In order to implement the reform of the approval mechanism for foreign investment addressed in Communiqué of the Third Plenary Session of the 18th Central Committee of the CPC, the Standing Committee of National People's Congress (“NPC”) of China recently passed the < Decision of the Standing Committee of NPC Regarding the Amendment of Four Laws, including PRC Law on Wholly Foreign-owned Enterprises > (hereinafter referred to as “the Decision”). The Decision amended the relevant provisions regarding administrative approval matters in the prevailing three Foreign-invested Enterprises Laws and < the Investment Protection of Taiwanese Compatriots of PRC >, which will come into effect from 1 October 2016. The Decision specifies the establishment and alteration of FIE (including Hong Kong, Macau, Taiwan investment company), if not related to items in the “special administrative measures regarding FIEs’ permission to China” (hereinafter referred to as “Negative List”), will be subject to record-filing procedures instead of the existing approval measures (hereinafter “Record-filing Administration Mechanism of FIE”). On the same day, the Ministry of Commerce released the < Interim Provisional Measures for the Record-filing Administration on the Establishment and Alteration of FIE (Discussion Draft) > (hereinafter referred to as “< Provisional Measures (Discussion Draft) >”), which provides the applicable scope, record-filing procedures, supervision and inspection measures as well as legal liabilities in relation to the record-filing administration mechanism of FIE.
The Decision and < Provisional Measures (Discussion Draft) > implies that the administration of national treatment plus Negative List mechanism for FIEs’ access to China, which was previously adopted in the pilot free trade zones, is rolling out nationwide officially. In this Issue of China Tax/Business News Flash, we will introduce the applicable scope, procedures and timelines and supervision requirements of the record-filing administration mechanism of FIE as well as share our observations on the trend of subsequent policies on foreign investment and takeaways for FIE’s to do business in China.