Q: How does a foreign or Taiwan, Hongkong and Macau enterprise apply for the establishment of Representative Office in Shanghai?

A: According to current application policies, enterprises from foreign countries, Hong Kong, Taiwan, Macao have to entrust an agent like Shanghai Excellent Investment Service Limited to apply for establishment of representative offices.

Q: What sort of documents and materials should I prepare when an application is made?

A: When applying for the establishment of a representative office, a foreign or Hongkong,Taiwan and Macau enterprise shall submit the following papers and materials:

(1) The application with the signature of either the Chair of the Board or the General Manager of the enterprise with such details as brief introduction of the enterprise, purpose to set up a representative office, the name of its representative office, names of the chief representative and representatives (if any) and business scope, its duration and its address, etc;

(2) A legal business certificate issued by the competent authorities of the country or region where the applicant is located; (copy)

(3) A letter issued by a financial institution which has business relations with the applicant testifying its financial and credit standing; ( original)

(4) A letter of attorney issued by the Chairman of the Board or the General Manager for the chief representative and representative (if any) of its office and their curriculum vitae and passport copy. If the Chairman of the Board happens to be the chief representative or representative, the letter should be co-signed by at least another two directors. For those enterprises with have no Board of Directors, the letter should be signed by the managing director.

(5) Two application forms;

(6) Other documents the government considers is necessary.

Q: Is a Representative Office/Company permitted to be located in a building both used for business and living or an apartment?

A:It's regulated by Shanghai Foreign Economic and Trade Committee that the Representative Office must be located in designated office building approved by the Government, which is qualified to host foreign preventative offices/companies.

Q: Is it necessary to rent office space prior to application of setting up representative office/company?

A:Yes. Before proceeding your office/company registration the lease agreement of office space must be signed at least for one year between tenant and owner.

Q: What's the maximum time limits of Representative Office for one approval? How long does the business registration certificate remain in force?

A: The maximum time limits for a Representative Office for one approval is three years and if it's necessary, the foreign (region) enterprises shall apply to the Shanghai Municipal Foreign Economic Trade and Relation Commission for extension through original sponsor at least sixty days before termination. The valid term of business registration certificate for a Representative Office is one year. The Representative Office shall apply for extension to the Administration Bureau for Industry and Commerce 30 days before termination with business summary in one year.

Q: Must the chief of representative office come to Shanghai to handle these issues such as office registration, tax registration, bank account opening etc.?

A: No, it's not necessary. You can authorize Shanghai Excellent Investment Service Limited to do it when you sign the Entrust Letter.

Q: What shall be done if a representative office wants to amend the contents of registration?

A: If it wants to change the name, its chief representative or representatives, its business scope, it duration and its address, a representative office shall entrust the original sponsor to apply to Administration of Industry and Commerce for amendment.

Q: How is the cancellation procedures handled when the Representative Office terminates or winds up operation before termination?

A: When it is time for termination or winding up operation before termination, the Representative Office shall report to the original examining and approval department for reference through original sponsor at least 30 days before termination with the Cancellation Application Letter signed by the Chairman of the Board or General Manager of the enterprise and afterwards go through the cancellation procedures at Administration Bureau for Industry and Commerce, Public Security Bureau and Custom Office after clearing its liabilities, tax and other relevant matters.

