China Newsletter 1 GREENBERG TRAURIG, LLP ATTORNEYS AT LAW

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1 Spring 2013 / Issue No. 23 of Series ALBANY AMSTERDAM ATLANTA AUSTIN BOSTON CHICAGO DALLAS DELAWARE DENVER FORT LAUDERDALE HOUSTON LAS VEGAS LONDON* LOS ANGELES MEXICO CITY+ MIAMI NEW JERSEY NEW YORK ORANGE COUNTY ORLANDO PALM BEACH COUNTY PHILADELPHIA PHOENIX SACRAMENTO SAN FRANCISCO SEOUL SHANGHAI SILICON VALLEY TALLAHASSEE TAMPA TEL AVIV^ TYSONS CORNER WARSAW~ WASHINGTON, D.C. WHITE PLAINS Strategic Alliances with Independent Law Firms** MILAN ROME 1. Government Institutional Reform 国务院出台机构改革和职能转变方案 (03/14/2013) To deepen government reform and improve government efficiency, the State Council of the People's Republic of China recently released the Plans for Government Institutional Reform and Function Change (the Restructuring Plan), and was approved by People s Congress at its first session and it took effect on March 14, Highlights of the Restructuring Plan are below: I. Number of Ministries Reduced Overall, the reshuffle does away with four agencies and reduces the number of ministry-level bodies by two for a total of 25. 1) The State Council disbanded the Railway Ministry, sending the Railway Ministry s regulatory responsibilities to the Ministry of Transport, which was previously responsible for road, air and water transportation regulations, and its operations to the newly-established commercial entity named the China Railway Corporation, responsible for building railways and managing freight and passenger services. 2) The State Council abolished the Health Ministry and National Population and Family Planning Commission and created the National Health and Family Planning Commission. This new agency is responsible for, among other things, ensuring the accessibility of health services, monitoring the public health and proposing birth control policies. 3) The State Council elevated the former State Administration of Food and Drugs to the General Administration level, signaling its increased attention to the food and drug safety issues. 4) The General Administration of Press and Publication and the State Administration of Radio, Film and Television merged to create the General Administration of Press and Publication, Radio, Film and Television, which inherits all powers and duties from the former two regulators. 5) The Oceanic Administration now handles all responsibility previously assumed by various agencies overlooking fisheries and other maritime law enforcement. This enhances the enforcement of the maritime law and protection of China s maritime interests. 6) The National Energy Administration absorbed the National Electricity Regulatory Commission and now has more power over energy sector management. II. Functions of Government Perfected According to the Restructuring Plan, the following operational changes will be adopted to guarantee more government efficiency and transparency: 1) Less approvals matters and decentralization of approval powers The scope of governmental approval will be narrowed down to the largest extent, and procedures are to be further simplified. In addition, local governments are 1

2 Spring 2013 / Issue No. 23 of Series authorized to examine and approve most projects, except cross-district projects or those subject to national coordination, total amount control or security review. 2) Less Recognition of Qualifications and Competency Except in certain specific vocations or industries that require special credits, special conditions or special skills, recognition of qualifications and competency no longer have legal force. 3) Less Special Transfer Payment and Administrative Charges Special transfer payments for designated purposes to local regions are reduced while general transfer payments are increased. Moreover, administrative charges will be reduced or exempted. 4) More Integrated Functions A sole competent agency integrates identical or similar functions performed by separate agencies, and unified platforms for transaction and information checks will be established. 5) Simplified Company Registration Process The company registration process will no longer require pre-registration approval, unless registration involves national security and life and property of citizens. Enterprises can now apply for special licenses and approvals after the issuance of a business license. - Plans for Government Institutional Reform and Function Change - 国务院机构改革和职能转变方案 - Issuing Authority: the State Council of the People s Republic of China - Date of Issuance: March 14, 2013 / Effective date: March 14, Labor China Further Regulates Labor Dispatch Activities 全国人民代表大会常务委员会关于修改 中华人民共和国劳动合同法 的决定 (12/28/2012) Five years after implementation of the Labor Contract Law of the People s Republic of China (the Labor Contract Law), many practical problems persist. Among them, the labor dispatch presents significant concern. Companies are increasingly abusing labor dispatch approach to get around the labor regulations to save money and avoid responsibility. On December 28, 2012, the Standing Committee of the PRC National People s Congress released the Decision on Amending the Labor Contract Law (the Labor Amendment), which specifically addressed the labor dispatch issue and will take effect from July 1, The Labor Amendment provides: I. Requirements for Providing Labor Dispatch Service A company engaging in the labor dispatch business (the Labor Dispatch Service Provider) is required to have a minimum registered capital of RMB 2,000,000, a fixed business place and facilities, and a legitimate labor dispatch management system that satisfies conditions required by applicable laws and regulations. The significant increase in the registered capital requirement indicates a much higher threshold to establish a labor dispatch business. In addition, the Labor Dispatch Service Provider must obtain administrative permission from the labor authority before filing for registration. 2

