Shanghai Municipality, Provisions on Encouraging the Establishment of Regional Headquarters by Multinational Corporations

 

(Issued by the Shanghai Municipal People's Government on July 25, 2019, and effective as of September 1, 2019 until August 31, 2024.)

 

(The Shanghai Municipality, Provisions on Encouraging the Establishment of Regional Headquarters by Multinational Corporations (Hu Fu Fa [2017] No.9) issued by the Shanghai Municipal People's Government on January 27, 2017 shall be repealed simultaneously.)

 

Hu Fu Gui [2019] No.31

 

 

Article 1: Purpose and Basis

 

These Provisions have been formulated in accordance with relevant laws and regulations in order to thoroughly implement the PRC Foreign Investment Law, the Central Committee of the Communist Party of China and State Council, Several Opinions on Building a New Open Economic System (Zhong Fa [2015] No.13), the State Council, Circular on Several Measures to Expand the Opening to the Outside World and Actively Utilize Foreign Investment (Guo Fa [2017] No.5), the State Council, Circular on Several Measures for Promoting the Growth of Foreign Investment (Guo Fa [2017] No.39), the State Council, Circular on Several Measures Concerning the Active and Effective Use of Foreign Investment to Boost High-quality Economic Growth (Guo Fa [2018] No.19), as well as the Several Opinions on Promoting the Development of Regional Headquarters of Multinational Corporations in Shanghai (Hu Fu Gui [2019] No.30) issued by the Shanghai municipal government, encourage multinational corporations to establish regional headquarters and headquarters-type entities in Shanghai and support the concentration of business, expansion of functions, enhancement of the competencies and the active participation in the development of Shanghai's "five centers" by regional headquarters and headquarters-type entities in Shanghai.

 

 

Article 2: Definitions

 

The term "Regional headquarters of a multinational corporation" (Regional Headquarters) means a foreign-registered parent company's only head office that, through investment or by authorization, performs management and service functions for enterprises in a region covering more than one country and that is established in Shanghai. Regional Headquarters established by multinational corporations in Shanghai must take forms of enterprise organizations with independent legal personality such as companies with an investment nature and management companies.

 

The term "headquarters-type entity of a multinational corporation" (Headquarters-type Entity) means a foreign-invested enterprise (including a (sub-)branch) that, although it does not fully satisfy the criteria for a Regional Headquarters of a multinational corporation, nonetheless actually undertakes numerous functions among supporting services such as management decision-making, funds management, procurement, sales, logistics, settlement, research and development, and training of its foreign-registered parent company in a region covering more than one country.

 

 

Article 3: Scope of Application

 

These Provisions apply to Regional Headquarters and Headquarters-type Entities established in Shanghai.

 

 

Article 4: Administrative Departments

 

The municipal commission of commerce is in charge of the recognition of Regional Headquarters and Headquarters-type Entities and coordinates relevant departments in carrying out administration of and providing services for Regional Headquarters and Headquarters-type Entities.

 

Departments such as market regulation, finance, taxation, foreign affairs, science and technology, human resources and social security, exit-entry administration of public security, foreign exchange control, people's bank and customs shall also duly carry out the administration of and provide services for Regional Headquarters and Headquarters-type Entities within their respective spheres of responsibility.

 

 

Article 5: Conditions for Recognition of Regional Headquarters

 

To apply for the recognition of a Regional Headquarters, the following conditions shall be satisfied:

 

(1)   it is a foreign-invested enterprise with an independent legal personality;

 

(2)   its parent company has total assets of not less than US$200 million;

 

(3)      as authorized by the parent, it handles headquarters functions such as management decision-making, fund management, procurement, sales, logistics, settlement, research and development, and training within the region consisting of one or more countries;

 

(4)     it has registered capital of not less than US$2 million; and

 

(5)     consideration may be given to according recognition where the foregoing conditions are essentially satisfied and the applicant has made outstanding contributions to the development of the economy of the region where it is located.

