LVP Newsletter - Sep 2018

1. The 5th meeting of the 13th NPC Standing Committee has voted to adopt the revised Individual Income Tax Law which will come into force on 1st January 2019. According to the new law, the minimum threshold for personal income tax exemption will be raised to RMB5,000 yuan per month and a new set of tax rates will apply; From 1st January 2019, income from individual personal services, author’s remuneration and royalties will be consolidated with salary for tax purpose and special expense deductions will also be adopted.

The new law further provides that resident individuals refer to those who have a residence in China or have no residence but reside in China for a total of 183 days in a tax year. Such rule, together with enforcement of the CRS (Common Reporting Standard), will bring more challenges to tax planning for senior management staff, expatriates and high net worth individuals. It is unclear as to whether the “5-year rule” under the Implementing Rules of Individual Income Tax will be rescinded. If such rule is rescinded, expatriates who have lived in China for more than 183 days in a year may be subject to individual income tax on worldwide income.

2．The E-commerce Law was finally issued on 31st August 2018 after 4 rounds of review within 5 years, which will come into force on 1st January 2019 and become the first comprehensive legislation in respect of e-commerce in China.

The law applies to the individuals, legal entities and non-corporate organizations that sell goods or provide services via e.g. internet, including e-commerce platform operators, operators residing on the platforms and e-commerce operators that sell goods or provide services via self-constructed websites or other internet services.

The law sets out the detailed requirements concerning the registration and publication of market participants, conclusion and fulfilment of e-commerce contracts, dispute resolution, promotion of e-commerce and legal liabilities, supplementing the other laws and regulations in respect of application of the platform “haven” rule, presumed capacity of the parties, protection of consumers, network security and data protection. Enforcement of this law indicates that the era of supervision on e-commerce has emerged.

3．On 3rd August 2018, the State Council issued the Decision on Removal of Certain Items subject to Administrative Approval (Guofa(2018)No. 28) which eliminates the work permit requirement on residents of Taiwan, Hong Kong and Macau.

Subsequently, the General Office of the State Council issued the Measures on Application and Issuance of Residence Permit of Residents of Hong Kong, Macau and Taiwan, providing that the residents of Hong Kong, Macau and Taiwan holding the residence permit will enjoy the rights of employment, social insurance, payment, withdrawal and use of housing fund in the place of domicile according to the law.

Elimination of the Work Permit Requirement will facilitate the employment and life of residents of Hong Kong, Macau and Taiwan in Mainland China. The detailed implementing rules have yet to come. Hence, continuous attention should be drawn to the issues concerning employment of residents of Hong Kong, Macau and Taiwan.

4．On 29th June 2018, the Ministry of Commerce issued the Interim Measures on Establishment and Change of Foreign Investment Enterprises (No. 6, 2018), the new recordal procedures have already become effective since 30th June 2018.

The biggest highlight of the revised Measures is the one-stop registration with and administration by both commerce authorities and AICs, which sets up a nationwide model of “One Time Collection and One Time Administration” for recordal of registration and change of FIEs. The revised Measures will optimize the method and procedures for recordal of registration and change of FIEs and then further facilitate foreign investment in China.