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In order to adapt to the new situation for attracting foreign investments, regulate the administration of foreign-funded enterprises, guarantee the healthy development of foreign-funded enterprises, maintain the lawful rights and interests of Chinese and foreign investors, we hereby, in accordance with the Law on Chinese-foreign Joint Ventures, the Law on Chinese-foreign Cooperative Enterprises, the Law on Foreign Wholly-owned Enterprises, the Company Law, the Contract Law, the Regulations on Foreign Exchange Control and other relevant laws and regulations, give our notice concerning the relevant issues on strengthening the approval, registration, foreign exchange control and taxation administration of foreign-funded enterprises as follows: I. The establishment of foreign-funded enterprises and the making of the contracts and articles of association (as well as the amendment of such contracts and articles of association) shall, in accordance with the state's relevant laws and regulations, be examined and approved pursuant to the present procedures for approving foreign-funded enterprises. II. In accordance with the present relevant laws and regulations on foreign investments, the proportion of the investments contributed by the foreign investor of a Chinese-foreign joint venture or a Chinese-foreign cooperative enterprise shall not be lower than 25% of the registered capital. Where the proportion of the investments contributed by the foreign investor is lower than 25%, approval and registration shall be carried out in accordance with the present procedures on approval and registration of foreign-funded enterprises unless otherwise provided for in laws or administrative regulations. A foreign-funded enterprise which has passed the approval shall be issued an approval certificate of foreign-funded enterprise marked with the words "the proportion of investments contributed by the foreign party is lower than 25%", and shall, after making the registration, be issued a business license of foreign-funded enterprise with the words "the proportion of investments contributed by the foreign party is lower than 25%" following the words of "Type of Enterprise". III. A foreign-funded enterprise with the proportion of investments contributed by the foreign investor lower than 25% shall not, when importing equipment or articles for its own use under the total investment amount, enjoy tax reduction treatment and the treatment for foreign-funded enterprises in respect of other taxes unless otherwise provided for in laws or administrative regulations. A foreign-funded joint stock company limited enjoying the treatment for foreign-funded enterprises may, after increasing its investments or shares or transferring its share rights to a foreign investor, shall still enjoy the treatment for foreign-funded enterprises in accordance with the relevant provisions. IV. For a foreign-funded enterprise with the proportion of investments contributed by the foreign investor lower than 25%, if the investors contribute investments in the form of cash, they shall contribute all the investments within 3 months as of the day when the enterprise obtains the business license. If the investors contribute investments in kind or industrial properties, they shall contribute all the investments within 6 months as of the day when the enterprise obtains the business license. V. Where a foreign investor purchases the share rights of a domestic enterprise of any nature or type, the said enterprise shall, in accordance with the relevant laws and regulations, be modified and established as a foreign-funded enterprise after being approved by the organ for approval pursuant to the present procedures for examining and approving foreign-funded enterprises, and shall conform to the industrial policies on foreign investments. After the approval, the organ for approval shall issue an approval certificate of foreign-funded enterprise, and the organ for industrial and commercial administration shall issue a business license of foreign-funded enterprise. Where the Chinese natural person shareholder of an original domestic company has the status as a shareholder for one year or more, it may, upon approval, continue to be the Chinese investor of the foreign-funded enterprise established after the modification. No Chinese domestic natural person is permitted to set up a foreign-funded enterprise with a foreign company, enterprise, other organization or individual by means of new establishment or purchase. VI. A foreign investor intending to purchase the share rights of a domestic enterprise shall pay the total purchase amount within 3 months as of the day when the foreign-funded enterprise is issued its business license. For those investors who need to postpone the payment due to some particular circumstances, they shall, upon the approval by the organ for approval, pay no less than 60% of the total purchase amount within 6 months as of the issuance of the business license, pay all the purchase amount within 1 year, and distribute the proceeds according to the proportion of the actually paid amount of investments. A shareholding investor shall, before totally paying the purchase amount, not enjoy the right to make decisions for the enterprise, nor include its equities and assets in the enterprise into its financial statements by means of combined statements. The certificate of foreign exchange registration of foreign investments which is issued by the department of foreign exchange control at the locality of the transferor of the share rights shall be the effective document proving the contribution of the foreign investor's purchase amount. Where a foreign investor purchases the share rights of a domestic enterprise, both the transferor and the transferee shall stipulate in the agreement on transfer of share rights the time limit for the foreign investor to pay the purchase amount. If no such time limit is stipulated in the agreement, the organ for approval shall not grant the approval. VII. A foreign-funded enterprise shall apply to the department of foreign exchange control at its registration place for making foreign exchange registration with its approval certificate of foreign-funded enterprise and business license of foreign-funded enterprise. The organ for approval shall, when approving a foreign investor's purchase of the share rights of a domestic enterprise, make a copy of the official reply on the transfer of the relevant share rights for the department of foreign exchange control at the locality of the domestic enterprise and also for the department of foreign exchange control at the locality of the transferor of the share rights, who shall supervise the collection of the foreign exchange. VIII. The organs for approval, the organs for industrial and commercial registration and the departments of foreign exchange control at all places shall strictly implement the present notice. As of the day when the present notice comes into force, any foreign-funded enterprise which does not go through the approval formalities in accordance with the present notice shall not be approved and not be permitted to make the industrial and commercial registration and foreign exchange registration. An enterprise established before the present notice comes into force with its investments contributed by the foreign party lower than 25% shall, within half a year as of the day when the present notice comes into force, go through the formalities of approval and registration. If the enterprise fails to go through the formalities in accordance with the provisions, the organ for industrial and commercial registration shall order it to do so within a time limit. If it still does not go through the formalities after the expiry of the time limit, the organ for industrial and commercial registration shall impose punishments on it in accordance with Article 63 of the Administrative Regulation on the Registration of Companies. An enterprise that still does not go through the relevant formalities after the punishments shall not pass the annual inspection of that year. The administrative departments for industrial and commercial registration in all places shall, in accordance with the present notice, do well in the relevant work of the enterprise such as statistics, adjustment of registration jurisdiction and handover of enterprise files. If any enterprise that has gone through the formalities of approval intends to modify its registration, it shall be under the jurisdiction of the registration organ with the power of registering foreign-funded enterprises at the enterprise's locality. IX. In case any previously promulgated provision is inconsistent with the present notice, the later shall prevail. X. Where investors from Taiwan, Hong Kong and Macao regions establish foreign-funded enterprises in the mainland, the present notice may be applied. XI. The present notice shall come into force on January 1, 2003. |
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