Rules for The Implementation of The Law of China on Foreign-Capital Enterprise |
From: | Date Add in:2018-07-26 14:54:00 [A A] |
(Approved by the State Council on October 28, 1990, and promulgated by Decree No. 1 of the Ministry of Foreign Economic Relations and Trade on December 12, 1990) Chapter I General Provisions Article 1 These Rules are formulated in accordance with the provisions in Article 23 of The Law of the People's Republic of China on Foreign-Capital Enterprises. Article 2 Foreign-capital enterprises shall be under the jurisdiction of and protection by China's laws. Article 3 A foreign-capital enterprise to be established in China must be conducive to the development of China's national economy, be capable of gaining remarkable economic results and shall meet at least one of the following conditions: Article 4 No foreign-capital enterprise shall be established in the following trades: Article 5 The establishment of foreign-capital enterprises shall be restricted in the following trades: Article 6 Application for the establishment of a foreign-capital enterprise shall not be approved if the proposed enterprise would involve one of the following circumstances: Article 7 A foreign-capital enterprise shall make its own managerial decisions within the approved scope of business operations and shall not be subject to intervention. Chapter II Procedures for Establishment Article 8 The application for the establishment of a foreign-capital enterprise shall be submitted to the Ministry of Foreign Economic Relations and Trade, and after examination and approval, a certificate of approval shall be issued by the Ministry. Article 9 With respect to a foreign-capital enterprise, the establishment of which has been applied for, if its products are subject to export license, export quota, or import license, or are under restrictions by the State, prior consent of the department of foreign economic relations and trade shall be obtained in accordance with the limits of powers for administration. Article 10 A foreign investor shall, prior to the filing of an application for the establishment of a foreign-capital enterprise, submit a report to the local people's government at or above the county level at the place where the proposed enterprise is to be established. The report shall include: the aim of the establishment of the proposed enterprise; the scope and scale of business operation; the products to be produced; the technology and equipment to be adopted and used; the proportion of the sales of products between the domestic market and the foreign market; the area of land to be used and the related requirements; the conditions and quantities of water, electricity, coal, coal gas and other forms of energy resources required; and the requirement of public facilities. Article 11 In case that a foreign investor wishes to establish a foreign-capital enterprise, an application shall be submitted to the examining and approving organ through the local people's government at or above the county level at the place where the enterprise is to be established, together with the following documents. Article 12 The examining and approving organ shall, within 90 days after receiving all the required documents with respect to an application for the establishment of foreign-capital enterprise, make a decision whether to approve or disapprove the application. In the event that the examining and approving organ has found that the documents mentioned above are not complete, or that some of them are inappropriate, it may call on the applicant to make up the incomplete documents, or to make necessary revisions, within a prescribed time limit. Article 13 After the approval of the application for the establishment of a foreign-capital enterprise by the examining and approving organ, the foreign investor shall, within 30 days after receiving the certificate of approval, file an application with the relevant administrative department for industry and commerce for registration, and obtain a business license. The date on which the business license is issued shall be the date of the establishment of the said enterprise. Article 14 Foreign investors may appoint a Chinese service agency for enterprises with foreign investment or other economic organizations to handle, on their behalf, the affairs stipulated in Article 9, the first paragraph of Article 10 and Article 11 of these Rules, but a contract of entrustment shall be concluded and signed between them. Article 15 The written application for the establishment of a foreign-capital enterprise shall include the following contents: Article 16 The articles of association of a foreign-capital enterprise shall include the following contents: Article 17 The articles of association of a foreign-capital enterprise shall become effective after the approval by the examining and approving organ. The same procedure shall apply when amendments are made. Article 18 The division or merge of foreign-capital enterprises, and the significant change in capital resulting from other causes, shall be subject to the approval by the examining and approving organ; in addition, the said enterprises shall engage a Chinese registered accountant to carry out verification, and to submit a report on