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The up-to-date Developments of Laws and Regulations in China

Part One: News from the tax zuthorities

1. Agreement has been reached on the avoidance of double taxation of income between Inland and Hong Kong Special Administrative Region (HKSAR)

In the middle of February, China National Taxation Bureau and the government of HKSAR reached an agreement on the problems of avoidance of double taxation with a name of "The arrangement on the avoidance of double income taxation by and between inland and HKSAR", this arrangement has also been confirmed by a memorandum formally signed by and between the above two parties. This arrangement has made reasonable division on the taxation jurisdiction between inland and HKSAR, the main contents of the arrangement are as follows:

The taxation bureaus of two regions will only levy tax on the business profits derived from the other party's companies and enterprises which has constitute a resident institution within its locality. For example, the taxation bureau will levy income tax on the service for a term of more than 6 months in the business of construction, installation, undertaking contracted projects, the installation instruction service of machinery and equipment and other relative services.

The taxation bureaus of two regions will grant the other party a treatment of tax exemption on the income derived from transportation by vessels, airplanes or vehicles within its locality.

The taxation bureau of two regions will provide limited tax exemption treatment to the other party's individual resident. For example, both tax bureaus will give tax-free treatment to the employees who are hired by the enterprises in other party's locality if he/she meets the following three conditions: (i) the continuous stay time does not surpass 183 days; (ii) the salary or wage obtained are not paid by the other party's resident employer or on behalf of the resident employer; (iii) the salary or wage obtained are not born by the resident institution established in the other party's locality.

This arrangement will apply to the income tax derived from the taxation year commencing from April 1st, 1998 in HKSAR; for the inland the application time of the arrangement will be July 1st, 1998.

Meanwhile, the inland taxation bureaus also states that in addition to the favorite treatment enjoyed by the banks and financial institutions of HKSAR as well as foreign investors at present, the tax treatment granted to them through negotiation between the two tax bureaus in the future will not be less favorite than such treatment granted to other countries' banks or financial institutions which has signed double tax avoidance agreement with Chinese government.

2. The tax reimbursement rate on some textile products has been raised

"Notice of raising the tax reimbursement rate on textile products" was issued by China national tax bureau in February, which announce that the tax drawback rate of textile products in five categories will be raised to 11% from January 1st 1998.

These textile products are: all kinds of clothing; knit goods; printing and dyeing cloth, grey cloth, coated abrasive; carpet; wool yarn, flax(excluding waste flax), raw silk(excluding waste silk); pure cotton yarn, chemical fiber yarn and all kinds of blend yarn. The notice clearly states that the time of implementing the new drawback tax rate is subject to the custom departing date recorded on the "bill of export goods".

Part Two: News from other industries

1. The quantity of registered trademarks in China has stepped into the top ten of the world

At present, the registered trademarks in mainland China has reached 860,000 pieces, which is among the top ten of the world. As investigated, in 1982, there were only 80,000 registered trademarks in China, and the number of trademark registration application was only 20,000 each year at that time, however, the application number has increased to 210,000 each year, the increasing rate is more than 10 times than before.

The above data was public announced on the commemoration symposium held by China national industry and commerce bureau with experts from the aspect of intellectual property right for the "15's anniversary of the implementation of China trademark law".

2. Key points on foreign exchange administration of 1998 has been determined

On February 16th , a meeting of foreign exchange administration bureaus' directors general was held in Beijing, on which the key points of foreign exchange administration of 1998 has be decided as follows:

a. perfecting the supervision of current exchange account and administration on capital transaction, preventing the illegal capital transaction by individual person or through noncommercial channels.

b. strengthening control the increase of international commercial loan, especially control the total amount of short-term foreign debt and the proportion it occupies.

c. moderately enlarging the range of direct-borrowed foreign exchange debt of domestic enterprises, and enlarging the number of enterprise with domestic Chinese investment which could keep foreign exchange income.

d. perfecting the rate generating and rate supervision system of RMB, researching and popularizing bank business on short-term settlement and sales of foreign exchange.

3. New regulation on company registration

On January 7th, State administration bureau of industry and commerce announced the "regulations on several problems of company registration ", which will come into effect on February 1st 1998, the "Opinions on several problems concerning the 'Administrative provisions on company registration of People's Republic of China'"(gong shang qi zi [1994] No. 185) and "Replies on several specific problems concerning the administration of company registration "(gong shang qi zi [1995] No. 303) issued by the State administration bureau of industry and commerce will be abolished simultaneously.

The new regulation includes such contents as the company registration authorities, the subject to carry company registration, detailed requests on the company's name and shareholders investment, and the punishment measures on violation of this regulation. The new regulation also clearly express some prohibiting stipulation on several problems, such as the company name can not be registered as "general company" or "group company"; if the investment of high and new technology exceeds 20% of the total registered capital, it should be confirmed by state or provincial technology administration authority and be evaluated by a legal registered assessment institution; except for the companies with state investment, companies are not permitted to establish a wholly owned subsidiary.

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