3 Spring 2013 / Issue No. 23 of Series II. Realization of Equal Pay for Equal Work The Labor Amendment explicitly stipulates certain obligations to be fulfilled by companies under the Equal Pay for Equal Work principle. Companies that accept labor dispatchers (the Accepting Company) must now offer the same remuneration policy to the labor dispatchers as they do for direct hires in similar positions, or use the remuneration standard of the same or similar position of other companies located in the same place as reference, if the similarity between the positions does not exist. Finally, labor contracts executed by the Labor Dispatch Service Provider with the labor dispatcher and with the Accepting Company will explicitly incorporate this principle. Though the Labor Amendment takes effect on July 1, 2013, this provision becomes effective immediately upon issuance of the Labor Amendment or December 28, III. Clarification of Temporary, Auxiliary or Substitute Job Positions The Labor Amendment clarifies the meaning of Temporary, Auxiliary or Substitute Job Positions and limits the number and percentage of labor dispatchers in the Accepting Company. Temporary job positions refer to positions lasting for less than six months; Auxiliary job positions refer to positions providing supporting services to the core business positions; and Substituting positions refer to positions temporarily vacant due to the former employees taking leave or studying. IV. Harsher Penalties for Legal Breaches A Labor Dispatch Service Provider that fails to obtain the required administrative permission must stop the irregularity, confiscate illegal gains, and pay a fine of more no less than one time and no more than five times illegal gains or a fine of RMB 50,000 in the absence of illegal gains to the competent labor department of the government. Both the Labor Dispatch Service Provider and the Accepting Company must correct within a certain period as designated by the competent labor department of the government, and imposed a fine of more than RMB 5,000 and less than RMB 10,000 per person if it fails to correct them within such period. - Decision of the on Amending the Labor Contract Law of the People s Republic of China - 全国人民代表大会常务委员会关于修改 中华人民共和国劳动合同法 的决定 - Issuing Authority: the Standing Committee of the PRC National People s Congress - Date of Issuance: December 28, 2012 / Effective date: July 1,

4 Spring 2013 / Issue No. 23 of Series 3. Labor China s Supreme Court Provides Guidance on Hearing Labor Disputes Cases 最高人民法院关于审理劳动争议案件适用法律若干问题的解释 ( 四 )(01/18/2013) On January 18, 2013, the Supreme People's Court issued its Fourth Interpretation on Certain Issues regarding the Applicable Law for Trail of Labor Dispute Cases (the Labor Interpretation), which became effective on February 1, Several important matters, including non-competition obligations, validity of verbal amendments, and expatriates employment are illustrated in this Labor Interpretation and issues of high concern are discussed below. I. Jurisdiction Labor disputes, before going to court, are subject to arbitration by the Labor Dispute Arbitration Committee (the Committee). If a labor dispute is refused to be accepted by the Committee on the grounds of lack of jurisdiction and the disputing parties file a suit in the court, the court must: Notify the parties to apply to other competent Committee for arbitration, if it holds the refusal of acceptance as valid upon examination; Notify the parties to apply for arbitration at the same Committee, if it holds the refusal of acceptance as invalid upon examination, and inform such Committee in writing of the finding. If such Committee still refuses to accept the application for arbitration, the court should accept the parties application for litigation instead. II. Labor Transfer The Labor Interpretation stipulates that, when an employee to be hired by a new employer for any reason not attributable to such employee and without being compensated upon termination of the previous employment, the employee may add the service years with the former employer to those with the new employer for the purposes of calculating economic compensation or severance in the event of terminating the labor contract regardless of whom the termination is initiated. III. Non-Competition and Economic Compensation The Labor Interpretation clarifies many issues regarding the non-competition that are not addressed in the PRC s Labor and Labor Contract Law. 1) Lack of Economic Compensation Provision Employees are encouraged to seek economic compensation if the employee completes their noncompetition obligations prescribed in their labor contract but payment of post-employment compensation was not mentioned within the contract. In such a case, the employee is entitled to monthly compensation based on 30 percent of the average monthly salary over the 12 months preceding the termination or expiration of employment. 2) Failure to Pay Compensation If the labor contract sets forth both non-competition and economic compensation provisions, but the employer fails to pay the compensation within three months after termination, employees are encouraged to seek a court order to terminate the non-competition agreement. 3) Termination of Non-Compete Agreement An employer may seek a court order to terminate the non-competition agreement during the noncompete term, as long as it pays three months of economic compensation as required by the employee. 4