Q: What sort of tax preferential policies can foreign investors enjoy in pudong New Area?
A:(1) The income tax of foreign-invested manufacturing enterprises shall be levied at a reduced rated of 15%.
(2) Foreign-invested enterprises scheduled to operate for a period over 10 years shall be exempted from income tax in the first two years starting from the profit-making year and be granted a 50% reduction in the next three years.
(3) "High-tech Projects" invested by foreign investors in Pudong New Area can enjoy 10% income tax rate for another three years after the period of tax exemption and tax reduction. Export enterprises with foreign investment shall pay their income tax at a reduced rate of 10% when their annual export sales value amounts to more than 70% of the annual sales value.
(4) The income tax of foreign-invested enterprises in the field of ports, energy and transportation shall be levied at a reduced rate of 15%. If the operation period of the above-mentioned enterprises is over 15 years, the income tax shall be exempted for the first 5 years starting from the first profit-making year and allowed a 50% reduction in income tax for the next 5 years.
(5) The buildings or houses built or purchased by foreign investors for their own use shall be exempted from house property tax for five years, starting from the date when the transaction is done.
(6) The foreign-invested banks and JV banks with its injected capital over USD10 million or its operating fund allocated by its headquarters over USD10 million, after approval, can enjoy a reduced income tax rate at 15%. And starting from the first profit-making year, the above-mentioned enterprises can enjoy income tax exemption for one year and 50% income tax reduction for another two years.

Q: How do you apply for the establishment of duty-free warehouses and duty free processing factories?
A:To apply for the establishment of a duty free warehouse, you will have to submit your application and business license issued by the Industrial and Commercial Administration Office together with relevant documents issued by the competent department of the Foreign Economic and Trade Commission to the Customs House. Once examined, spot-investigated and approved, the Customs House will promulgate a Duty-Free Warehouse Registration Certificate. Only then can you start the business.
To set up a duty free processing factory, you shall entrust either an authoritative department ratified by the government dealing with import and export businesses or an enterprise engaged in the business of processing registered and ratified by the Industrial and Commercial Administration
Department to submit your application and relevant documents to the local Customs House. Once the examination result by the Customs House is in accordance with the related laws and regulations, once you have a special factory or workshop and a special warehouse or ground, once
you have facilities for supervision and inspection of the customs, once you ensure that you'11 abide by the Customs law of P.R.C. and all regulations concerning duty-free factories drawn by the Customs and once you promise to shoulder the responsibilities which you are supposed to fulfil, the Customs House will approve and issue the Duty-Free Registration Certificate.

Q:Are there any differences between cooperative enterprises and joint ventures?
A:The main difference between cooperative enterprises and joint ventures lies in the fact that shares are not calculated merely by capital and that profit is divided not according to the proportion of shares but according to the investment-distribution ratio based on the content.

Q:What are the regulations on foreign investor's proportion in a jointly invested or wholly foreign-funded enterprise?
A: General speaking, a foreign investor's investment can not be less than 25% of the registered capital in a Sino-foreign joint venture. If it is less than 25%, it can be approved with certificate of notification less than 25%.

Q:What is the lowest investment quota of overseas businessmen in a jointly invested or solely foreign-funded enterprise?
The lowest investment of an overseas businessman in a Sino-foreign joint venture or a wholly foreign-invested enterprise shall be no less than USD 200,000 and that in a foreign funded enterprise shall be no less than USD 200,000.
Q: By what means of forms can a Sino-foreign joint venture pay the investment?
A:Each party of the joint venture can invest by means of either money or other things that can be evaluated in terms of money like buildings, machinery, materials, industrial property right, know-how and land-using right. Each party cannot draw back its capital within the term of joint venture.

Q: What shall be included in the project proposal of a Sino-foreign joint venture?
A:(1) The Chinese partner: it shall include the name of the Chinese partner, a briefing about its production and business, the legal address, the name and title of the legal person as well as the name of the authoritative bureau (department).
(2) The purpose of cooperation: The emphasis shall be laid on the necessity and the probability of exporting to make profit & introducing technologies.
(3) The foreign partner: it shall include the name of the foreign company, the registered country, the legal address and legal person together with his name, title and nationality.
(4) The business scope and scale: The necessity of the project construction, the demand of the product both at home and abroad, the production as well as sales areas or regions of the product shall be emphasized.
(5) Investment estimation: it refers to the total amount of fixed assets and circulation fund required.
(6) The prospect of investment & the source of capital: it shall include both the ration of investment and ratio of capital formed by both parties.
(7) Production techniques & main equipment: emphasis is laid on the superiority, suitability and reliability of the technology and equipment as well as important technological and economic indexes.
(8) The quantity and source of major raw materials, water, electric power, gas and transport shall be included.
(9) The number, formation and source of labor shall be included.
(10) Economic analysis with emphasis on arrangement of foreign exchange balance shall be included.
(11) Main documents:
a. The agreement contract of cooperation signed by both parties;
b. the credibility investigation of the foreign investors.

