Guangzhou City, Provisions on Encouraging Foreign Investors to Invest in and Establish Headquarters and Regional Headquarters

For the purposes of these Provisions, the term "regional headquarters" means the head organization invested in and established in the city by a foreign investor that exercises operational and management functions over all or some of the enterprises that the foreign investor has invested in in a certain territory in China.

Headquarters and regional headquarters may be established in the form of an investment-type company, management company, research and development centre or production enterprise of a headquarters nature.

Article 3: The competent foreign trade and economic cooperation department of Guangzhou City (City Foreign Trade Department) is in charge of the recognition of the headquarters and regional headquarters invested in and established in the city by foreign investors, making the arrangements for the implementation work and coordinating relevant departments in the administration of headquarters and regional headquarters.

The industry and commerce, financial, tax, foreign affairs, public security and other such departments shall be responsible for the administration of headquarters and regional headquarters in accordance with the law within their respective purviews.

Article 4: An application may be made to have an investment-type company established in the city with the approval of the Ministry of Commerce recognized as a headquarters or regional headquarters.

If an application is to be made to establish or recognize a management company, a recognized foreign-invested research and development centre or production enterprise of a headquarters nature as a headquarters or regional headquarters, it must simultaneously satisfy the following conditions:

(1) its parent company has a good credit rating and, in the year preceding the application, total assets of not less than US$300 million;

(2) the enterprises that it has invested in, in China and/or abroad, or the entreprises that it has been authorized to manage, total at least three, and it is responsible for managing and servicing the same;

(3) the capital contributions to the paid-in registered capital of the enterprises that it has invested in in China or that it has been authorized to manage total at least US$30 million;

(4) it has registered capital of at least US$2 million; and

(5) it has independent legal personality.

Article 5: In addition to its existing scope of business, a headquarters or regional headquarters established in the city may, in accordance with laws, regulations and rules, engage in some or all of the following operational, management and service activities:

(1) making investment and operating decisions in sectors in which the state permits foreign investment;

(2) marketing services: including acting as an agent in the import and export business and the commodity distribution business of the enterprises that it manages, or providing them after-sales services, etc.;

(3) application of funds and financial management: subject to the approval and under the supervision of the foreign exchange control department, it may balance the foreign exchange among the enterprises it manages; subject to the approval of the banking regulatory department, it may select a bank in China to establish a fund pool to centrally allocate the balances of self-owned funds among the affiliated subsidiaries that it manages in China; it may assist the enterprises that it manages in seeking loans and providing security for them;

(4) technical support and research and development;

(5) employee training and management: assisting the enterprises that it manages in human resources management;

(6) information and logistics services: providing integrated services to the enterprises that it manages including marketing information, investment policy consulting, transport, warehousing, etc.;

(7) accepting service contracts from offshore companies; and

(8) other operational, management and service activities specified in laws, regulations and rules.

Article 6: If an investment-type company, management company, research and development centre or production enterprise of a headquarters nature already established in the city by a foreign investor (Existing FIE) wishes to apply for recognition as a headquarters or regional headquarters, it shall submit an application together with the following documentation to the City Foreign Trade Department:

(1) a written application signed by the legal (or authorized) representative of the Existing FIE;

(2) the authorization document for the establishment of the headquarters or regional headquarters and the performance of its basic functions signed by the legal (or authorized) representative of its parent company;

(3) (photocopies of) the approval certificate, business licence and capital verification report of the Existing FIE;

(4) a document evidencing the creditworthiness and (a photocopy of) the registration document of its parent company and the proof of identity of the legal representative;

(5) a list of the enterprises subject to the management of, and recipient of the services from, the headquarters or regional headquarters (together with photocopies of the enterprise approval certificates, business licences and capital verification reports);

(6) the power of attorney of the proposed legal representative of the headquarters or regional headquarters from the parent company and the proof of identity of the proposed legal representative of the headquarters or regional headquarters; and

(7) other documentation specified in laws, regulations and rules.

If a new management company, research and development centre or production enterprise of a headquarters nature is to be established and an application for its recognition as a headquarters or regional headquarters is to be made, in addition to the documentation specified above in this Article, the following documentation must be submitted:

(1) the articles of association and feasibility study report of the proposed management company, research and development centre or production enterprise of a headquarters nature;

(2) (a photocopy of) the lawful proof of the source of the premises for the company;

(3) the balance sheets for the most recent three years of the parent company;

(4) the list of the members of the board of directors appointed by the parent company; and

(5) other documentation specified in laws, regulations and rules.