5 Spring 2013 / Issue No. 23 of Series 4) Breach of Non-Compete Agreement by Employee In the case that an employee violates the non-compete agreement, the employer is entitled to request the employee to continue to fulfill the non-competition obligations even after receiving liquidated damages as agreed thereunder. IV. Validity of Verbally Amended Labor Contract The Labor Interpretation confirms that oral modifications to labor contracts are valid and effective if the parties perform orally-modified labor contract and does not violate laws, regulations, national policies or public orders. V. Notification to Trade Union for Unilateral Termination The Labor Interpretation stipulates that an employee may seek a court order against the employer for damages for unlawful termination as described in Article 39 and Article 40 of the Labor Contract Law, but the court will not hear the case if the employer rectifies this defect of process before litigation commences. VI. Economic Compensation in Case of Expiration of Business Term An employee is entitled to economic compensation in the case that the labor contract is no longer possible to be performed due to expiration of the business term of the employer. VII. Expatriates Employment in China Foreigners or residents of Hong Kong Special Administrative Region, Macau Special Administrative Region or Taiwan that enter into an employment contract with employers in China without first obtaining a work permit will not be protected by Chinese labor law. Moreover, the court will not recognize their labor relations. Fourth Interpretation on Certain Issues regarding the Applicable Law to Labor Dispute Cases Hearing - 最高人民法院关于审理劳动争议案件适用法律若干问题的解释 ( 四 ) - Issuing Authority: the Supreme People's Court - Date of Issuance: January 18, 2012 / Effective date: February 1, Labor Work-Related Injuries to Be Further Clarified 人力资源社会保障部关于 关于执行 < 工伤保险条例 > 若干问题的意见 ( 征求意见稿 ) 公开征求意见的通知 (01/24/2013) The State Council published the Regulations on Work-Related Injury Insurance in 2003 and revised in Recently, the Ministry of Human Resources and Social Security (MHRSS) promulgated the Opinions on Several Issues Concerning the Implementation of the Regulations on Work-related Injury Insurance (Draft for Comments) (the Draft Injury Opinions), seeking public comments before February 20, As of today, MHRSS has not released any formal opinions. Below are some highlights of the Draft Injury Opinions: 1) When identifying injuries incurred during business trips, two criteria shall be taken into consideration: (1) whether the employer required the employee to take the business trip; and (2) whether the injury is directly and closely related to the employee s job. 2) When identifying work-related injuries under circumstances like traffic accidents for which the employee is not primarily responsible, such as intoxicated with drugs or alcohol or the employee s suicide, determination documents issued by competent authorities or an effective judgment given by court are required. As to intentional crime, an effective judgment given by court is requested. 5

6 Spring 2013 / Issue No. 23 of Series 3) The procedure to determine work-related injuries will be suspended in case the employment relationship is in dispute and will continue after existence of employment relationship is determined through arbitration by the Labor Dispute Arbitration Committee. 4) Full-time students at colleges and technical secondary schools working as interns are not employees under the Labor Contract Law and their loss caused by injuries incurred during their internship may be compensated through commercial insurance or other means. 5) If an employer qualified in hiring employees subcontracts its business to individuals or entities without such qualifications, the qualified employer is liable for work-related injuries arising from the subcontracted business. 6) An employee who has reached the statutory retirement age but continues to work for the employer is entitled to apply for determination of work-related injuries if he/she has neither received basic pensions nor completed the retirement formalities. 7) An employee who was exposed to an occupational hazard before his/her retirement is entitled to apply for determination of work-related injuries within one year after being diagnosed of or determined as occupational disease, if he/she is no longer involved in occupationally hazardous activities after retirement. - Opinions on Several Issues Concerning the Implementation of the Regulations on Work-related Injury Insurance (Draft for Comments) - 人力资源社会保障部关于 关于执行 < 工伤保险条例 > 若干问题的意见 ( 征求意见稿 ) 公开征求意见的通知 - Issuing Authority: the Ministry of Human Resources and Social Security - Date of Issuance: January 24, 2012 / Effective date: N/A 5. Labor Supreme People s Court Clarifies Refusal to Pay Remuneration 最高人民法院关于审理拒不支付劳动报酬刑事案件适用法律若干问题的解释 (01/16/2013) Remuneration is undoubtedly among one of the most important issues for employees. The Supreme Court issued the Judicial Interpretation on Several Issues on the Application of Law in Criminal Cases Regarding Refusal to Pay Labor Remuneration (the Remuneration Interpretation) on January 16, 2013, which went into effect on January 23, The Remuneration Interpretation explicitly defines labor remuneration, establishes standards for evading payment of labor remuneration by transferring assets, fleeing, and hiding or through other methods, and defines a relatively large amount and serious consequences, at the same time listing circumstances for lenient punishment. I. Scope of Labor Remuneration Labor Remuneration under Item 1 of Paragraph 1 of Article 276 of the PRC Criminal Law shall include wages, bonuses, allowances, premiums, overtime payments and other wages paid in special circumstances, as stipulated under the PRC Labor Law and PRC Contract Law. Overtime payment is covered under this criminal provision for the first time. II. Methods of Assets Transfer and Escape The following circumstances are now deemed as evading payment of labor remuneration by transferring assets or fleeing: Hiding assets, maliciously paying off or making up debts, falsely declaring bankruptcy, or transferring or disposing assets by other means; Fleeing or hiding; 6