Q:What shall be included in the feasibility study report of a Sino-foreign joint venture?
A: (1) A brief introduction
a. The name of the joint venture, its legal address, purpose, business scope and scale;
b. The names of each party, their registered countries, their legal addresses, their legal-persons' names, titles and nationalities (the Chinese party shall make known its competent department or bureau);
c. The total investment of the joint venture, its registered capital, and the number & amount of shares (investment of each party, investment proportion of each party, the means of investment and the deadline for the payment of capital);
d. The term for cooperation, the profit allocation and the ratio of sharing loss and damage;
e. The approval certificate of the project proposal;
(2) Arrangement of production and its basis; The demand of the product both at home and abroad, methods of market survey, the capacity of the production equipment used or being used at home and abroad shall be explicitly stated.
(3) Arrangement of the supply of materials and fuel (including energy and transportation) and its basis.
(4) Selection of the project site and its basis.
(5) Selection of technological equipment and technique process and their bases.
(6) Arrangement of organizing production and its basins (including the total number, formation and source of employees, as well as management).
(7) Treatment of environmental pollution, production safety and hygienic measures and their bases.
(8) Construction methods, progress of the construction & The grounds for doing so.
(9) Sources of fund and its basins (including the shares converted from the original factory buildings and equipment).
(10) Arrangement of foreign exchange receipts and payments and its basins.
(11) Comprehensive analysis (including the analyses of economic results, technology, finance and law); Profits of the project and a risky prospect (Or in a sensitive analytic method).
(12) Main documents:
a. A copy (duplicate) of the business license of each party issued by the competent department of its country or regions;
b. Proof of the legal-person of each party;
c. A balance sheet and a loss-and-profit sheet of each party;
d. The survey of both domestic and international markets, the prediction report and the export ratio of product;
e. Comments of the competent department on the site of the project;
f. Comments of the competent department on environmental protection, fire protection, production safety and hygienic measures;
g. Comments of the competent department on the arrangement of foreign exchange;
h. Pre-examination and estimation report of the competent department about the project.

Q:What shall be included in the contract of a Sino-foreign joint venture?
A:(1) The general;
(2) Each party of the joint venture;
(3) The establishment of the corporation;
(4) The purpose, scope and scale of production and management;
(5) Total investment and registered capital;
(6) The responsibility of each party;
(7) Technological transfer;
(8) Sales of product;
(9) Board of directors;
(10) Management organization;
(11) Purchase of equipment;
(12) Preparation and construction;
(13) Management of production;
(14) Taxation, finance and audit;
(15) Term for joint venture;
(16) Handling of property after the term of joint-venture expires;
(17) Insurance;
(18) Modification, alteration and termination of the contract;
(19) Responsibility for breaking the contract;
(20) Force majeure;
(21) Suitability for law;
(22) Settlement of disputes;
(23) Wording;
(24) Effect of the contract and others.

Q: Can a foreign invested enterprise which has already been registered reduce or increase its registered capital?
A:A foreign-invested enterprise can increase its registered capital during its operation period, but the increase must be unanimously approved and decided by board meeting and then it must be submitted to the original approval authority for examination and approval.
If the increased amount exceeds the authority of the original examination and approval authority, the application should be submitted to a higher authority by the original examination and approval authority
A foreign-invested enterprise usually is not allowed to reduce its registered capital during its operation period. If there are justified reasons, the application should be submitted to the original examination and approval authority according to relevant laws and regulations of the State.

Q:Can a registered foreign invested enterprise enlarge its business scope?
A:A foreign-invested enterprise can enlarge its business scope during its operation period, provided that the investors' capital contribution has been paid up. The application shall be submitted to the original examination and approval authority.

