Integrated National Demonstration Zone for Opening up the Services Sector in Beijing Pilot Free Trade Zone.
On Monday, October 18, 2021, China’s State Council announced that it had permitted Beijing to temporarily adjust certain regulations to enable more access to areas of the services sector for foreign investors, effective immediately.
Below are the industries and areas that are approved to be further opened to foreign investors
| Catalogue of Administrative Regulations and State Council-Approved Departmental Regulations Temporarily Adjusted in Beijing | |||
| No. | Sector | Relevant administrative regulations and State Council-approved departmental regulations | Implementation of adjustment |
| 1 | Education | Regulations of the People’s Republic of China on Chinese-Foreign Cooperation in Running Schools Article 60 Measures for administration of for-profit training institutions which are cooperatively run by Chinese and foreign parties and registered at the administrative department for industry and commerce shall be formulated separately by the State Council. |
Beijingwillformulate and release specific administrative measures to encourage foreign investors to invest in for-profit adult education and training institutions and encourage foreign investors to invest in the establishment of for-profit vocational skills and training institutions. |
| 2 | Telecommunications | Provisions on Administration of Foreign-Invested Telecommunications Enterprises Article 2 Foreign-invested telecommunications enterprises refer to enterprises providing telecommunications services that are established according to law with joint investment and in the form of Chinese-foreign joint ventures by foreign and Chinese investors within the territory of the People’s Republic of China. Article 6 paragraph 2 The proportion of foreign investment in a foreign-invested telecommunications enterprise providing value-added telecommunications services (including radio paging in basictelecommunications services) shall not exceed 50%. |
Remove equity cap on foreign investors in the information services business (limited to the app store) in theZhongguancunNational Innovation Park inHaidianDistrict, Beijing. |
| Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) 16. Telecommunications companies are subject to the provision of telecommunications services opened up pursuant to China’s WTO commitments; the foreign share ratio for value-add telecommunications services (except for e-commerce, domestic multi-party communications, storage-forwarding and call centers) shall not exceed 50 percent; and the controlling stake shall be held by the Chinese party for basic telecommunications services. |
Removal of the equity cap on foreign investors engaged in value-added telecommunications business, such as internet access services (limited to thoseproviding internet access services to users), inBeijing’sService Industry Expansion and Opening-up Comprehensive Demonstration Zoneand the Demonstration Park. | ||
| 3 | Entertainment | Regulations on the Administration of Commercial Performances Article 10 paragraph 1 Foreign investors may establish performance brokerage agencies and performance venue business units within China in accordance with the law; they may not establish performing arts groups. Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) 33. Investment in performing arts groups is prohibited. |
Allow foreign investors to invest in performing arts groups in the Beijing Tongzhou Culture Tourist Zone (the Chinese party must hold the controlling stake). |
| 4 | Construction | Regulations on the Quality Management of Construction Projects Article 11 paragraph 2 Construction drawings and design documents that have not been reviewed and approved shall not be used. Regulations on the Administration of Construction Engineering Survey and Design Article 33 paragraph 2 Constructiondrawings and design documents that have not been reviewed and approved shall not be used. |
Allow Beijing to explore reforms in the examination and approval system in the field of construction and engineering, such ascancellingor reducing the scope of review of construction drawings, implementing a notification and commitment system and a designer lifetime responsibility system. |
| 5 | Tourism | Article 23 Foreign-invested travel agencies are not allowed to provide tours to mainland Chinese residents to destinations outside of China or to the Hong Kong Special Administrative Region, the Macau Special Administrative Region, or Taiwan. Exceptions are made in cases where other provisions have been made in State Council decisions, a free trade agreement signed by China, or through arrangements on establishing closer economic and trade relations between the Mainland, Hong Kong, and Macau. | Allow foreign-invested travel agencies that are established in Beijing and meet certain requirements to provide overseas tours for mainland Chinese residents, except to Taiwan. |
| 6 | Private non-enterprise units | Interim Regulations on Registration and Administration of Private Non-Enterprise Units Article 2 The private non-enterprise units referred to in these Regulations mean social organizations which are established by enterprises, institutions, associations, or other social forces, as well as individual citizens using non-state assets and conducting non-profit-making social service activities. |
Relax access to non-profitprivatenursing homesprivate non-enterprise unitsto permit foreign investors to donate and establish nursing homes. |