the verification of capital; after the approval by the examining and approving organ, the enterprises concerned shall go through the procedures for the change of the registration with the relevant administrative department for industry and commerce. Chapter III Form of Organization and Registered Capital Article 19 The organizational form of a foreign-capital enterprise shall be a limited liability company. With approval, the enterprise may also take any other liability form. Article 20 The total amount of investment of a foreign-capital enterprise refers to the total amount of funds needed for the establishment of the enterprises, i. e. the sum total of the funds invested in capital construction in arror-dance with the scope of production and the circulating funds for production. Article 21 The registered capital of a foreign-capital enterprise refers to the total amount of capital registered with the administrative department for industry and commerce for the purpose of establishing the foreign-capital enterprise, i. e the total amount of investment the foreign investor undertakes to contribute. Article 22 A foreign-capital enterprise shall not reduce the registered capital during the term of business operations. Article 23 The increase or assignment of the registered capital of a foreign-capital enterprise shall be subject to approval by the examining and approving organ; in addition, the said enterprise shall go through the procedures for the change of the registration with the administrative department for industry and commerce. Article 24 In case that a foreign-capital enterprise intends to mortgage or assign its assets or rights and interests to a foreign unit, the case shall be submitted to the examining and approving organ for approval, and then to the administrative department for industry and commerce for the record. Article 25 The legal representative of a foreign-capital enterprise shall be the person-in-charge who, in accordance with the stipulations in the enterprise's articles of association, executes his/her functions and powers on behalf of the enterprise. Chapter IV Methods of Contributing Investment and the Time Limit Article 26 Foreign investors may use convertible foreign currencies for the contribution of investment, or use as their investment machinery and equipment, industrial property rights, and proprietary technology that are assigned a fixed price. Article 27 In case that foreign investors intend to use machinery and equipment, being assigned a fixed price, as their investment, the said machinery and equipment must meet the following requirements: Article 28 In case that foreign investors intend to use industrial property rights and proprietary technology, being assigned a fixed price, as their investment, the said industrial property rights and proprietary technology must meet the following requirements: Article 29 When the machinery and equipment, being assigned a fixed price and used as contributing investment, have arrived at China's port, the foreign-capital enterprise shall apply to China's commodity inspection authorities for inspection, which shall then issue an inspection report. Article 30 After the industrial property rights and proprietary technology priced as contributing investment have been put to use, the examining and approving organ has the power to carry out inspection. In the event that the said industrial property rights and proprietary technology are not in conformity with the data originally provided by the foreign investors, the examining and approving organ has the power to require the foreign investors to make corrections within a prescribed time limit. Article 31 The time limit for a foreign investor to make the investment contributions shall be clearly stipulated in the written application for the establishment of the foreign-capital enterprise and also in the articles of association of the enterprise. A foreign investor may make the investment contribution by instalments, but the last instalment of the contribution shall be made within the period of three years beginning from the day when the business license is issued. The first instalment of investment contribution shall not be less than 15% of the total amount of investment contribution that the foreign investor undertakes to make, and shall be made in full within a period of 90 days beginning from the day when the business license is issued. Article 32 After making the first instalment of investment contribution, the foreign investor shall make the remaining instalments of contribution strictly as scheduled. In the event that a foreign investor is in arrears with the contribution for 30 days without any justification, the case shall be handled in accordance with the provisions of paragraph 2 of Article 31 of these Rules. Article 33 After the foreign investor's each instalment of investment contribution, the foreign-capital enterprise shall engage a Chinese registered accountant to carry out verification, and to prepare a report on the verification of capital, which shall be submitted to the examining and approving organ and the administrative department for industry and commerce for the record. Chapter V Use of Site and the Site Use Fees Article 34 With respect to the site to be