Unless the provision of a photocopy of the foregoing documentation is specified, an original of the document shall be provided. If an intermediary organization is appointed to carry out the establishment application procedures or if a document signed by someone other than the legal representative of the parent company is submitted, the relevant power of attorney shall be issued.

Article 7: The City Foreign Trade Department shall complete its review within 15 working days from the date of receipt of the complete set of application materials. If the applicant satisfies the conditions, the City Foreign Trade Department shall render a recognition decision and issue it a recognition certificate.

Article 8: With recognition as a headquarters the city government shall give an award of Rmb5 million and with recognition as a regional headquarters it shall give an award of Rmb2 million.

Article 9: If a new organization is established in the city and is recognized as a headquarters or regional headquarters, it shall, for office space that it purchases or constructs for its own use (excluding premises of an auxiliary nature), be granted a subsidy of Rmb1,000 per square metre of floor area earmarked for office purposes, which will be paid in instalments within three years. During the period of receiving the subsidy, the office premises may not be leased out or sold. If it leases office premises for its own use, it shall, for a period of three years, be granted an annual rental subsidy equivalent to 30% of the reference market rent for leased premises at the time in question for the area in question and for the section of street in question as published by the city land resources and housing management department. During the period of receiving the subsidy, neither may the lease of the office premises be transferred to a third party nor may the purpose of the premises be changed.

If an organization established in the city and recognized as a headquarters or regional headquarters prior to the implementation hereof intends to purchase, construct or lease new office premises to meet its business development needs, it shall be granted a subsidy equivalent to 50% of the foregoing rates.

The floor area of the office premises purchased, constructed and used, or leased by a foreign-invested headquarters or regional headquarters and for which a subsidy is granted shall be that determined by the city land resources and housing management department.

If a headquarters or regional headquarters violates the foregoing provisions by leasing out, selling or transferring the lease of the office premises or changing the purpose thereof, it shall return the subsidy that it has received to such date and pay interest thereon at the rate for bank loans of the same period.

Article 10: The city government will give awards to headquarters and regional headquarters established as head and branch organizations as well as to those that make outstanding contributions to the economic development of the city and obtain good economic and social returns. The specific measures therefor shall be formulated and implemented by the city department in charge of finance and the City Foreign Trade Department.

The city government will give citations to the expatriate senior management personnel of headquarters and regional headquarters that make outstanding contributions to the economic development of the city.

Article 11: An organization recognized as a headquarters or regional headquarters shall be eligible for the favourable tax treatment specified by the state.

Following approval by the provincial government after submission by the city government, a headquarters or regional headquarters shall be eligible for exemption from or reduction of local income tax in accordance with relevant state provisions.

Real property newly constructed or purchased by a headquarters or regional headquarters shall be eligible for a three year exemption from urban real property tax commencing from the month in which construction was completed or the purchase was finalized.

If a headquarters or regional headquarters invests in and establishes a research and development organization, business tax shall not be levied on the revenue derived by it from engaging in technology transfer and technology development and related technical consulting and technical services.

A headquarters or regional headquarters in an industry in which the state encourages foreign investment shall be eligible for an exemption from import duties and import stage value-added tax for imported self-used equipment falling within its total amount of investment, with the exception of commodities that the state specifies as not being eligible for exemption from import duties and taxes.

The expatriate personnel of a headquarters or regional headquarters shall be eligible for preferential individual income tax treatment, such as a housing allowance, home leave allowance, child education allowance, etc.

Article 12: A headquarters or regional headquarters that has been recognized as a research and development centre shall be eligible for the preferential treatment offered to foreign-invested research and development centres by the state and the city.

A headquarters or regional headquarters that has been assessed and confirmed in accordance with provisions as a foreign-invested advanced technology enterprise or product export enterprise shall be eligible for relevant preferential treatment.

Article 13: If a headquarters or regional headquarters imports raw materials, parts and components into bonded areas under an arrangement for the processing of supplied materials and provides the same for processing to a production enterprise in China that it has invested in or been authorized to manage, such production enterprise may apply to the competent tax authority for exemption of value-added tax on its fee for the processing or entrusted processing of the goods.

Article 14: The establishment in the city of cross border procurement centres and logistics centres by headquarters and regional headquarters is encouraged and supported. Pursuant to relevant state laws, if approved, a cross border procurement centre or logistics centre may obtain import and export rights and the goods exported by it shall be eligible for tax refund policies.