| 7 | Virtual private networks | Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) 16. Telecommunications companies are subject to the provision of telecommunications services opened up pursuant to China’s WTO commitments; the foreign share ratio for value-add telecommunications services (except for ecommerce, domestic multi-party communications, storage-forwarding and call centers) shall not exceed 50 percent; and the controlling stake shall be held by the Chinese party for basic telecommunications services. |
Open domestic virtual private network (VPN) business to foreign investment (the foreign party stake must not exceed 50 percent). Attract overseas telecommunications operators to provide domestic VPN services to foreign-invested companies in Beijing by establishing joint ventures. |
| 8 | Audiovisualproducts | Special Administrative Measures for Foreign Investment Access (Negative List) (2020 Edition) 28. Investment in editing, publishing, and production of books, newspapers, periodicals, audio-visual products, and electronic publications shall be prohibited. |
Allow foreign investors to invest in the production ofaudiovisualproducts (restricted to collaboratingwithin the Beijing National Music Product Base, the Beijing Publishing Creative Industry Park, and the Beijing National Digital Publishing Base. The Chinese party must have operational leadership and final adjudication of the content.) |
| Note: The above translation was created by the China Briefing team for reference only. Source: State Council | |||
China Individual income tax related rules updates
- IIT incentive policy against year end bonus will be ended as of 31 Dec 2021, this means any payable year end bonus that should be paid within 2021 is best to be calculated its due IIT and filed according to year end bonus IIT treatment by the end of Dec 2021. Otherwise commencing from 2022, the incentive rules of year end bonus IIT treatment will be ceased
- The tax payment proof document can now be downloaded from personal APP named “Natural Person Electronic Tax Office Platform APP”, this replaces previous practice that the personnel needs to travel physically to tax authority for printing off their tax payment proof.
- Annual tax return work will be coming after year end of 2021. There would be some individual income tax regularization calculation and filing work opportunities. For China part, we’ve got GMAC and Fanatics who are having Chinese employees, and I will prepare one email to introducing annual IIT regularization services and send as promotion.
China Incentive Tax policies updates
Incentive tax policies that are being abolished in 2021 as below
- Value-added tax (VAT)
Until Dec 31 2020, general taxpayers with cumulative 12 months’ sales under RMB5 million could appy to switch to small sized taxpayer option to enjoy lower VAT rates. However effective from Jan 01 2021, general taxpayers will no longer be able to switch to the small size taxpayer option.
- Corporate income tax (CIT)
Some business industries who have been negatively impacted by the COVID-19 pandemic could extend their loss carryforward period from 5 years to 8 years for losses incurred in 2020. These industries include restaurants and catering services, transportation, entertainments, tourism etc.. However effective from Jan 01 2021, the loss carry forward period for these industries has been restored to 5 years only. Small sized low profit businesses can enjoy deferred CIT payments now. But businesses who are treated CIT payment deferrals in 2020 need to ensure timely payment in the tax filing period due on Jan 2021.
- Payroll taxes –social insurance contribution
In 2020, the nationwide reduction or exemption of social security payments helped businesses to save on labor related costs and there were deferral of social insurances payment allowances as well as payable rate reduced measurements to reduce labour cost for the enterprises throughout 2020. Effective from Jan 2021, these incentives expire in most provinces and cities, with the exception of a few regions (such as Xiamen city and Guangzhou city). Beijing and Shanghai cities had abolished the incentive policies from 2021.
Still Effective tax Incentive policies in 2021 as below
- Reduced VAT rates for small size taxpayers remains effective in 2021. This means 0% VAT for small-sized taxpayers in Hubei Province (the first outbreak of COVID-19 province in China) and 1% rate for small sized taxpayers in other regions throughout China. There hasn’t been any official announcement from the STA regarding when the policy is to be abolished
- Small sized taxpayers with monthly sales below RMB100,000 or accumulated quarterly sales below RMB300,000 can still be treated full VAT exemption until Dec 31 2021.
- Small sized low profit businesses can be treated reduced CIT rates until Dec 31 2021 which is 5% for the portion of annual taxable income of less than or equal to RMB1 million and 10% for the portion beyond RMB1 million and less than or equal to RMB3 million.
- In 2020, the STA and China customs and Ministry of Finance issued a joint announcement on tariff and tax exemption of export goods returned due to the COVID-19 pandemic. For the goods declared for export between Jan 01 to Dec 31 2020 which are to be shipped back to China intact within one year of export due to force majeure caused by pandemic, the government will exempt import duty tax, import VAT and consumption tax. Any duties and taxes levied at the time of export will be returned to the company. The tariff exemption policy is still valid for export goods shipped out in 2020 and returned to China in 2021 that falls into the one year time frame.