used by a foreign-capital enterprise, the local people's government at or above the county level in the place where the enterprise is to be located, shall make arrangements after examination and verification in the light of the local conditions. Article 35 A foreign-capital enterprise shall, within 30 days from the day the business license is issued, go through the procedure for the use of land and obtain the land certificate by presenting the certificate of approval and the business license to the land administration department under the local people's government at or above the county level in the place where the enterprise is to be located. Article 36 The land certificate shall be the legal instrument for the foreign-capital enterprise to use land. The foreign-capital enterprise within its term of operations, may not assign its land-use right without permission. Article 37 A foreign-capital enterprise shall, when obtaining the land certificate, pay its land use fee to the land administrative department in the place where the enterprise is located. Article 38 In case that a foreign-capital enterprise uses land that has already been developed, it shall pay the land development fee. Article 39 In case that a foreign-capital uses land that has not been developed, it may develop the land by itself, or it may entrust a department concerned in China to develop the land. Article 40 The standard for the calculation and collection of land use fee and land development fee shall be handled in accordance with pertinent provisions of China. Article 41 The term for the use of land by a foreign-capital enterprise shall be the same as the approved operation period of the said enterprise. Article 42 foreign-capital enterprise, besides obtaining the land-use right in accordance with the provisions of this Chapter, may also obtain the same right in accordance with the pertinent provisions of other Chinese laws and regulations. Chapter VI Purchasing and Marketing Article 43 A foreign-capital enterprise shall formulate and execute its production and operation plans on its own; the said production and operation plans shall be submitted to the competent department in charge of the trade, in the place where the said enterprise is located, for the record. Article 44 A foreign-capital enterprise is entitled to make decisions for itself on the purchase, for its own use, of machinery and equipment, raw and processed materials, fuels, parts and components, fittings, primary parts, means of transport, and articles for office use (hereinafter uniformly called "goods and materials"). Article 45 In case that a foreign-capital enterprise sells its products on the Chinese market, it shall conduct its sales in accordance with the approved sales proportion. Article 46 A foreign-capital enterprise is entitled to export of its own accord, goods produced by itself; it may also appoint a Chinese foreign trade company or a company outside the territory of China to sell its goods on a commission basis. Article 47 Where machinery and equipment being assigned a fixed price and use by foreign investors as contributing investment require, according to the pertinent provisions of China, import licenses, the foreign investors shall, on the strength of the approved inventory of equipment and goods and materials of the said enterprise to be imported, file an application directly, or through an agency entrusted by them , with the license-issuing organ for obtaining due import licenses. Article 48 The prices of the goods and materials and technological labor service imported by a foreign-capital enterprise shall not be higher than the normal prices of similar goods and materials and technological labour service on the international market at the time. The price of export products produced by a foreign-capital enterprise shall be fixed by the enterprise itself with reference to the international market prices at the time, but the prices must not be lower that the reasonable export prices. With respect to the evasion of tax by using such methods a importing at high prices while exporting at low prices, the tax authorities shall have the power, in accordance with the pertinent provisions of the tax law, to investigate the legal responsibilities therefor. Article 49 A foreign-capital enterprise shall provide statistical data and submit statistical statements to the departments concerned in accordance with the provisions in the Statistics Law of the People's Republic of China and the relevant provisions of China concerning the statistical system for the utilization of foreign capital. Chapter VII Taxation Article 50 A foreign-capital enterprise shall pay taxes and duties in accordance with the provisions of Chinese laws and regulations. Article 51 The workers and staff members of a foreign-capital enterprise shall pay individual income tax in accordance with the provisions of Chinese laws and regulations. Article 52 The following goods and materials imported by a foreign-capital enterprise shall be exempted from Customs duties and consolidated industrial and commercial tax; Article 53 The export commodities produced by a foreign-capital enterprise, except those whose exportation is restricted by China, shall be exempted form Customs duties