New Rules to Consummate the Supervisory and Control System over Central State-Owned Enterprises’ Outbound Investment

In the recent years, the central state-owned enterprises (SOE) in China have played a significant role in many high profile outbound investment cases.  According to statistics, the aggregate turnover attributable to foreign investments by Central SOEs between January and November 2011 reached RMB 3.4 trillion yuan.  The State-Owned Asset Supervision and Administration Commission of the State Council (SASAC) has lately issued a series of measures to set forth a framework of a supervisory and control regime to regulate outbound investment projects made by Central SOEs.  For further information about the measures or the regime, please follow the link below.  Headquartered in Beijing,  Jun He Law Offices is one of the best firms in China.

http://www.junhe.com/marketing/201205/Corporate&Investment_20120504.pdf

China Allows RMB Trade Settlement

On February 3, 2012 the People’s Bank of China (“PBC”), Ministry of Finance, Ministry of Commerce, General Administration of Customs, State Administration of Taxation, and Banking Regulatory Commission jointly issued the Circular on Issues Concerning the Administration of Enterprises Settling Goods Export in RMB (yinfa[2012] No. 23).  This notice eliminated previous restrictions requiring domestic exporters to obtain PBC designations before conducting RMB trade settlement.  Under the new rule, all Chinese companies with import and export qualifications are allowed to settle their goods exports in RMB.  This is considered a giant step the Chinese government has taken recently to internationalize its yuan currency.  Prior to this new rule, only those companies who received desginations from PBC may settle export of goods in RMB.  Read More ›

China Is Expanding VAT Reform

To avoid double taxation, China started replacing its Business Tax to VAT in the transport sector and some service sectors in Shanghai from January 1 this year under the VAT reform pilot program.  Business Tax refers to a tax on the gross revenue of a business, while VAT means a tax levied on the difference between a commodity’s price before taxes and its cost of production.  Following the circulars replacing Business Tax to VAT in Shanghai, the Ministry of Finance and the State Administration of Taxation jointly released another Circular to clarify issues regarding the application of zero VAT rate and VAT exemption in Shanghai.  According to the Circular, companies in the following service sectors will enjoy zero VAT rate:

• international transport services (including cross-border and overseas transport of both passengers and cargo);
• research and development services provided to overseas entities;;
• design services provided to overseas entities (excluding design services provided in respect of domestic immovable property).

Four-Part Series of In-Depth Discussions of China, Opportunities, and Challenges.

In the past few months,  we worked together with Long Stanton Asia to present a four-part series explaining the current realities of doing business in China, the change coming in the next five years, what it means to US businesses and we invited local companies to share their first-hand experiences doing business in China.  Read More ›

Foreign-funded Investment Companies Allowed to Use its RMB Income to Directly Invest in Other Companies

On December 8, 2011, the Ministry of Commerce (“MofCom”) and the State Administration of Foreign Exchange (“SAFE”) jointly issued the Notice on Further Improving the Administrative Measurers for FICs (Decree No. 1078 [2011]).  The purpose of this Notice is to simply the procedures for foreign-funded investment companies in domestic reinvestment. Read More ›

DOJ continues its aggressive antitrust deterrence efforts

The Antitrust Division of the U.S. Department of Justice (“DOJ”) has been stepping up its enforcement efforts against international corporations and their executives, including Japanese companies and nationals.  In February 2010, the DOJ, in cooperation with the Japanese Fair Trade Commission (“JFTC”) and the European Union, conducted a raid of well known Japanese auto parts makers suspecting a conspiracy to fix the price of electrical parts.  In February 2012, not unrelated to this incident, two Japanese companies reached a federal plea agreement with the DOJ regarding their price-fixing conspiracy on electrical auto parts, often described as the central nerve system of an automobile.  The combined criminal fines against these companies, which include jail sentences imposed on four Japanese executives, make one of the largest antitrust cases of all time.   Read More ›

Understanding “Representative Office” and “Wholly Foreign Owned Company” - Which is the Right Form for You?

A “Representative Office” (RO), as it name suggests, is the China representative of the foreign company.   It is not an independent entity; instead, it is considered to be part of the foreign company.  On the other hand, a “wholly foreign owned company” (WFOE) is a limited liability company organized under the laws of China and is a legal entity separate from its parent company back home.  Read More ›

Compliance with Transfer Pricing Rules - A new way to bridge differences between the IRS and Customs –

Multinational companies face compliance challenges and spend substantial time and money on transfer pricing issues.  Transfer pricing arises as an issue when affiliated entities within a business enterprise buy or sell goods or services between them.  Major car makers, for example, have many subsidiaries and affiliates throughout the world. They ship parts from one affiliate to another through a supply chain that produces an assembled vehicle.  To use a hypothetical, when a Chinese subsidiary ships a gear box to its parent company’s US assembly plant, this is a purchase/sale transaction between affiliates.  Two major governmental issues arise when this happens – taxes and Customs duties. Read More ›

Frost Brown Todd Japan Desk Seminar Series: Supply Chain Management in the Global Automotive Market

Japan exports 2 million transmissions a year to North America and another 6.5 million to other world markets. Delays and disruptions in the automotive supply chain, which have been caused by the recent major Tsunami/earthquake, are affecting not only the Japanese suppliers and automakers, but also many U.S. companies. This seminar explores both the concept and practice of automotive supply chain management today, and tries to shed some new lights for the future of the automotive industry.

Click here to view the seminar summary.

A Snapshot of Typical Structures for Private Equity Market in China

Despite the dire economy in the western world, Asian private equity had a vibrant year in 2010 and has kept its momentum.  It is largely attributed to funds denominated in RMB according to a study by professional researchers.  RSM Nelson Wheeler, a prominent accounting and consulting firm based in Hong Kong recently issued its November newsletter where it explored the typical structures and related tax issues for private equity activities in three of the most active markets in Asia including Hong Kong, mainland China and Singapore.  The newsletter summarized, among other things, the most common three PE structures used by U.S. persons, including: Read More ›