7 Spring 2013 / Issue No. 23 of Series Hiding, destroying or falsifying accounts, employee directory, payroll records, attendance records, and other data relevant to labor remunerations; and Evading payment of labor remuneration by other means. III. Standards of Relatively Large Amount The Remuneration Interpretation has established standards for Relatively Large Amounts under the PRC s Criminal Law: Refusal to pay owed remuneration of a single employee for more than three months and for an amount of between RMB5,000 and RMB20,000 or more; Refusal to pay owed remuneration of more than ten employees for an accumulative amount of between RMB30,000 and RMB100,000 or more; and Specific amounts may be determined by the local government in consideration of local social and economic conditions and shall be filed with the Supreme People's Court for the record. IV. Interpretation of Refusal to Pay after Being Ordered An employer will be deemed as refusing to make payment under Item 1 of Paragraph 1 of Article 276 of the Criminal Law, if the employer refuses to pay remuneration after receiving a Rectification Order or an Administrative Penalty Decision issued by human resources and social security authorities or other competent government authorities. The above is not applicable if there is evidence that the employer has justifiable reasons for not knowing the order requiring payment or for not making remuneration payment in time. V. Definition of Serious Consequences Serious consequences caused by refusal of payment as prescribed under Item 1 of Paragraph 1 of Article 276 of the Criminal Law include the following: Greatly affecting the basic living conditions of an employee or the persons supported by him/her and causing the above to be unable to receive timely medical treatment for a serious illness or continue studying at school; Threatening or using violence against an employee making a claim employment remuneration; or Causing other serious consequences. - Judicial Interpretation on Several Issues on the Application of Law in Criminal Cases Regarding Refusal to Pay Labor Remuneration - 最高人民法院关于审理拒不支付劳动报酬刑事案件适用法律若干问题的解释 - Issuing Authority: the Supreme People's Court - Date of Issuance: January 16, 2012 / Effective date: January 23,

8 Spring 2013 / Issue No. 23 of Series 6. Foreign Direct Investment China Encourages Equity Contribution by Intangible Assets 关于印发 关于支持科技成果出资入股确认股权的指导意见 的通知 (11/15/2012) Given that the government increasingly wants to promote scientific and technological achievements as a form of equity contribution to promote technological innovations and development, the Ministry of Science and Technology and China Securities Regulatory Commission jointly released the Circular on Printing and Distributing the Guiding Opinions on Supporting Equity Contribution by Scientific and Technological Achievements and Identifying Equity ( Contribution Circular) on November 15, 2012, which took effect on the same day. In order to avoid future disputes, the Contribution Circular encourages enterprises, at the formation stage, to explicitly stipulate ownership, evaluation and appraisal and amount and ratio of share conversion of to-becontributed the scientific and technological achievements in the sponsorship agreement, investment agreement or articles of associations. The proportion of such contribution can reach as high as 70 percent of the total contribution as prescribed under the PRC Company Law. The Contribution Circular also mentions protection of scientific and technical personnel s rights and interests, which shall be explicitly stated in their service invention contracts. - Circular on Printing and Distributing the Guiding Opinions on Supporting Equity Contribution by Scientific and Technological Achievements and Identifying Equity - 关于印发 关于支持科技成果出资入股确认股权的指导意见 的通知 - Issuing Authority: the Ministry of Science and Technology and China Securities Regulatory Commission - Date of Issuance: November 15, 2012 / Effective date: November 15, Foreign Direct Investment China Guides Merger and Reorganization of Enterprises in Key Industries 关于加快推进重点行业企业兼并重组的指导意见 (01/22/2013) In January, 2013, 12 ministries and government departments jointly released the Guidelines to Urge Merger and Reorganization of Enterprises in Key Industries (the Merger Guidelines), which will have a significant impact in the following nine industries; automobile, steel, cement, shipbuilding, electrolytic aluminum, rare earth metals, electronic information, pharmaceutical and agriculture industrialization. Enterprises in these industries will be encouraged and supported to conduct trans-regional and trans-industrial merger and reorganization, so that the industrial concentration will be remarkably increased. Meanwhile, the Merger Guidelines state that local governments must formulate and implement specific measures to support the merger and reorganization in consideration of local social and economic situations. The Merger Guidelines further encourage foreign investors to participate in mergers and reorganizations through equity participation and other possible means. However, foreign investors may be subject national security review and anti-monopoly review if necessary. 8

9 Spring 2013 / Issue No. 23 of Series - Guidelines to Urge Merger and Reorganization of Enterprises in Key Industries - 关于加快推进重点行业企业兼并重组的指导意见 - Issuing Authority: the State Administration of Taxation, the Administration of Industry and Commerce, Ministry of Finance, the Ministry of Land and Resources, the Ministry of Human Resources and Social Security, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China State-Owned Assets Supervision and Administration Commission, and the People s Bank of China - Date of Issuance: January 22, 2012 / Effective date: January 22, Foreign Exchange China Clarifies Foreign Exchange Matters Regarding Foreign Invested Partnership Enterprise 国家外汇管理局关于外商投资合伙企业外汇管理有关问题的通知 (11/19/2012) The foreign invested partnership enterprise (the FIPEs) is emerging in China and becoming a popular legal form available to foreign investors for their direct investment. However, under the existing PRC s Partnership Enterprise Law and the Administrative Regulations on Establishing Partnership Enterprises by Foreign Enterprises or Individuals in China, the foreign exchange management on FIPEs is general and unclear and awaiting clarification. In light of the current situation, the State Administration of Foreign Exchange released the Circular on Several Issues Concerning the Foreign Exchange Management on Foreign Invested Partnership Enterprises (the FIPE Circular) on November 19, 2012, and took effect on December 17 of the same year. Key provisions of the FIPE Circular are summarized as follows: I. Establishment of the FIPEs Two foreign individuals or entities (collectively the foreign partners) or foreign partners and Chinese individuals, legal persons or other entities may establish FIPEs. Domestic partnership enterprises may be transformed into FIPEs when foreign partners join in the domestic partnership enterprise or purchase part or all of the partnership property from domestic partners. II. Foreign Exchange Registration Just like WFOEs and JVs in China, FIPEs are required to go through registration formalities with competent foreign exchange authorities within thirty (30) days upon receipt of the business license. However, FIPEs branches are not required to file for foreign exchange registration. For change of registration, registration formalities shall also be completed with competent foreign exchange authorities within thirty (30) days upon receipt of renewed business license, which, together with updated information sheet and confirmation letter, shall be submitted to the authority. FIPEs are also subject to annual foreign exchange inspection pursuant to applicable laws and regulations. III. Bank Accounts A special foreign exchange account must be opened in the designated bank with the foreign exchange registration certificate for purposes of receiving contributions in foreign currency from foreign partners. In the event that a foreign partner makes a capital contribution before a FIPE has completed its general foreign exchange registration, the foreign partner may apply to the relevant local foreign exchange authority to open an upfront fee account in its own name into which the capital can be contributed prior to SAFE registration. 9