Headquarters or regional headquarters may, in accordance with their production needs, apply to establish bonded warehouses and bonded factories.

Article 15: Following approval by the provincial government after submission by the city government, a headquarters or regional headquarters may be eligible for a cap on or reduction in administrative charges.

The relevant departments of the city shall actively support and make overall arrangements for the water, electricity, gas, telecommunications and other such utilities required by headquarters and regional headquarters.

Article 16: The participation in the reform, rehabilitation and restructuring of enterprises in the city by headquarters and regional headquarters through the acquisition of equity interests therein, takeovers, mergers, contracting, leasing, taking in trust, etc. is encouraged and supported. If a restructured enterprise meets the criteria for a foreign-invested enterprise as specified in relevant laws and regulations, it shall be eligible for treatment as a foreign-invested enterprise.

Article 17: Subject to the approval of the foreign exchange control department, a headquarters or regional headquarters may, under the current legal framework for entrusted loans, centrally manage the foreign exchange funds of its onshore member companies at a designated bank through the daily concentration of its available foreign exchange.

Subject to the approval of the foreign exchange control department, the financial centre or fund centre established by a headquarters or regional headquarters may open an offshore account with a designated bank in China for the centralized management of the foreign exchange funds of its offshore member companies. The scope of receipts of the offshore account shall be the foreign exchange funds remitted in by the offshore member companies and the foreign exchange funds of onshore member companies for which the approval of the foreign exchange control department has been obtained for extending loans overseas. The scope of expenditures shall be the remittances to the offshore member companies.

Subject to the approval of the foreign exchange control department, a headquarters or regional headquarters may, when extending loans overseas, carry out the forward settlement and sale of foreign exchange, and renminbi and foreign exchange swaps.

If a headquarters or regional headquarters satisfies the relevant qualification conditions, it may apply to the foreign exchange control department for recognition as a regional headquarters qualified to extend overseas loans.

With respect to the authority for the examination and approval of non-trade related sales and purchases of foreign exchange that is not expressly specified in current regulations, subject to the approval of the foreign exchange control department, if an amount is equivalent to US$100,000 or less, it shall be reviewed and handled by the designated foreign exchange bank; if the amount is greater than the equivalent of US$100,000, the payment procedures shall be carried out by the designated foreign exchange bank after review by the foreign exchange control authority.

Article 18: Exit procedures shall be facilitated for the Chinese personnel of headquarters and regional headquarters who need to travel to Hong Kong, Macao, Taiwan or abroad for business purposes.

If the expatriate senior management personnel or technical personnel of a headquarters or regional headquarters need to temporarily enter China on several occasions, they may apply for six month to one year multiple entry visitor's visas. The expatriate personnel of a headquarters or regional headquarters who need to reside in the city over the long term may apply for one to five year foreigner's resident permits. Expatriate personnel of a headquarters or regional headquarters who need to come to the city on a temporary basis may apply to the public security department for entry visas at the point of entry in accordance with relevant state provisions.

Article 19: The procedures for the entry, exit and residence of the family of expatriate senior management personnel of a headquarters or regional headquarters, school enrollment of their children, etc. shall be facilitated in accordance with provisions.

Article 20: The City Foreign Trade Department regulates recognized headquarters and regional headquarters. It shall revoke the recognition certificates of those headquarters and regional headquarters that no longer satisfy the conditions therefor and terminate their eligibility for the relevant policies.

Article 21: Headquarters and regional headquarters established in the city shall be governed by these Provisions, whereas the headquarters and regional headquarters of foreign-invested financial institutions shall be governed by the Guangzhou City, Several Implementing Rules for the Opinion on Supporting the Development of the Finance Industry.

Article 22: Matters relating to the establishment in the city of headquarters and regional headquarters by investors from Hong Kong, Macao and Taiwan shall be handled with reference to these Provisions.

Article 23: For the purposes of these Provisions, the term "senior management personnel" means senior management personnel serving as the chairman of the board, vice chairman of the board, general manager, deputy general manager, chairman of the supervisory board, etc. of a headquarters or regional headquarters.

For the purposes of these Provisions, where the term "not less than" is used, the number referred to is included unless otherwise specified.

Article 24: The City Foreign Trade Department is in charge of interpreting these Provisions.

Article 25: If laws, regulations or rules provide otherwise with respect to headquarters and regional headquarters, such provisions shall prevail.

Article 26: These Provisions shall be effective as of the date of issue and shall be valid for five years.