In the news: Apple invests $1B in Didi, China plans to close MNC tax loopholes, environmental inspection teams target local polluters and the housing authority prepares new rules for property agencies

China airs proposal to close MNC tax loophole

China's authorities are considering plans to toughen up multinational companies' (MNCs) tax reporting standards to help close a loophole, in response to the Organization for Economic Cooperation and Development (OECD)'s call for a global clampdown on the corporate grey area of internal transfer pricing. It is part of an international effort to prevent MNCs from altering prices put on labor, services or intangible asset transfers within global operations, a scheme that allows them to divert profits to low-tax countries. The OECD estimated that these profit-shifting practices amount to about $100 billion to $240 billion in lost tax revenue each year. The State Administration of Taxation (SAT) issued a draft proposal at the end of last year, which was reportedly a subject of much debate due to the amount of disclosure required of companies (Chinese firms included)—China will apparently require onshore subsidiaries of MNCs to provide information on their head offices and worldwide operations, so authorities can grasp companies' transfer pricing policies and come up with a reasonable solution from a PRC perspective. Lawyers China Law & Practice spoke to then predicted that the country will move away from the arms-length principle to the profit-split method, which directly allocates a certain percentage of revenue to China.

China's environment ministry given inspection powers

China's Ministry of Environmental Protection (MEP) has been authorized to send inspection teams to provinces and regions across the country as part of efforts to root out local polluters, according to China Daily. It would become only the second national authority, after the Central Commission for Discipline Inspection (which carries out the anti-corruption campaign), to have the power to send inspection teams and hold discussions with provincial leaders. An MEP official said that Beijing still needs more clout to crack down on polluting entities and the local authorities that regulate them. For instance, Hebei, which is home to seven of the 10 smoggiest cities in China, has failed to put enough pressure on city-level governments to meet standards, the MEP said. The ministry imposed total fines of Rmb117.97 million ($17.78 million) in the first quarter of this year. Going green is a priority at the highest levels of the PRC government. The Supreme People's Court set up an environmental tribunal in 2014 and local courts began accepting pollution-related public interest cases last year. These newly awarded powers to investigate at the regional level will hopefully clear concerns of lax enforcement—as a central body, the MEP will be able to override any local protectionism awarded to plants that have gotten away with poor emission standards for years.

Regulations to target real estate agencies

Authorities are formulating stricter measures for property agencies, of which misleading information has become a major source of customer complaints. The Ministry of Housing and Urban-Rural Development and other departments are working on regulating housing listings and strengthening the management of brokers. Also on the agenda is improving credit information systems and supervision over real estate agents' practices. Shanghai regulators imposed fines of between Rmb130,000 ($20,000) and Rmb200,000 on six real estate agents, including industry leaders Lianjia.com and 5i5j.com, for false advertising last month. The State Administration for Industry and Commerce (SAIC)'s Provisions for the Dissemination of Real Estate Advertisements, which came into effect on February 1 this year, crack down on fraudulent pricing and misleading ads and impose fines of up to three times the illegal income. Advertising and consumer protection violations are rampant in China and taken very seriously by the authorities—fabricated listings and irregular fee charges are reportedly among the commonly filed client complaints regarding property agencies. The measures being formulated will help regularize industry standards.

Bridgewater wins first foreign hedge fund license

Bridgewater Associates became the first foreign hedge fund manager to win approval to set up a wholly owned investment management business in China, Shanghai-based consulting firm Z-Ben Advisors said. It won permission to set up the unit in Shanghai's Free Trade Zone on March 7. China has awarded similar licenses to global money managers Aberdeen Asset Management Plc and Fidelity Investments, though Bridgewater is the first foreign hedge fund to win the approval. Rules may allow these licensed firms to offer China-focused products to Chinese clients except mass-retail investors. This is in contrast to qualified domestic limited partner (QDLP) licenses, which permit the sale of offshore products to PRC clients. China reportedly stopped accepting applications for registration of all new companies with finance-related names in April, due to concerns about under-regulated activities like P2P lending. But this move increases investors' hopes of having the suspension lifted. It's worth pointing out that the rules “may” allow the sale of PRC products—there is a chance this could turn out to be restricted and challenging in reality. In a market where the overwhelming majority are individual investors, China is as keen as it is cautious on reforming its financial system.

