The Circular clarifies the refund of enterprise income tax in connection with re-investments by foreign investors of profits distributed after equity transfers.
This Circular provides that domestic debts of at least US$200K with repayment duration of at least 180 days will be administered through foreign debt registraion. Some pre-Circular interpretation conflicts and practical enforcement problems are also solved.
This Law provides that a company is a separate legal entity from its shareholders. Two types of companies are allowed: limited liability company (LLC), and companies limited by shares.
The Circular provides for the minimum credit rating of short-term financing bills in which a money market fund invests, while the domestic credit rating shall prevail over international credit rating. The percentage of the investment by a money market fund in the short-term financing bills and short-term corporate bonds issued by one company may not in total exceed 10% of the net value of the fund's assets. If the credit rating of short-term financing bills held by a money market fund drops, the fund shall fully divest itself of such bills within 20 trading days.
The Letter further elaborates on the Provision for the Administration of the Employment of Foreigners in China, and requires that foreigners engaged in state-specified occupations must hold an Occupational Qualification Certificate of the PRC.
Compared with previous rules regarding debt provisioning, the Measures introduces greater flexibility in making the minimum 1% of year-end balance of risk assets a guideline rather than a mandatory requirement. It changes the nature of general provisions allocated from one of pre-tax deduction to a post-tax distribution of profit. The Measures allows financial institutions to set aside two types of loan loss provisions: specific provisions and special provisions. Further requirements for other categories of the asset impairment provisions, for instance bad debt provisions and provisions for impaired long-term investments, are also in place.
The Circular allows domestic residents to set up offshore financing platform by means of special purpose companies and to participate in various equity financing activities through reverse acquisition, equity transfer, convertible bonds in international financial market. The Circular also stipulates the relevant registration and administration procedures for special purpose companies and remittance of profits, dividends, liquidation proceeds, equity transfer proceeds, and capital reduction proceeds.
The Tentative Measures provides for investments in government bonds, financial bonds and enterprise/corporate bonds. It also specifically stipulates on new bond products as commercial bank financial bonds, international development organization renminbi bonds and short term financing bonds. In its risk control efforts, the Tentative Measures requires the establishment of a sound bond investment risk control system with a precise, scientific and effective business operation flow, a credit risk evaluation system for bond issuing parties and bonds, and an independent third-party custody system.
In addition to elaborating the Tentative Measures for the Administration of Overseas Utilization of Foreign Exchange Insurance Funds, the Implementation Rules further establish the basic management structure, duties and responsibilities, their basic operations and management procedures, and their selection following market-oriented principles for the insurance company (the entrusting party), the investment management institution (the entrusted party) and the commercial bank (the custodian). The Implementing Rules also add new overseas products such as structured deposits, mortgaged-backed securities and money market funds. It also introduces independent third parties in supervising funds flow, internal control mechanisms, accounting, credit rating and assets evaluation.
This Circular addresses issues regarding pre-tax deduction of advertisement and publicity expenses, and public welfare and relief donations by the head offices of enterprises that consolidate (combine) their tax payments.