Tentative Measures for the Recognition of Onward Investments by Taiwanese Investors Through a Third Place

(Promulgated by the Ministry of Commerce and the Taiwan Affairs Office of the State Council on, and effective as of, February 20 2013.)

Announcement of MOFCOM and TAOSC [2013] No.12

Article 1: These Measures have been formulated pursuant to relevant laws and administrative regulations in order to protect the lawful rights and interests of Taiwanese investors investing in the mainland and to implement the Cross-strait Bilateral Investment Protection and Promotion Agreement.

Article 2: If a Taiwanese investor invests in and establishes an enterprise on the mainland (an Investee Enterprise) using, as the investor, a company, enterprise or other economic organisation in a third place that it directly or indirectly owns or controls (a Third Place Investor), it may submit an application pursuant hereto to have such Third Place Investor recognised as being the equivalent of a Taiwanese investor (Onward Investment Recognition).

Article 3: The Ministry of Commerce in concert with the Taiwan Affairs Office of the State Council, and the competent commerce departments of the provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans and the Xinjiang Production and Construction Corps (the Competent Provincial-level Commerce Department) in concert with the Taiwan affairs office at the same level, are charged with the work associated with the recognition and administration of onward investments by Taiwanese investors through a third place.

Article 4: The term “Taiwanese investor” as used herein refers to a natural person or enterprise as set forth below:

(1) a natural person holding a Taiwan identity document; or

(2) an enterprise incorporated in Taiwan, including companies, trusts, commercial firms, partnerships or other organisations, but excluding offshore branches, offices, liaison offices and entities not engaging in substantive business operations incorporated in Taiwan by natural persons, enterprises or organisations from countries or regions other than the mainland and Taiwan.

Article 5: The term “third place” as used in Article 2 hereof means a country or region other than the mainland and Taiwan, and a Third Place Investor shall have been established in accordance with the laws of such country or region.

Article 6: The term “owns” as used in Article 2 hereof means that the Taiwanese investor owns more than 50% of the equity of the Third Place Investor.

Article 7: The term “controls” as used in Article 2 hereof means that the requirement in Article 6 hereof is not satisfied, but that any of the following circumstances applies:

(1) the Taiwanese investor in fact has more than half of the votes on the board of directors, shareholders' meeting or other such authority organ of the Third Place Investor;

(2) the Taiwanese investor has the power to appoint or dismiss more than half of the members of the board of directors or other such authority organ of the Third Place Investor and the business decision-making, etc. of the Third Place Investor is done by such authority organ;

(3) the Taiwanese investor has the power to decide on matters of the Third Place Investor such as its operations, financial affairs and personnel affairs; or

(4) another circumstance as specified by the Ministry of Commerce together with the Taiwan Affairs Office of the State Council applies.

Article 8: Where two or more qualified Taiwanese investors own equity or voting rights in the same Third Place Investor, they may calculate their equity or votes in, and the relevant influence on, the Third Place Investor together, in which case Articles 6 and 7 hereof shall apply.

Article 9: The term “substantive business operations” as used in Item (2) of Article 4 hereof shall satisfy all of the following conditions:

(1) having a place of business in Taiwan;

(2) having a record of the payment of taxes in Taiwan; and

(3) employing employees in Taiwan.

Article 10: When a Taiwanese investor applies for Onward Investment Recognition, it shall submit an application and the following materials to the Competent Provincial-level Commerce Department of the place where the Investee Enterprise is located:

(1) an Application for the Recognition of Onward Investment by a Taiwanese Investor Through a Third Place, and if the Taiwanese investor entrusts another to apply on its behalf, a notarised power of attorney signed by the Taiwanese investor;

(2) if the Taiwanese investor is a natural person, a notarised copy of his identity document;

(3) if the Taiwanese investor is an enterprise, notarised copies of the document evidencing its incorporation, the document evidencing its ownership or lease of its place of business, the document evidencing its payment of income tax for the previous year (if it is an enterprise in deficit, the document evidencing its deficit position issued by the tax authority) and proof of insurance payments for its employees;

(4) an account of and the documents evidencing the ownership and control relationships among the Taiwanese investor, the Third Place Investor and the Investee Enterprise; and

(5) other documents the provision of which is requested by the department charged with recognition and administration.