 

 

Article 6: Conditions for Recognition of Headquarters-type Entities

 

To apply for the recognition of a Headquarters-type Entity, the following conditions shall be satisfied:

 

(1)     it is a foreign-invested enterprise with an independent legal personality or a (sub-) branch thereof;

 

(2) its parent company has total assets of not less than US$100 million;

 

(3)    as authorized by the parent, it handles headquarters functions such as management decision-making, fund management, procurement, sales, logistics, settlement, research and development, and training within the region consisting of one or more countries; and

 

(4) it has registered capital of not less than US$1 million, or if it is established in the form of a (sub-)branch, the operating capital allocated to it by the head office is not less than US$1 million.

 

 

Article 7: Application Materials

 

To apply for the recognition of a Regional Headquarters or Headquarters-type Entity, the following materials shall be submitted to the municipal commission of commerce:

 

(1)     an application letter signed by the legal representative of the company;

 

(2)     the authorization document for the basic functions of the Regional Headquarters or Headquarters-type Entity of the multinational corporation signed by the authorized signatory of the parent company;

 

(3)     (a photocopy of) the business license of the company.  If the Headquarters-type Entity is a (sub-)branch, (a photocopy of) the business license of the Shanghai branch and a document attesting to the allocation of the operating capital to it by the head office additionally need to be provided;

 

(4)     the audit report of the parent company of the most recent year;

 

(5)     (photocopies of) the business licenses or registration certificates of the domestic and offshore enterprises it has been authorized to manage; and

 

(6) other materials as required by laws, regulations or rules.

 

The originals of the documents specified in the preceding paragraph shall be submitted unless the submission of photocopies is specified.

 

 

Article 8: Examination

 

The municipal commission of commerce shall complete its review and render its decision on whether to grant recognition within eight working days after the date of receipt of the application letter and the other materials. If it decides to grant recognition, it shall issue a recognition certificate.

 

 

Article 9: Financial Assistance and Incentives

 

A Regional Headquarters may, in accordance with relevant provisions, be eligible for financial assistance for a start-up and premises lease.

 

If a Regional Headquarters has comprehensive operations functions including operations management, funds management, research and development, procurement, sales, logistics, support services, etc., makes outstanding contributions to economic development and obtains good returns, it may be eligible for rewards in accordance with relevant provisions.

 

If a multinational corporation is establishing an Asia region, Asia-Pacific region or larger Regional Headquarters and it satisfies relevant conditions, it shall be eligible for financial assistance in accordance with relevant provisions.

 

The specific implementing measures for financial assistance and incentives shall be formulated separately by relevant departments.

 

 

Article 10: Funds Operation and Management

 

Regional Headquarters and Headquarters-type Entities may establish centralized internal funds management systems to centrally manage their own funds. If operation of foreign exchange funds is involved, such operation shall be carried out in accordance with relevant exchange control provisions. Qualified Regional Headquarters or Headquarters-type Entities may engage in a number of matters involving the centralized operation and management of the multinational corporation's cross-border funds, including centralized receipt and payment of foreign exchange on the current account and netting, centralized operation and management, and centralized conversion and sale of onshore and offshore funds, and centralized allocation of foreign debt and foreign loan extension limits in accordance with relevant provisions.

 

A company with an investment nature may, in accordance with the Measures for the Administration of the Finance Companies of Enterprise Groups, establish a finance company to provide centralized financial management services to its investee enterprises in China.

 

Non-trade foreign exchange payment procedures will be optimized, the tax payment guidance and services for Regional Headquarters and Headquarters-type Entities will be strengthened and green channels for the record filing of non-trade foreign exchange payment contracts and tax payment rulings for Regional Headquarters and Headquarters-type Entities will be provided.

 

A Regional Headquarters or Headquarters-type Entity may, in accordance with provisions, open free trade accounts and, based on the principle of convertibility, carry out cross-border renminbi/foreign currency receipts and payments and domestic renminbi receipts and payments.

