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CHINA LAW DIGEST NEWSLETTER Vol. 2, No.8 - July 22, 2003 TOPICS THIS ISSUE:
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Regulations on Establishment of Foreign Invested Investment Company
Issuing Date: June 10, 2003
Issuing Authority: Ministry of Commerce
Effective Date: 30 days after issuing date.
Summary
The Regulations integrated all previously issued rules and decisions made by Ministry of Commerce with regard to foreign invested investment companies. There are no changes to the prevailing provisions. The previously issued rules include:
- Provisional Regulations on Establishment of Foreign Invested Investment Companies (1995)
- Interpretation on Questions Concerning the Provisional Regulations on Establishment of Foreign Invested Investment Companies (1996)
- Supplementary Rules on the Provisional Regulations on Establishment of Foreign Invested Investment Companies (1999)
- Supplementary Rules II on the Provisional Regulations on Establishment of Foreign Invested Investment Companies (2001)
- Decisions on Revising of Provisional Regulations on Establishment of Foreign Invested Investment Companies and its Supplementary Rules (2003)
Interim Measures on Establishment of Travel Agencies With Majority Foreign Equity or With Wholly Foreign-Owned Investment
Issuing Date: June 12, 2003
Issuing Authority: China National Travel Administration, Ministry of Commerce
Effective Date: 30 days after issuing date.
Summary
The Measures apply to the transitional period before China committed WTO time frame regarding the establishment of travel agencies with majority foreign equity or with wholly foreign-owned investment.
To establish travel agencies with majority foreign equity, foreign investors shall meet certain requirements as follows: 1) the foreign investors must be travel agencies or company engaging mainly in travel business; 2) annual revenue generated from travel business shall exceed US$40 million; 3) a member of travel association of its home country; and 4) maintain good reputation internationally and advanced travel agency management.
To setup wholly foreign owned travel agencies, foreign investors shall not only meet all the above requirements but also maintain annual revenue of at least US$500 million.
The register capital of a travel agency with majority foreign equity or with wholly foreign-owned investment shall not be less than RMB4 million. Currently foreign investors can only set up such foreign invested travel agencies in approved State Travel and Vacation Areas and in the five cities of Beijing, Shanghai, Guangzhou, Shenzhen and Xi'an. Foreign invested travel agencies are not allowed to engage in the business of overseas travel of Chinese citizens and travel between China mainland and Hong Kong, Macau and Taiwan.
Notice on Payment of Enterprise Income Tax of Foreign Invested Startup Investment Company
Issuing Date: June 4, 2003
Issuing Authority: State Administration of Tax
Effective Date: March 1, 2003
Summary
According to the Notice, Foreign Invested Startup Investment Companies (FISIC) engaging in the business of equity investment and transfer and providing startup investment management and consultation services do not belong to manufacture oriented enterprises. No tax preferential treatment on manufacture-oriented enterprises should apply to FISICs.
If a FISIC is not incorporated as a legal person, the FISIC may choose to either pay enterprise income tax in the name of the FISIC or pay respectively by investors. If the FISIC choose the latter, the foreign investors shall be regarded as foreign companies with offices in China when calculating enterprise income tax. Should the non-legal person FISIC does not set up any management body in China and does not engage directly in the management of startup investment rather it will authorize a startup investment management company to operate instead, such FISIC's foreign investors shall be regarded as foreign companies without offices in China when calculating enterprise income tax.
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Opinion on Questions Concerning Copyright Licensing
Issuing Date: June 4, 2003
Issuing Authority: State Copyright Administration
Effective Date: As of the issuing date.
Summary
The Opinion was released in respond to a query by Hainan Copyright Administration regarding questions on copyright licensing. It provides that copyright owners have the right to transfer all or part of their copyrights in accordance with Article 10 of the Copyright Law of the People's Republic of China. No approvals from copyright administration are required on copyright transactions.
Should the transfer of foreign related copyright be conducted through an authorized third party, the third party shall be subject to the Interim Circular on Management of Copyright Agencies Engaging in Foreign Related Business to obtain approval from the State Copyright Administration for engaging foreign related copyright agency business.
Measures on Transfer of State Owned Land Use Right Through Negotiation
Issuing Date: June 11, 2003
Issuing Authority: Ministry of Land and Resources
Effective Date: August 1, 2003
Summary
The Measures aim to prevent the transfer of state owned land use right through negotiation at a price lower than the minimum price set by the government. The Measures only apply to the transfer of state owned land use right through negotiation which are not required by law to undertake methods such as tender, auction or public list.
The minimum price for the transfer through negotiation shall not be lower than the sum of the land use charge for newly added construction land, land confiscation/remove compensation and all taxes assessed upon in accordance with related laws and regulations. Provided that the transferred land has Standard Price set by the government, the negotiated minimum price shall not be lower than 70% of the Standard Price of the land.
According to the Measures, the municipal level government shall make public announcement on annual plan concerning the transfer of state owned land use right. Only when there is one proposed transferee for a certain piece of land, can the municipal land authority transfer the land use right by way of negotiation, provided such land does not belong to commercial land such as land for commercial, travel, entertainment or residential housing purposes. If there are more than one proposed transferees, the transfer shall be conducted through tender, auction or public list.
Violation of the Measures may result in administrative disciplines on the person in charge or criminal charges if severe enough. Such violation includes transferring of land use right without following the announced land use right annual plan, transferring of land use right at a price lower than the minimum price or reduce or exempt land use right charges.
Interim Measures on Preventing Price Monopoly Activities
Issuing Date: June 18, 2003
Issuing Authority: State Development and Reform Commission
Effective Date: November 1, 2003
Summary
The Interim Measures aim to prevent price monopoly activities and promote fair play in the market place. Since China does not have anti-trust laws, provisions on anti-trust are very limited and scattered in a few regulations. The Interim Measures are the first in its type to regulate monopoly on pricing.
Under the Interim Measures, price monopoly refer to the activities that business operators manipulate market price through conspiracy or abuse of market dominant position resulting in market disorder and damage to other business operators, consumers or public interests. Market dominant position is determined by the business operator's market share, the availability of replacement and the difficulty for new competitors to enter into the exiting market.
Business operators shall not conduct the following price monopoly activities through conspiracy of any kind: 1) set up/maintain/modify to unified price; 2) manipulate price through limitation on production or supply; 3) manipulate price in tender-bid or auction; or 4) other kind of monopoly activities.
In addition, business operators shall not set up mandatory transferring price for their distributors based on its market dominant position. Neither shall business operators sell products at a dumping price lower than their costs for the purpose of squeezing out or causing damage to their competitors.
Violation of the Interim Measures may result from confiscation of illegal profits, fines of under five times of the illegal profits to the most severe of revocation of business license.
Lehman, Lee & Xu
China Lawyers, Notaries, Patent, Copyright and Trademark Agents
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The China Law Digest News is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
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