and consolidated industrial and commercial tax in accordance with the tax law of China. Chapter VIII Control of Foreign Exchange Article 54 Foreign exchange affairs of a foreign-capital enterprise shall be handled in accordance with the pertinent laws and regulations of China concerning foreign exchange control. Article 55 A foreign-capital enterprise shall, on the strength of the business license issued by the administrative department for industry and commerce, open an account at a bank which may handle foreign exchange business within the territory of China, and its receipts and payments in foreign exchange shall be subject to the supervision by the interested bank. Article 56 A foreign-capital enterprise shall achieve by itself the balance of revenues and expenditures in foreign exchange. Article 57 In case that a foreign-capital enterprise has the necessity to open a foreign exchange account at a bank outside the territory of China to meet the needs of production and business operations, the case shall be submitted the Chinese administrative department for foreign exchange control for approval and, in accordance with the provisions of the Chinese administrative department for foreign exchange control, regular reports on the conditions of revenues and expenditures in foreign exchange and statements of account shall be submitted. Article 58 The wages and salaries as well as other rightful earnings in foreign exchange of foreign workers and staff members and of those form Hong Kong, Macao and Taiwan working in a foreign-capital enterprise may be remitted freely out of the country after taxes have been paid in accordance with the provisions of the Chinese tax law. Chapter IX Financial Affairs and Accounting Article 59 A foreign-capital enterprise shall, in accordance with Chinese laws, regulations and the provisions of financial organs, set up financial and accounting systems, which shall be reported, for the record, to the financial departments and the tax authorities at the place where the enterprise is located. Article 60 The fiscal year of a foreign-capital enterprise shall begin from January 1 and end on December 31 of Gregorian calendar. Article 61 Reserve funds and bonus and welfare funds for workers and staff members shall be withdrawn from the profits after a foreign-capital enterprise has paid income tax in accordance with the provisions of the Chinese tax law. The proportion of reverse funds to be withdrawn shall not be lower than 10% of the total amount of profits after payment of tax; the withdrawal of reserve funds may be stopped when the total cumulative reserve has reached 50% of the registered capital. The proportion of bonus and welfare funds for workers and staff members to be withdrawn shall be determined by the foreign-capital enterprise of its own accord. Article 62 Accounting vouchers, account books and accounting statements made by a foreign-capital enterprise shall be written in the Chinese language; if they are written in a foreign language, notes in the Chinese language are required. Article 63 Business accounting of a foreign-capital enterprise shall be conducted independently. Article 64 The foreign investor may engage Chinese or foreign accounting personnel to consult the account books of a foreign-capital enterprise, and the expenses thus entailed shall be borne by the foreign investor. Article 65 A foreign-capital enterprise shall submit its annual statement of assets and liabilities and annual statement of profit and loss to the competent departments for financial and tax affairs, and also to the examining and approving organ as well as the administrative department for industry and commerce for the record. Article 66 A foreign-capital enterprise shall set up account books at the place where the said enterprise is located, and shall receive supervision of the competent departments for financial and tax affairs. Chapter X Workers and Staff Members Article 67 In case that a foreign-capital enterprise employs workers and staff members within the territory of China, both the enterprise and the workers and staff members shall, in accordance with the Chinese laws and regulations, conclude and sign a labor contract. Matters as employment, dismissal, salaries and wages, welfare labor protection and, labor insurance shall be clearly stipulated in the contract. Article 68 The workers and staff members of a foreign-capital enterprise shall have the right to set up a grass-roots trade union organization and carry out trade union activities in accordance with the provisions of the Trade Union Law of the People's Republic of China. Chapter XI Trade Union Article 69 The workers and staff members of a foreign-capital enterprise shall have the right to set up a grass-roots trade union organization and carry out trade union activities in accordance with the provisions of the Trade Union Law of the People's Republic of China. Article 70 The trade union in a foreign-capital enterprise shall represent the interests of workers and staff members, and have the right to conclude labor contracts with the enterprise on their behalf, and to supervise the execution of the labour contracts. Article 71 The basic tasks of the trade union in a foreign-capital enterprise shall be as follows: