FREQUENTLY ASKED QUESTIONS
CHINA FOREIGN INVESTED COMPANY
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.
Q15: How does a foreign management staff in a foreign invested enterprise pay personal income tax?
Q18: How do the Chinese and the foreign party share the loss in the joint venture?
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.
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.
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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