 

 

Article 11: Simplification of Entry and Exit Procedures

 

Eligible personnel of Chinese nationality of a Regional Headquarters or Headquarters-type Entity may apply for an APEC Business Travel Card.  Where such a person needs to travel to Hong Kong, Macao, Taiwan or a foreign country on business, the relevant departments shall facilitate their exit from China.

 

Personnel of foreign nationality of a Regional Headquarters or Headquarters-type Entity who require multiple temporary entries may apply for multiple entry visas valid for terms of not more than one year that permit them to stay for not more than 180 days; personnel of foreign nationality who need to come to Shanghai on a temporary basis shall apply for an entry visa at a Chinese embassy or consulate in a foreign country, or, where time is pressing, they may, in accordance with relevant state provisions, apply to the exit-entry administration of the public security department for a port visa for entry.

 

Foreign personnel of a Regional Headquarters or Headquarters-type Entity who need to reside for a long term in Shanghai may apply for alien residence permits for three to five years.

 

The legal representative and other such senior management personnel of a Regional Headquarters or Headquarters-type Entity may be preferentially recommended to apply for an Alien Permanent Residence Permit in accordance with the Measures for the Administration of the Examination and Approval of the Permanent Residence in China of Foreign Nationals.

 

Shanghai Customs (exit-entry inspection and quarantine department) shall provide a green channel for carrying out the procedures for a health certificate for the legal representative of a Regional Headquarters or Headquarters-type Entity and its senior management personnel who have functions in the head office.

 

 

Article 12: Attraction of Human Talent

 

The human resources and social security department and the science and technology department shall facilitate the working and application for relevant certificates in Shanghai by human talent with foreign nationality brought in by Regional Headquarters and Headquarters-type Entities.

 

When a Regional Headquarters or Headquarters-type Entity seeks to attract outstanding human talent from China, it may, if satisfying relevant conditions, carry out the procedures for obtaining permanent household registration in Shanghai.

 

Graduates who have studied abroad, have undergraduate or higher educational level or those who have special skills and have obtained foreign nationality, graduates who have studied abroad and other professional talent who have a Chinese passport and permanent (long-term) residence status in a foreign country but no permanent household registration in China, and professional talent from the Hong Kong and Macao Special Administrative Regions and Taiwan who are engaged by a Regional Headquarters or Headquarters-type Entity may, in accordance with provisions, apply for a Shanghai Residence Certificate (Type B).  The spouses and children of less than 18 years of age or in senior high school of the aforementioned persons may carry out the procedures for an accompaniment certificate.

 

The district where a Regional Headquarters or Headquarters-type Entity is located shall facilitate school entrance for children, medical insurance coverage, application for apartments, etc. for the human talent brought in by the Regional Headquarters.

 

 

Article 13: Facilitating Trade

 

Customs shall focus on facilitating trade for qualified Regional Headquarters and Headquarters-type Entities, innovate in regulatory systems and models, exert efforts to enhance customs clearance efficiency and facilitate customs clearance for their imports and exports.

 

If a Regional Headquarters or Headquarters-type Entity establishes an allocation center to integrate logistics, departments such as customs and foreign exchange department shall adopt simplified measures for the oversight thereof.

 

 

Article 14: Support of District-level Governments

 

District governments may, in light of the actual circumstances in their jurisdictions, formulate policy measures to support the development of Regional Headquarters and Headquarters-type Entities, so as to create a business environment conducive to the development of Regional Headquarters and Headquarters-type Entities.

 

 

Article 15: Application by Reference

 

The establishment of Regional Headquarters and Headquarters-type Entities in Shanghai by investors from Hong Kong, Macao and Taiwan shall be handled with reference to these Provisions.

 

 

Article 16: Effective Date and Period

 

These Provisions shall be effective as of September 1, 2019 until August 31, 2024.