10 Spring 2013 / Issue No. 23 of Series IV. Capital contribution confirmation Unlike WFOEs and JVs, FIPEs are required to complete a confirmation process with the relevant local foreign exchange authority regarding capital contribution by a foreign partner, which constitutes a pre-condition for FIPEs to transfer the contributed capital to other accounts in the PRC or convert the money into RMB. This is also required to remit the foreign partner s income derived from liquidation, capital reduction, transfer of property, or distribution of profits out of China or use such income for re-investment in China. V. Purchase of Foreign exchange Where a foreign partner transfers its partnership property to a domestic partner, the domestic partner shall complete the change of registration formalities with the local foreign exchange authority, and then carry out foreign exchange purchase and payment process with the bank in the place where the FIPE is located. Where a domestic partner transfers its partnership property to a foreign partner, the FIPE shall complete the change of registration formalities with the local foreign exchange authority. Such domestic partner must open a special account in the bank for converting assets into cash to receive payment from the foreign partner. When a FIPE intends to remit the foreign partner s capital gain derived from its withdrawal from of liquidation of the FIPE, it shall also complete relevant change and de-registration formalities with the local foreign exchange authority before carrying out foreign exchange purchase and payment process with the bank. - Circular on Several Issues Concerning the Foreign Exchange Management on Foreign Invested Partnership Enterprises - 国家外汇管理局关于外商投资合伙企业外汇管理有关问题的通知 - Issuing Authority: the State Administration of Foreign Exchange - Date of Issuance: November 19, 2012 / Effective date: December 17, Foreign Exchange China Improves Foreign Exchange Administration 国家外汇管理局发布 关于境外上市外汇管理有关问题的通知 (01/28/2013) The State Administration of Foreign Exchange issued the Circular on Issues Concerning Foreign Exchange Administration of Overseas Listing (the Foreign Exchange Circular) on January 28, The Foreign Exchange Circular simplifies routine procedures for opening banking accounts and fund remittance for domestic companies listed overseas (Overseas Listed Company). Some key provisions of the Foreign Exchange Circular are summarized as follows: I. Overseas Listed Companies 1. Accounts Opening According to the Foreign Exchange Circular, an Overseas Listed Company must go through the registration procedures to obtain the registration certificate for overseas listing (the Registration Certificate for Overseas Listing) in the local foreign exchange bureau within 15 working days upon its initial offerings. An Overseas Listed Company must open its domestic accounts for initial offerings (or seasoned equity offerings) and buy-back business, respectively, at the local bank to handle corresponding funds remittance and transfer after obtaining the Registration Certificate for Overseas Listing. 10

11 Spring 2013 / Issue No. 23 of Series 2. Foreign Exchange Settlement An Overseas Listed Company needs to obtain foreign exchange settlement approval issued by the local foreign exchange bureau before it can settle the foreign exchanges from the overseas listing. 3. Withdrawal An Overseas Listed Company must cancel its relevant overseas listing registrations in the local foreign exchange bureau within 15 working days upon its withdrawal from the overseas securities market. II. Domestic Shareholders of Overseas Listed Companies 1. Accounts Opening According to the Foreign Exchange Circular, a domestic shareholder of an Overseas Listed Company must go through the registration procedures to obtain the registration certificate for overseas holdings (the Registration Certificate for Overseas Holdings ) in the local foreign exchange bureau if he intends to increase or reduce his overseas holdings. A domestic shareholder of an Overseas Listed Company may open his domestic account for increasing (or reducing) overseas holdings at the local bank to handle corresponding funds remittance and transfer after obtaining the Registration Certificate for Overseas Holdings. 2. Foreign Exchange Settlement The capital income of a domestic shareholder of an Overseas Listed Company from his overseas holdings of an Overseas Listed Company shall be transferred to his domestic account for increasing (or reducing) overseas holdings within two years upon his receiving of the aforesaid capital income. The foreign exchange settlement may be handled after submitting the Registration Certificate for Overseas Holdings. - Circular on Issues Concerning Foreign Exchange Administration of Overseas Listing 关于境外上市外汇管理有关问题的通知 -Issuing Authority: State Administration of Foreign Exchange; -Date of Issuance: January 28, 2013/ Effective Date: January 28, Foreign Investment China Opens Mainland Market to Hong Kong and Macau Medical Service Providers 商务部卫生部联合发布 关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知 (10/22/2012) The Ministry of Commerce and the Ministry of Health jointly released the Circular on Issues Concerning the Establishment of Medical Institutions in Mainland China by Hong Kong and Macau Service Providers (the Circular) on October 22, 2012, taking effect on January 1, The Circular allows Hong Kong and Macau service providers to establish medical institutions in mainland China in the form of single proprietorship or in the forms of equity joint venture and contractual joint venture with mainland medical institutions, companies, enterprises and other economic organizations. Provincial public health administrative departments in China will handle approvals of applications to establish these organizations. 11

