Asia Tax Bulletin Autumn 2017

Author:Mr Pieter de Ridder
Profession:Mayer Brown JSM


Policy on foreign investment

On 8 August 2017, the State Council issued a notice (Guo Fa [2017] No. 39) announcing measures to encourage foreign investment. The measures are intended to improve the foreign investment policy in five aspects.

The contents of the notice are summarised below:

Reduction of limitations on import of foreign capital: The national treatment and negative list management system in respect of foreign investment, which was trialled in Free Trade Pilot Zones, will be fully implemented nationwide with increased market access to foreign investors. The notice encourages foreign investments in special and new energy automobiles, vessel design, call centres, banking, insurance and securities, etc. Fiscal and tax incentives: Qualifying profits (dividends) derived by foreign investors from resident enterprises and reinvested in China are temporarily exempt from withholding tax. The income tax incentives currently aimed at technologically advanced service enterprises located in designated service outsourcing cities will be made available nationwide. The Ministry of Finance (MoF) and the State Administration of Taxation (SAT) will study the introduction of preferential tax policies regarding the remittance of foreign income to China by resident enterprises (including regional headquarters of multinational companies). Meanwhile, local governments may, within the framework of the laws, issue policies, including fiscal support, to encourage multinational companies to set up regional headquarters in China. In addition, the relocation of existing foreign investment in high-end manufacturing industries to the western and northeast part of China is encouraged. As such, local provincial governments may issue bonds to fund the construction of infrastructure and other key projects for trading with foreign countries. Improvement of investment environment in the National Development Zones: More power will be granted to National Development Zones in terms of management of investments. The use of land for construction of foreign investment projects will be prioritised and guaranteed. Auxiliary services will also be upgraded. Relaxation of entry and exit of talented and skilled persons: The policy on attraction of foreign talents will be optimised and work permit issuance is expected to be standardised across the country in 2018. Qualifying foreign talent may be entitled to a multiple entry visa for 5-10 years, and it may...

To continue reading