Article 11: The Competent Provincial-level Commerce Department together with the Taiwan affairs office at the same level shall review all the valid materials within 20 working days from the date of receipt thereof, and if the materials satisfy the requirements hereof, they shall issue the Taiwanese investor an Onward Investment Recognition certificate; if the materials do not satisfy the requirements, they shall issue an opinion withholding recognition. The Competent Provincial-level Commerce Department shall input the Application for Onward Investment by a Taiwanese Investor Through a Third Place into the system for the administration of the examination and approval of foreign investments, and carry out an electronic record filing with the Ministry of Commerce through said system.

Once the Taiwanese investor secures the Onward Investment Recognition certificate, the Investee Enterprise shall apply to the competent commerce department with examination and approval authority for the issuance or replacement of an approval certificate of a foreign-invested enterprise or approval certificate of a Taiwan, Hong Kong, Macao or overseas Chinese-invested enterprise on the strength of the recognition certificate. If the Investee Enterprise is subject to the approval of the Ministry of Commerce, the approval certificate of a foreign-invested enterprise or approval certificate of a Taiwan, Hong Kong, Macao or overseas Chinese-invested enterprise may be replaced by the Competent Provincial-level Commerce Department of the place where the Investee Enterprise is located if so authorised by the Ministry of Commerce.

When issuing or replacing the approval certificate, the competent commerce department shall add the notation “(Onward investment by a Taiwanese investor through a third place)” on the approval certificate of a foreign-invested enterprise or approval certificate of a Taiwan, Hong Kong, Macao or overseas Chinese-invested enterprise after the name of the Third Place Investor.

Article 12: If any of the changes set forth below occurs after the securing of Onward Investment Recognition, the Taiwanese investor shall report the change to the competent commerce department that originally issued the recognition certificate and submit an account of and the document evidencing the change in a timely manner:

(1) the Taiwanese investor ceases to satisfy the provisions of Articles 4 and 9 hereof;

(2) the ownership or control of the Third Place Investor by the Taiwanese investor ceases to satisfy the provisions of Article 6 or 7 hereof; or

(3) another circumstance as specified by the Ministry of Commerce together with the Taiwan Affairs Office of the State Council arises.

The competent commerce department together with the Taiwan affairs office at the same level shall cancel the Taiwanese investor's recognition of onward investment through a third place, replace the approval certificate of a foreign-invested enterprise or approval certificate of a Taiwan, Hong Kong, Macao or overseas Chinese-invested enterprise and delete the notation “(Onward investment by a Taiwanese investor through a third place)” within 10 working days after receipt of the account of and the document evidencing the change.

Article 13: If a Taiwanese investor that has secured Onward Investment Recognition is involved in an investment dispute and cites the provisions in the Cross-strait Bilateral Investment Protection and Promotion Agreement on the resolution of investment disputes in applying for resolution through mediation to the mainland's cross-strait investment dispute resolution institution, it shall submit to the mainland's cross-strait investment dispute resolution institution the Onward Investment Recognition certificate issued by the competent commerce department and the approval certificate of a foreign-invested enterprise or approval certificate of a Taiwan, Hong Kong, Macao or overseas Chinese-invested enterprise carrying the notation in accordance with Article 11 hereof.

If the interval between the recognition date recorded on the written recognition opinion for the onward investment through a third place of the Taiwanese investor and the date of submission of the investment dispute resolution application to the mainland's cross-strait investment dispute resolution institution is more than one year, or if it is less than one year but during that period a change in the Taiwanese investor or the Taiwanese investor's ownership or control of the Third Place Investor has occurred, the Taiwanese investor shall submit to the mainland's cross-strait investment dispute resolution institution a confirmation opinion for its Onward Investment Recognition issued by the competent commerce department.

Article 14: To apply for confirmation of its Onward Investment Recognition, a Taiwanese investor shall, with reference to the relevant requirements of Article 10 hereof, submit to the Competent Provincial-level Commerce Department an account of whether there has been a change in the Taiwanese investor or the Taiwanese investor's ownership or control of the Third Place Investor, and relevant documents for the period between the recognition date and the date of submission of the confirmation application. The Competent Provincial-level Commerce Department together with the Taiwan affairs office at the same level shall complete the review and issue a confirmation opinion within 10 working days.

Article 15: These Tentative Measures shall be effective as of February 20 2013. The Ministry of Commerce together with the Taiwan Affairs Office of the State Council are in charge of the interpretation hereof.

Attachment

APPLICATION FOR THE RECOGNITION OF ONWARD INVESTMENT BY A TAIWANESE INVESTOR THROUGH A THIRD PLACE