Apple invests $1 billion in Didi

Apple Inc. has invested $1 billion in Chinese taxi-hailing app company Didi Chuxing Technology Co. (formerly Didi Kuaidi), as the battle for the future of driving intensifies and alliances among automakers, tech firms and ride-sharing companies increase. Didi is reportedly targeting an IPO in New York next year, though the timing may depend on how its competition with Uber Technologies Inc. in China plays out. It is said to be in the process of raising about $3 billion in funding, including Apple's $1 billion contribution, which has swelled its valuation to about $26 billion. The company is backed by Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Tim Cook is in China again, his eighth visit to the country since he became chief of Apple in 2011 (the front page of China Daily on Tuesday showed a photo of the Apple CEO and Didi president Liu Qing in a Didi taxi). Apple has faced some recent setbacks in China, including declining phone sales and last month's iTunes shutdown, but investments like this show that Apple will not take a backseat in China's surging tech market.

China airs proposal to close MNC tax loophole

China's authorities are considering plans to toughen up multinational companies' (MNCs) tax reporting standards to help close a loophole, in response to the Organization for Economic Cooperation and Development (OECD)'s call for a global clampdown on the corporate grey area of internal transfer pricing. It is part of an international effort to prevent MNCs from altering prices put on labor, services or intangible asset transfers within global operations, a scheme that allows them to divert profits to low-tax countries. The OECD estimated that these profit-shifting practices amount to about $100 billion to $240 billion in lost tax revenue each year. The State Administration of Taxation (SAT) issued a draft proposal at the end of last year, which was reportedly a subject of much debate due to the amount of disclosure required of companies (Chinese firms included)—China will apparently require onshore subsidiaries of MNCs to provide information on their head offices and worldwide operations, so authorities can grasp companies' transfer pricing policies and come up with a reasonable solution from a PRC perspective. Lawyers China Law & Practice spoke to then predicted that the country will move away from the arms-length principle to the profit-split method, which directly allocates a certain percentage of revenue to China.

China's environment ministry given inspection powers

China's Ministry of Environmental Protection (MEP) has been authorized to send inspection teams to provinces and regions across the country as part of efforts to root out local polluters, according to China Daily. It would become only the second national authority, after the Central Commission for Discipline Inspection (which carries out the anti-corruption campaign), to have the power to send inspection teams and hold discussions with provincial leaders. An MEP official said that Beijing still needs more clout to crack down on polluting entities and the local authorities that regulate them. For instance, Hebei, which is home to seven of the 10 smoggiest cities in China, has failed to put enough pressure on city-level governments to meet standards, the MEP said. The ministry imposed total fines of Rmb117.97 million ($17.78 million) in the first quarter of this year. Going green is a priority at the highest levels of the PRC government. The Supreme People's Court set up an environmental tribunal in 2014 and local courts began accepting pollution-related public interest cases last year. These newly awarded powers to investigate at the regional level will hopefully clear concerns of lax enforcement—as a central body, the MEP will be able to override any local protectionism awarded to plants that have gotten away with poor emission standards for years.

Regulations to target real estate agencies

Authorities are formulating stricter measures for property agencies, of which misleading information has become a major source of customer complaints. The Ministry of Housing and Urban-Rural Development and other departments are working on regulating housing listings and strengthening the management of brokers. Also on the agenda is improving credit information systems and supervision over real estate agents' practices. Shanghai regulators imposed fines of between Rmb130,000 ($20,000) and Rmb200,000 on six real estate agents, including industry leaders Lianjia.com and 5i5j.com, for false advertising last month. The State Administration for Industry and Commerce (SAIC)'s Provisions for the Dissemination of Real Estate Advertisements, which came into effect on February 1 this year, crack down on fraudulent pricing and misleading ads and impose fines of up to three times the illegal income. Advertising and consumer protection violations are rampant in China and taken very seriously by the authorities—fabricated listings and irregular fee charges are reportedly among the commonly filed client complaints regarding property agencies. The measures being formulated will help regularize industry standards.

Bridgewater wins first foreign hedge fund license

Bridgewater Associates became the first foreign hedge fund manager to win approval to set up a wholly owned investment management business in China, Shanghai-based consulting firm Z-Ben Advisors said. It won permission to set up the unit in Shanghai's Free Trade Zone on March 7. China has awarded similar licenses to global money managers Aberdeen Asset Management Plc and Fidelity Investments, though Bridgewater is the first foreign hedge fund to win the approval. Rules may allow these licensed firms to offer China-focused products to Chinese clients except mass-retail investors. This is in contrast to qualified domestic limited partner (QDLP) licenses, which permit the sale of offshore products to PRC clients. China reportedly stopped accepting applications for registration of all new companies with finance-related names in April, due to concerns about under-regulated activities like P2P lending. But this move increases investors' hopes of having the suspension lifted. It's worth pointing out that the rules “may” allow the sale of PRC products—there is a chance this could turn out to be restricted and challenging in reality. In a market where the overwhelming majority are individual investors, China is as keen as it is cautious on reforming its financial system.

In the news: Apple invests $1B in Didi, China plans to close MNC tax loopholes, environmental inspection teams target local polluters and the housing authority prepares new rules for property agencies

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