12 Spring 2013 / Issue No. 23 of Series - Circular on Issues Concerning the Establishment of Medical Institutions in Mainland China by Hong Kong and Macau Service Providers 关于香港和澳门服务提供者在内地设立医疗机构有关问题的通知 -Issuing Authority: Ministry of Commerce; Ministry of Health -Date of Issuance: October 22, 2012/ Effective Date: January 1, Foreign Investment China Opens Its Mainland Market to Hong Kong and Macau Elder Care Institutions and Institutions for Disabled Persons 商务部民政部发布 关于香港 澳门服务提供者在内地举办营利性养老机构和残疾人服务机构有关事项的通知 (02/17/2013) The Ministry of Commerce and the Ministry of Civil Affairs jointly released the Circular on Relevant Matters Concerning the Establishment of Profit-making Elder Care Institutions and Institutions for Disabled Persons in Mainland China by Hong Kong and Macau Service Providers (the Circular) on February 17, 2013 and the Circular took effect the same day. The Circular allows Hong Kong and Macau service providers to establish elder care institutions and institutions for disabled persons in mainland China in the forms of Sino-foreign equity joint venture, Sino-foreign contractual joint venture or wholly foreign-owned enterprises, and may do this by establishing a new company or merger with an existing one. An application to form such institutions must be approved by provincial commerce authorities after consulting civil affairs departments. After July 1, 2013, only applicants who obtain the administrative licenses to establish elder care institutions from the civil affairs departments can push their application to provincial commerce authorities for approval. - Circular on Relevant Matters Concerning the Establishment of Profit-making Elder Care Institutions and Institutions for Disabled Persons in Mainland China by Hong Kong and Macau Service Providers 关于香港 澳门服务提供者在内地举办营利性养老机构和残疾人机构服务有关事项的通知 -Issuing Authority: Ministry of Commerce; Ministry of Civil Affairs -Date of Issuance: February 17, 2013/ Effective Date: February 17, Environmental China Standardizes Environmental Management Registration of Hazardous Chemicals 环保部发布 危险化学品环境管理登记办法 ( 试行 ) (10/10/2012) To strengthen management of hazardous chemicals, the Ministry of Environmental Protection issued the Measures for the Environmental Management Registration of Hazardous Chemicals (for Trial Implementation) (the Hazardous Chemicals Measures) on October 10, 2012, taking effect on March 1, The Hazardous Chemicals Measures apply to the production, use and import and export of hazardous chemicals within the territory of PRC. According to the Hazardous Chemicals Measures, enterprises that produce or use hazardous chemicals must apply to the environmental protection administrative departments to obtain environmental management registration certificates for production and use of hazardous chemicals (Production and Use Registration Certificate). 12

13 Spring 2013 / Issue No. 23 of Series In addition, when enterprises intend to import or export hazardous chemicals that are restricted from such under Chinese law, such enterprises must seek registration for the environmental management of import or export of hazardous chemicals in advance with the environmental protection administrative department of the State Council. - Measures for the Environmental Management Registration of Hazardous Chemicals (for Trial Implementation) 危险化学品环境管理登记办法 ( 试行 ) -Issuing Authority: Ministry of Environmental Protection -Date of Issuance: October 10, 2012/ Effective Date: March 1, Foreigners China Protects Lawful Rights of Foreigners with Permanent Residence 个部门联合出台 外国人在中国永久居留享有相关待遇的办法 (09/25/2012) To better protect the lawful rights and interests of foreigners with permanent residence in China, 25 departments jointly released the Circular on Printing and Distributing the Measures for Enjoyment of Related Treatment of Foreigners' Permanent Residence in China (the Measures) on September 25, According to the Measures, foreigners with the Foreigners' Permanent Residence Permit in China enjoy the same rights and bear the same obligations as Chinese citizens with the exception of political rights and the rights and obligation as otherwise specified by laws and regulations. The Measures also provide national treatment to foreigners with the Foreigners Permanent Residence Permit in various aspects such as visa, employment, investment, social insurance, housing provident fund and tax. - Circular on Printing and Distributing the Measures for Enjoyment of Related Treatment of Foreigners' Permanent Residence in China 关于印发 外国人在中国永久居留享有相关待遇的办法 的通知 -Issuing Authority: State Administration of Taxation; State Administration for Industry and Commerce; State Administration of Foreign Exchange; China National Tourism Administration; State Administration of Foreign Experts Affairs; Civil Aviation Administration; Ministry of Finance; Ministry of Commerce; Ministry of Housing and Urban-Rural Development; Ministry of Education; Ministry of Human Resources and Social Security; Ministry of Public Security; Ministry of Science and Technology; Ministry of Railways; Ministry of Foreign Affairs; General Administration of Customs; National Development and Reform Commission; China Insurance Regulatory Committee; China Banking Regulatory Committee; China Securities Regulatory Committee; Population and Family Planning Commission; Peoples Bank of China; State-owned Assets Supervision and Administration Commission; Overseas Chinese Affairs Office; Organization Department of the Central Committee of the Communist Party; -Date of Issuance: September 25, 2012/ Effective Date: September 25,

