- Status report on workers from other provinces employed in Shanghai
- Regulators clarify work permit issues for foreign employees of NGOs
Recent trends in China will drive foreign investors to rethink their business models, Tan Lee Lee, Director of Business Advisory at SBA Stone Forest, said at our China Briefing on 29 September 2017.
Foreign businesses in China should find ways to leverage economic restructuring, urbanisation and rising disposable incomes of local consumers, as well as productivity-enhancing technologies to grow in a sustainable manner, she said.
As China shifts towards a service- and consumption-based economy, businesses might have to restructure to take advantage of this trend. Part of the country’s economic restructuring efforts involves a relaxation of legislation on foreign direct investments, with foreign businesses now allowed to operate in certain sectors where they were previously prohibited.
“Our general feel is that the legal environment will be more favourable for foreign investors in China, with greater ease of incorporation,” Lee Lee said.
Foreign investors in China’s 11 free trade zones (FTZs) may apply for the establishment or de-registration of a foreign-invested enterprise without official approval as long as the industry is not on the “negative list” of prohibited or restricted sectors for FTZs, which has also been shortened.
There have also been more bilateral agreements between China and other countries in recent years to reduce employment costs and enhance trade.
However, challenges remain. For example, China’s new work permit system that took effect on 1 April 2017 categorises foreign applicants into three classes based on points scored for factors such as annual salary, education/certification, work experience, age and Mandarin proficiency. Issuance of work permits to those who fall under the third class (less than 60 points) would be greatly restricted. This process seeks to moderate the influx of unskilled foreign workers into China in favour of highly skilled professionals, and is expected to become more rigorous in the future.
Companies that re-employ workers who have reached their retirement age need not make social insurance contributions for them. As China’s retirement age is expected to increase over the next few years, employers may be required to make social insurance contributions over a longer period.
James Chang, Group Chief Cross-border Officer of Lazada Group, highlighted the rapid growth of cross-border e-commerce in Southeast Asia, driven by positive trends such as rising incomes, greater adoption of online shopping, and the widespread use of mobile apps. Given this favourable environment, Lazada has expanded its services over the past five years to areas such as global shipping and cross-border fulfilment.
James noted that Southeast Asia’s e-commerce market is expected to grow a whopping 16 times to reach US$88 billion by 2025, compared with 2015. “As the online market continues to evolve, the issue is how traditional retailers can adapt to compete with online retailers,” he said.
Organised by SBA Stone Forest, the seminar was held in Singapore with the theme, “New World of Business”, and ended with a panel discussion.
China’s State Administration of Taxation (SAT) explained value added tax (VAT) regulations for taxable cross-border activities, transportation services and VAT invoices.
VAT registration exemption for taxable cross-border activities
The SAT stated that taxpayers are required to register for VAT exemption the first time they perform taxable cross-border activities that qualify for such exemption. Once registered, they would be exempt from further registrations for such activities subsequently. However, taxpayers that fail to register the first time would likely be permanently disqualified from VAT exemption for such activities. Records of the first registration and relevant documents should therefore be kept in case of further tax reviews or inspections by the tax authority in charge.
Input VAT treatment for carriers under a subcontract
When a carrier (taxpayer) signs a transportation service contract with a consignor and subcontracts the service fully or partially to another carrier, the input VAT qualifies for VAT credit only with respect to the resulting toll fees and fuel costs incurred by the taxpayer under the subcontract. In addition, the VAT invoices issued should be compliant with prevailing PRC tax regulations.
Delegation of VAT invoice application to authorised party
When an individual authorises a letting agency or an enterprise engaging in property leasing to lease real estate, the individual is allowed to delegate application for VAT invoices to the authorised party.
VAT invoices for discounted interest or inter-bank discount businesses
From 1 January 2018, a financial institution that is required to issue VAT invoices for discounted interest or inter-bank discount businesses must issue normal VAT invoices based on the full amount of discounted interest. For bill rediscounting however, the rediscounting institution must issue normal VAT invoices to the discounting institution based on the rediscounted interest.
This regulation may retrospectively apply to any relevant outstanding tax matters from 1 September 2017 onwards.
Twelve Chinese authorities jointly revised the intellectual property rights (IPR) law to strengthen enforcement efforts against illegal production and sales of counterfeit goods, which also infringe on IPRs owned by foreign-invested enterprises. Intensive enforcement efforts against such illegal activities will last from September to the end of 2017.
Enforcement efforts are divided among the authorities and target offences in the following areas:
- Infringement of trade secrets
- Infringement of patent rights
- Malicious trademark registration
- Free-riding of renowned brands
- Infringement and piracy in relation to the internet
- Strengthening regulation of imports, exports and courier services
Public awareness programmes will also be conducted in the following important sectors:
- Food and drugs
- Environmental protection
- Work safety
- High-tech and innovative technologies
- Import and export
In September, Shanghai Municipal Human Resources and Social Security Bureau issued a status report on workers from other provinces employed in Shanghai. The report compiled information from the hiring registration system used by local employers and sample surveys.
It showed that in June 2017, over 4.5 million people from other provinces were registered as ‘employed’ in the system, an increase of 187,000 year-on-year. However, the number of people from other provinces registered as ‘employed’ for the first time during the first half of 2017 fell by 1,000 compared with the same period last year.
The average monthly salary of workers from other provinces employed in Shanghai is RMB5,095, with those in the local financial services industry commanding the highest average monthly salary of RMB8,188.
The validity period of work permits issued to foreign employees responsible for registered temporary activities at foreign NGOs without representative offices in China shall not exceed the duration of the activities, according to a joint circular by the State Administration of Foreign Experts Affairs and Ministry of Public Security.
Foreign chief representatives of foreign NGOs with representative offices in China — who qualify as top-tier talent under the country’s new work permit system — shall apply for work permits with a validity period of up to 5 years. Documents required for such applications include the representative certificate, health check report, and work permit application form.
Serving growing businesses since 1985, RSM in Singapore is the largest accounting, business advisory and solutions group outside the Big 4, with a total staff strength of over 950 in Singapore and 320 in China.
Our China Practice is dedicated to helping you venture into China smoothly and supporting you in navigating its complex regulatory and business environment.
Represented in Shanghai, Beijing, Suzhou, Shenzhen, Chengdu and Hangzhou by our wholly-owned subsidiary, SBA Stone Forest, we are a one-stop shop well positioned to support your expansion into China and subsequent operations there.
Chan Weng Keen, Partner & Industry Lead, China Practice
T +65 6594 7864
Ng Thiam Soon, Partner & Deputy Industry Lead, China Practice
T +65 6594 7809
Tan Lee Lee (Ms), Director, China Practice
T +86 21 6186 7602
Yeo Lee Soon, Director, China Practice
T +86 10 8591 1900