Annual Employer Declaration
Beginning on 17 July and lasting to 31 October 2023 the Shanghai Human Resources and Social Security bureau is carrying out the Annual Employer Declaration in accordance with the “Regulations on Labour Security Supervision”.
All enterprises and state organs and institutions in Shanghai are required to declare data related to the actual employment situation of their employees, both Chinese and foreign.
Fifth National Economic Census
China’s State Council, in line with the Statistic Law of PRC, has decided to conduct a National Census to analyze the scale, distribution and development of China’s secondary and tertiary industries and the basic situation of all types of organizations. The Census started in August 2023 and Census Official Census registration is 1 January 2024.
Information required includes basic information of each enterprise and financial statements. Enterprises that falsely report, conceal or fail to report the information will be subject to administrative punishment according to the law and publicized on the National Credit Information sharing platform and the National Enterprise Credit Information Publicity System, on the “Credit China” website.
Focus on VAT of Export Trading Companies
According to Notice 39 released by the Ministry of Finance and the State Administration of Taxation on “export goods and service VAT tax exemption” [2012] trading companies carrying out export without any domestic sales are exempted from VAT. The non-deductible-refunded Input VAT must be transferred out and adjusted to the expenses account.
According to Notice 36 released by Ministry of Finance and the State Administration of Taxation on “The Comprehensive Implementation of the Pilot Project of Replacing Business Tax with Value-added Tax” [2016] the input tax of the following items must not be deducted from the output tax: collective welfare, purchased goods for personal consumption, processing, repair, repair labour services, services, intangible assets and real estate.
When Input VAT cannot be classified and deducted for VAT exempted items, taxpayers should calculate the non-deductible input tax according to the following formula:
Non-deductible input tax =
Input tax that cannot be divided in the current period x
Sales of VAT exempt items / Current sales
Focus on Labour Dispatching Contracts in China
“Labour dispatch” is regulated by Section 2 of the PRC Labour Contract Law and “Interim Regulations on Labour Dispatch” (MOHRSS Order No. 22). According to the Interim Regulations, the contract signed between the labour dispatch agency and the dispatched employee should have a fixed employment term of at least two years.
According to Article 59 of “Labour Contract Law of the People’s Republic of China” a labour dispatching company must sign a labour dispatch agreement with the company that accepts the dispatched personnel. The labour dispatching agreement must stipulate the dispatched positions and the number of personnel, the dispatch period, the amount and payment method of labour remuneration and social insurance, and the liability for breach of the agreement.
The company can stipulate in the dispatching agreement the form of salary payment for the dispatched personnel. The salary can be paid by the dispatching company directly, in which case it is compensated by the dispatch fee the utilizing company pays the dispatching company. Alternatively, the company that is using the dispatched personnel can act as a conduit for the salary. In either case, the dispatched employee establishes the labour relationship with the dispatching company not the labour utilizer.
According to the provisions of Article 92 of the Labour Contract Law, if the dispatching company violates the law and infringes upon the rights and interests of dispatched employees, the company utilizing the personnel bears joint liability.
China Export Tax Refund Policy
China’s State Taxation Administration has released Announcement No. 9 on Relevant Matters concerning “Further Facilitating Export Tax Rebate Process and Promoting the Stable Development of Foreign Trade”.
The announcement deals with the following:
– simplifying the handling procedures for export tax refund/exemption;
– improving the classified administration of enterprises eligible for export tax refund/exemption;
– optimizing the administration of export tax refund/exemption filing documents;
– improving the export tax refund policies for the processing trade;
– streamlining the materials required to be submitted for export tax refund/exemption and improving the foreign exchange receipt for export tax refund/exemption.
According to the announcement the processing time for export refund will be shortened from seven working days in 2021 to within six working days in 2022.
China Banks Strengthen Control of Corporate Accounts
According to the “Notice of the general office of the China Banking Regulatory Commission on strengthening the prevention and control of operational risks and cases of foreign banks” version 2012 [113] issued by China Banking and Insurance Regulatory Commission, for any payment transfer above USD 100,000, bank personnel are required to call two persons to confirm the payment process, otherwise the payment will be suspended.
Main Reasons for Denial of Entry for Food Items
The main reasons for foods to be refused entry to China include:
– unqualified labels,
– microbial contamination,
– inconsistent cargo certificates,
– failure to provide certificates or qualified certification documents as required,
– failure of sensory inspection,
– failure to obtain inspection and quarantine access,
– non-compliant use of food additives and nutritional fortification substances,
– unqualified packaging,
– presence of impurities and without relevant certification documents attached,
– detection of animal diseases,
– expired shelf life,
– containing animal-derived or plant-derived ingredients that have not been approved for inspection and quarantine.
According to the “Measures for the Administration of Import and Export Food Safety” non-entry foods will be returned or destroyed at the ports. Therefore, when importing foods, importers must strictly follow the requirements of the regulations, check relevant documents, and ensure that the products are qualified before import, to avoid unnecessary losses.
Stricter Requirements To Open a Corporate Bank Account in China
Banks have become stricter about opening corporate bank accounts due to organizations and individuals taking advantage of the COVID situation and illegally gathering personal information and opening a large number of corporate accounts under their names.
In order to carry out daily operations a foreign-invested company needs to open 2 corporate bank accounts after obtaining a Business License: a RMB Basic Account and a Capital Account in foreign currency, for example, USD or EUR.
Banks have now implemented on-site visit procedures, in which the legal representative must come in person with their original passport for the account opening to verify the real business of the company, and a bank officer will visit the premises of the applicant to verify that they have a physical location and staff. The photo of the location with the company nameplate and a photo of the building where the office is located will be taken for the bank’s internal compliance purposes.
Banks also require that the applicant submitting the original passport of the legal representative on behalf of the company provide, at the time of the account opening, two Chinese phone numbers and related passports/IDs of two persons able to speak Chinese or IDs of 2 Chinese persons and their mobile phone numbers. Some bank branches will allow a video verification of a legal representative who, due to a travel ban, cannot physically come to China to do the in-person bank account opening. After the video is accepted by the bank staff, the “physical office” location visit is performed.
Penalty for Companies that Fail to Apply for Tax Registration
According to Article 60 of China’s Law on the Administration of Tax Registration, a new established company must apply for tax registration within 30 days from the date of obtaining the industrial and commercial business license. If the company does not register it may be listed as an abnormal business and a fine between RMB 2,000 and RMB 10,000 yuan may be imposed according to the circumstances.
Using Electronic Seals During Lockdown
Due to the ongoing lockdown measures in Shanghai with employees still forced to work from home, one concern faced by companies is how to seal contracts remotely.
To solve this issue, enterprises could use an official electronic seal for the signing of online contracts. An electronic seal is the digital version of the physical seal. It has the same legal effect as a physical seal and can be only used by the person in charge of an enterprise or other people with authorization. The applicant can use electronic seals remotely on a smartphone or computer through the WeChat app. Electronic seals are not valid for documents concerning personal relations such as marriage, adoption, and succession, or for documents related to public utility services such as stopping water supply, heat supply, and gas supply.