to safeguard the lawful rights and interests of workers and staff members in accordance with the provisions of Chinese laws and regulations, and to assist the enterprise in the rational arrangements and use of welfare and bonus funds for the workers and staff members; to organize workers and staff members in carrying on political study, in learning scientific, technical and professional knowledge, in carrying out cultural, artistic and sports activities; to educate workers and staff members in complying with labour discipline and in striving to fulfil various economic tasks of the enterprise. Article 72 A foreign-capital enterprise shall give an active support to the work of the trade union of the enterprise, and, in accordance with the provisions of the Trade Union Law of the Peoples' Republic of China, provide the trade union organization with the necessary houses and equipment for handling trade union work, holding meetings and conducting such collective undertakings as welfare benefits, and sports activities for workers and staff members. Every month, the enterprise shall appropriate a sum equal to 2% of the actual total amount of wages and salaries of workers and staff members to the trade union as outlay, and the trade union of the enterprise shall use this sum of money in accordance with the measures for the administration of trade union outlay, as formulated by the All-China Federation of Trade Unions. Chapter XII Term of Operations, Termination and Liquidation Article 73 The term of operations of a foreign-capital enterprise shall be proposed by the foreign investor in the written application for the establishment of the enterprise in the light of the specific conditions of different enterprises, and shall be subjected to the approval by the examining and approving organ. Article 74 The term of operations of a foreign-capital enterprise shall be calculated form the day when the business license is issued. Article 75 A foreign-capital enterprise that falls under one of the following circumstances shall terminate its business operations: Article 76 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Items (1), (2), (3) and (6) of Article 75, the enterprise shall, make a public announcement and notify the creditors; and, it shall, within 15 days from the day of the public termination announcement for liquidation, the principles of liquidation, and the candidates for the liquidation committee to the examining and approving organ for verification and approval before liquidation is carried out. Article 77 The liquidation committee shall be composed of the legal representatives of the foreign-capital enterprise, the representatives of the creditors, the representatives from the competent authorities concerned; Chinese registered accountants and lawyers shall be engaged in the liquidation. Article 78 The liquidation committee shall execute the following functions and powers: Article 79 Prior to the conclusion of the liquidation of foreign-capital enterprise, the foreign investor shall not remit or carry the said enterprise's funds out of the territory of China, nor dispose of the enterprise's property privately. Article 80 Upon the conclusion of the liquidation of a foreign-capital enterprise, it shall go through the procedures for the cancellation of registration with the administrative department for industry and commerce, and to hand in the business license for cancellation. Article 81 While disposing of the assets and properties of a foreign-capital enterprise, Chinese enterprises or other economic organizations shall, under equal conditions, have the priority in purchasing the aforesaid assets and properties. Article 82 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Item (4) of Article 75, its liquidation shall be carried out with reference to the pertinent laws and regulations of China. Chapter XIII Supplementary Provisions Article 83 With respect to the various categories of insurance for a foreign-capital enterprise, it shall take out insurance from insurance companies within the territory of China. Article 84 If a foreign-capital enterprise concludes economic contracts with any other Chinese enterprise or economic organization, the Economic Contract Law of the People's Republic of China shall be applied. Article 85 Cases concerning the establishment, in China's mainland, of enterprises, the capital of which is owned solely by the companies, enterprises, and other economic organizations or individuals in the regions of Hong Kong, Macao or Taiwan, or by Chinese citizens residing in foreign countries, shall be handled with reference to these Rules. Article 86 Foreign workers and staff members, and workers and staff members from Hong Kong, Macao and Taiwan, who are working in a foreign-capital enterprise, may carry into the country means of transport and articles for daily use that are within reasonable quantities and for their own use, and they shall go through the import procedures in accordance with pertinent provisions of China. Article 87 The right to interpret these Rules shall reside in the Ministry of Foreign Economic Relations and Trade. Article 88 These Rules shall go into effect as of the date of promulgation.
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