14 Spring 2013 / Issue No. 23 of Series 14. Tax China Clarifies Issues Concerning Enterprise Income Tax Paid by Non-resident Enterprises in VAT Reform 国家税务总局发布 关于营业税改征增值税试点中非居民企业缴纳企业所得税有关问题的公告 (02/19/2013) The State Administration of Taxation released the Announcement on Issues Concerning the Enterprise Income Tax Paid by Non-resident Enterprises in the Pilot Program Relating to the Conversion of Business Tax to Value Added Tax (the Announcement) on February 19, According to the Announcement, in the event that a nonresident enterprise in the pilot program obtains an income that satisfies the conditions set forth in Paragraph 3 of Article 3 of the Enterprise Income Tax Law of the People's Republic of China (i.e., a non-resident enterprise has not set up institutions in China or there is no actual relationship between income obtained and the institutions set up), this income becomes taxable up to the total income exclusive value added tax. - Announcement on Issues Concerning the Enterprise Income Tax Paid by Non-resident Enterprises in the Pilot Program Relating to the Conversion of Business Tax to Value Added Tax 关于营业税改征增值税试点中非居民企业缴纳企业所得税有关问题的公告 -Issuing Authority: State Administration of Taxation -Date of Issuance: February 19, 2013/ Effective Date: February 19, Tax China Enhances Administration of the Collection of Consolidated Payments of Enterprise Income Tax by Trans-regional Enterprises 国家税务总局印发 跨地区经营汇总纳税企业所得税征收管理办法 (12/27/2012) 关于 跨省市总分机构企业所得税分配及预算管理办法 的补充通知 (12/25/2012) The State Administration of Taxation (SAT) released the Administrative Measures for the Collection of Consolidated Payments of Enterprise Income Tax by Trans-regional Enterprises (the Measures) on December 27, The measures took effect on January 1, The Measures apply to resident enterprises that establish non-legal-person branches in other regions, thus making consolidated payments of enterprise income tax (EMCPEIT). 1. General Provisions According to the Measures, the head office and secondary branches with separate production and operation functions of EMCPEIT will allocate and pay the enterprise income tax on a local basis. 2. Tax Prepayment and Consolidated Settlement and Payment According to the Measures, EMCPEIT must calculate the overall enterprise income tax to be prepaid and the overall enterprise income tax to be paid or refunded after the consolidated calculation. Fifty percent of the enterprise income tax shall be allocated among various eligible branches and the remaining fifty percent shall be borne by the head office. The branches and the head office shall pay their tax to the local state treasuries, respectively, and, as the case may be, draw tax refunds from such local state treasuries. The proportions of enterprise income tax to be borne by different eligible branches shall be decided based on the operating revenue, employee compensation and total branch assets, with the weights of the three factors being 0.35, 0.35 and 0.30, respectively. EMCPEIT shall calculate the amount of enterprise income tax to be prepaid by its head office and eligible branches. Then, the head office and branches need to file to prepay their required amounts to the local tax authorities within 15 days after the end of each month or quarter, respectively. 14

15 Spring 2013 / Issue No. 23 of Series To better implement the Administrative Measures for the Allocation and Budget of the Business Income Tax of Enterprises with Head Office and Branches in Different Provinces and Municipalities (Cai Yu [2012] No. 40), SAT, the Ministry of Finance and the People s Bank of China further released a supplementary circular (Supplementary Circular) on December 25, The Supplementary Circular primarily sets out that fifty percent of overdue tax, and its associated fines and penalties paid by secondary branches after taxation inspection shall be distributed to the local government of such secondary branches and the remaining fifty percent shall be apportioned to the head office. After this is completed, 25 percent shall be distributed to the local government of the head office, and 25 percent shall be turned over to the national treasury. -Announcement on Printing and Distributing the Administrative Measures for the Collection of Consolidated Payments of Enterprise Income Tax by Trans-regional Enterprises 关于印发 跨地区经营汇总纳税企业所得税征收管理办法 的公告 -Issuing Authority: State Administration of Taxation -Date of Issuance: December 27, 2012/ Effective Date: January 1, Supplementary Circular on the Administrative Measures for the Allocation and Budget of the Business Income Tax of Enterprises with Head Office and Branches in Different Provinces and Municipalities 关于 跨省市总分机构企业所得税分配及预算管理办法 的补充通知 -Issuing Authority: State Administration of Taxation; Ministry of Finance; People s Bank of China -Date of Issuance: December 25, 2012/ Effective Date: December 25, Tax China Clarifies the Computation and Payment Method for VAT Reform 财税部国税总局联合印发 总分支机构试点纳税人增值税计算缴纳暂行办法 (12/31/2012) Following the issuance of the Implementing Measures for Pilot Program Relating to the Conversion of Business Tax to Value-added Tax (VAT) in Transportation and Certain Areas of Modern Services Industries (Cai Shui [2011] No. 111), the State Administration of Taxation (SAT) and the Ministry of Finance (MOF) jointly released the Circular on Printing and Distributing the Interim Measures for the Computation and Payment of VAT for Head Offices and Their Branches as Pilot Taxpayers (VAT Payment Circular) on December 31, According to the VAT Payment Circular, the head office of a pilot taxpayer shall compute in a consolidated manner the VAT payable arisen from businesses listed in the Notes to the Scope of Taxable Services, among which VAT and business tax paid by the branches shall be turned over to the treasury where the head office is located. VAT and business tax paid by branches for businesses listed in the Notes to the Scope of Taxable Services in a current period may be deducted from the VAT payable of the head office for the current period, and may be carried over to the next period for further deduction if any left. - Interim Measures for the Computation and Payment of VAT for Head Offices and Their Branches as Pilot Taxpayers 总分支机构试点纳税人增值税计算缴纳暂行办法 -Issuing Authority: State Administration of Taxation; Ministry of Finance; -Date of Issuance: December 31, 2012/ Effective Date: December 31,