Q:What sort of preferential policies can foreign investors in software and integrated circuit industry enjoy?
A: Developing and manufacturing software products in China is encouraged by the State. If, before the year 2010, normal Value Added Tax (VAT) taxpayers who sell self-developed and self-produced software goods pay BAT on the basis of legal tax rate of 17%, then the part of tax paid by over 3% rate may be refunded for R&D and reproduction on an extended scale of software enterprises. The newly set up software enterprises which are verified by the relevant competent department shall, form the year beginning to make profit, be exempt form income tax in the first and second years and allowed from a fifty percent reduction of income tax from the third to fifth years. Except goods listed in Catalogue For Equipment Imported By Foreign Invested Enterprises Not Enjoying Tax Exemption, the Customs Duties and VAT on importing equipment may be exempt if the equipment, technology (including software), accessories and parts imported together with the equipment of software enterprises are imported for self-use.
Setting up integrated circuit manufacturing enterprises in the form of Sino-foreign joint ventures or wholly foreign owned enterprises in China is encouraged by the State. As for normal VAT taxpayers who sell self-produced integrated circuit products (including mono-crystal line silicon), if, before the year 2010, VAT is paid on the basis of legal tax rate of 17%,then the real part of tax paid by over 6% may be refunded for R&D and reproduction on an extended scale. Integrated circuit manufacturing enterprises, with a total investment of over 8 billion RMB yuan or producing integrated circuit whose line width is less than 0.25 micron may enjoy the same preferential policies as that of energy and transportation projects and may also be exempt form the Customs Duties and VAT on imported technology, equipment, raw materials and consumables.

Q:What is an export-oriented enterprise?
A: A manufacturing enterprise whose export volume(including export on its own or via an agent) accounts for over 50% of its annual sales, and who has a surplus of foreign exchange and has made a profit during the year, is deemed as an export-oriented enterprise.

Q: What is an advanced hi-tech enterprise?
A: A manufacturing enterprise which is in conformity with the State's Industrial Guidance and which adopts internationally advanced and applicable process for manufacturing, technology, and equipment, whose products's quality and technology take the lenad in the domestic marker, can be acknowledged as an advanced hi-tech enterprise. In getting that name, a foreign invested company should first apply to Shanghai Foreign Investment Commission and get verified after examination. Examinations will be carried out every year.

Q: What preferential policies can an export-oriented enterprise and an advanced hi-tech enterprise enjoy?
A: a Apart form the state provisions that they pay for or extract for insurance, welfare and accommodation allowance for the Chinese staff, export-oriented enterprises and advanced hi-tech enterprises are exempt for other subsidies the state give to employees.
b. Export-oriented enterprises and advanced hi-tech enterprises are given priority in the supply of water, electric power, transportation and telecommunication required in business and charged at the same prices as with State enterprises.
c. Export-oriented enterprises and advanced hi-tech enterprises which need in production and circulation short-term funds of other necessary loans shall be given priority once examined by the Bank of China.
d. The exported-oriented enterprises can still be exempt form local income tax after the period of local income tax exemption expires when the value of exports exceeds 70% of the year's production value.
e. Advanced hi-tech enterprises can still paytheir enterprise income tax at a reduced rate of 50% for another 3 years after the period of enterprise income tax exemption and reduction expire.
f. Those export-oriented enterprises & advanced hi-tech enterprises in special economic zones and in economic development zones and those already have been paying their enterprise income tax at a reduced rate of 15% can have a 10% reduction if they fit in with the situation mentioned previously.
g. "Two Types of Enterprises" which obtain the land-using right by means of requisition of allocation, can enjoy the preferential policies of land use fee exemption or reduction according to the land grade.
It should be explained that the two types of enterprises mentioned above is not perpetual. According to MOFTEC, an acknowledged export-oriented enterprise will be examined by government authorities every year. If it is disqualified, its preferential for several times, its verification certificate will be revoked.