association can have their dispute solved by the court of arbitration.
Arbitration can be handled in accordance with the arbitration procedures
of the China's Arbitration Committee of Internatioanl Trade and
Commerce.
With the consent of each party concerned, the dispute can also be
handled by an arbitrary organization in the country prosecuted or
in a third country, following its arbitration procedures.
If there is no written agreement on arbitration between the parties
of the negotiation, either party can bring the dispute to the People's
Court of Justice according to law.
Q20: Can foreign businessmen
working for foreign invested enterprises apply for a mulit-time
exit and re-entry visa?
Yes. After getting the working permition from the Labour Bureau,
foreign businessman can apply to the Exit and Entry Department of
Shanghai Municipal Bureau of Public Security.
Q21: Can foreign employees
of a foreign invested enterprise remit their pay abroad?
Yes. The foreign employess of a foreign-invested enterprise can
remit abroad their salaries and other proper incomes after fully
pa6ing the income tax.
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Q22: Can a foreign
invested enterprise open a bank account at a foreign bank in China?
With the business license issued by the State ICAB, any foreign-invested
enterprise can open bank accounts of both foreign exchange and RMB
at any bank or at any other financial institution which is permitted
to handle foreign exchange business by the State Foreign Exchange
Administration Department.
Q23: What shall be done
if there are disputes about production between a foreign invested
enterprise and its employees?
If labor disputes occur between the employer and employees, they
shall first of all be solved through negotiation between the enterprise
and its trade union. If they cannot be solved, either party of the
disputes or both parties can seek arbitration from Shanghai Labor
Dispute Arbitrary Committee. Either party who is still unconvinced
can bring it to the Shanghai People's Court of Justice for legal
prosecution.
Q24: Is it necessary
to form a trade union in a foreign invested enterprise?
In accordance with the Law of Trade Union of the P.R.C., any physical
laborer or mental laborer of a manufacturing enterprise or of an institution or of
a government office who lives mainly on his salary has the right
to join or organize a trade union regardless of his nationality,
race, sex, occupation, religion and education.
The trade union of the enterprise shall help and guide the employees
in signing labor contracts with the administration of the enterprise
or of the institution. It can also represent all the employees to
sign a collective contract with the administration of the enterprise.
The collective contract shall be handed to the Congress of Staff
Representatives or all the employees for discussion. The trade union
shall coordinate with the administration of the enterprise to deal
with the employee's welfare, pay, labor protection and labor insurance.
The trade union shall help the administration to arrange for the
employees cultural and technical studies at their spare time as
well as training, to improve their cultural standard and professional
work and to organize sports and recreational activities for them.
A Sino-foreign joint venture or a Sino-foreign cooperative enterprise
shall ask its trade union for its opinions before it makes decisions
on employees' pay, welfare, production safety, labor protection
and labor insurance.
The trade union of a foreign-invested enterprise can put forward
suggestions about employees' pay, welfare, production safety, labor
protection and labor' insurance and negotiate with the administrators
of the enterprise.
Q25: What's the regulation
about the trade union's funds of a foreign invested enterprise?
A foreign-invested enterprise shall extract 2% of the total income
of the enterprise's staff per month as the trade union's fund: The
funds can be used in accordance with the regulation on the trade
union's funds promulgated by China's Federation of Trade Unions.
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