16 Spring 2013 / Issue No. 23 of Series 17. Intellectual Property China Strengthens Protection to Legitimate Rights of Employee Inventors 国家知识产权局等 13 部门印发 关于进一步加强职务发明人合法权益保护促进知识产权运用实施的若干意见 (11/26/2012) 13 Departments jointly released Several Opinions on Further Strengthening Protection to Legitimate Rights of Employee Inventors and Promoting the Application and Implementation of Intellectual Property Rights (the Opinions) on November 26, The Opinions do the following: (a) establish sound regulations to clarify rights and obligations of employers and employee inventors; and (b) protect the legitimate rights of employee inventors and encouraging employee inventors to participate in the application and implementation of their inventions through: (i) encouraging the employers and employee inventors to reach agreements on the belongings of the intellectual property rights; (ii) protecting the rights of authorship of employee inventors; (iii) increasing the remuneration proportion to all employee inventors; (iv) paying remuneration to the employee inventors promptly; and (v) ensuring employee inventors to receive their remunerations under certain special circumstances such as after terminating the labor contracts with the employers and the deaths of employee inventors. - Several Opinions on Further Strengthening Protection to Legitimate Rights of Employee Inventors and Promoting the Application and Implementation of Intellectual Property Rights 关于进一步加强职务发明人合法权益保护促进知识产权运用实施的若干意见 - Issuing Authority: State Administration of Taxation; State Administration for Industry and Commerce; State Intellectual Property Office; State Forestry Administration; Ministry of Finance; Ministry of Education; Ministry of Human Resources and Social Security; Ministry of Science and Technology; Ministry of Agriculture; Ministry of Industry and Information Technology; General Administration of Press and Publication (including National Copyright Administration); State-owned Assets Supervision and Administration Commission; People's Liberation Army Flag -Date of Issuance: November 26, 2012/Effective Date: November 26, 2012 This GT Alert was prepared by Dawn Zhang and George Qi in GT s Shanghai office. Questions about this information can be directed to: Dawn Zhang zhangd@gtlaw.com George Qi qig@gtlaw.com Or to your Greenberg Traurig attorney 16

17 Spring 2013 / Issue No. 23 of Series Albany Fort Lauderdale Orange County Shanghai Amsterdam Houston Orlando Silicon Valley Atlanta Las Vegas Palm Beach County N Tallahassee Austin London* +44 (0) Palm Beach County S Tampa Boston Los Angeles Philadelphia Tel Aviv^ Chicago Mexico City Phoenix Tysons Corner Dallas Miami Sacramento Warsaw~ Delaware New Jersey San Francisco Washington, D.C Denver New York Seoul White Plains This Greenberg Traurig Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor as a solicitation of any type. Please contact the author(s) or your Greenberg Traurig contact if you have questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer s legal qualifications and experience. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. All rights reserved. *Operates as Greenberg Traurig Maher LLP. **Greenberg Traurig is not responsible for any legal or other services rendered by attorneys employed by the strategic alliance firms. +Greenberg Traurig s Mexico City office is operated by Greenberg Traurig, S.C., an affiliate of Greenberg Traurig, P.A. and Greenberg Traurig, LLP. Operates as Greenberg Traurig LLP Foreign Legal Consultant Office. ^Greenberg Traurig's Tel Aviv office is a branch of Greenberg Traurig, P.A., Florida, USA. ~Greenberg Traurig s Warsaw office is operated by Greenberg Traurig Grzesiak sp.k., an affiliate of Greenberg Traurig, P.A. and Greenberg Traurig, LLP. Certain partners in Greenberg Traurig Grzesiak sp.k. are also shareholders in Greenberg Traurig, P.A. No aspect of this advertisement has been approved by the Supreme Court of New Jersey Greenberg Traurig, LLP. 17