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【中国・香港】Failure to Specify Arbitral Seat in the Arbitration Clause May Result in Unenforceable Award
In a recent PRC case (the “Taizhou Court Case”), the Taizhou Intermediate People’s Court (“Court”) refused enforcement of an ICC award on grounds of public policy because the court had previously held that the arbitration clause was invalid. This outcome could have been avoided if the parties had specified a suitable arbitral seat in the arbitration clause. Our alert will discuss this case and provide recommendations for avoiding such outcomes.
【中国】 China’s New Judicial Interpretation Clarifies Criteria and Punishment for Bribery Offences
The Supreme People’s Court (“SPC”) and the Supreme People’s Procuratorate’s (“SPP”) have released the Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Cases Related to Graft and Bribery/关于办理贪污贿赂刑事案件适用法律若干问题的解释 (“Interpretation”) which includes clarifying sentencing criteria for official (those involving government officials) and commercial bribery offences.
The Interpretation, issued on 18 April 2016, supplements the Criminal Law revised in late 2015 (“Ninth Amendment”) and strengthens the continuing anti-graft campaign in China. Our alert discusses the key features of the Interpretation.
【中国】 State Administration of Taxation Bulletin on Matters Related to Enhancing the Declaration of Related Party Transactions and the Administration of Contemporaneous Documentation
In accordance with the Enterprise Income Tax Law of the People’s Republic of China (hereinafter referred to as “Enterprise Income Tax Law”) and the implementing regulations issued thereunder, as well as the Law of the People’s Republic of China for the Administration of the Levy and Collection of Taxes (hereinafter referred to as the “Tax Collection Law”) and the detailed implementing rules issued thereunder, in order to further enhance the declaration of related party transactions and the administration of contemporaneous documentation, the relevant issues are announced.
【中国】 China Revamps The Cross-Border E-Commerce Regime
From April to May 2016, the Ministry of Finance (“MOF”), General Administration of Customs (“GAC”), China Food and Drug Administration (“CFDA”) and State Administration of Taxation (“SAT”), published several new regulations to revamp China’s cross-border e-commerce regulatory regime.
This regulatory regime was initially introduced by GAC in early 2014, in order to regulate the sale of goods by overseas retailers directly to Chinese customers through approved e-commerce platforms (referred to as the “Pilot Program”). In parallel, China continued to allow individual consumers to purchase consumer goods through foreign websites not falling under the Pilot Program, and have the goods imported into China through traditional courier or postal channels, so long as the goods satisfied the quantity and value requirements for “personal articles” (referred to as the “Personal Article Program”).
【中国・香港】 Hong Kong Court of Final Appeal Confirms Money Laundering Offence Does Not Require Actual Knowledge Nor Does the Property Need to be Actual Proceeds of Crime
There are increasingly aggressive efforts by regulators and now by the judiciary in Hong Kong in combating money laundering. The recent judgment of the Hong Kong Court of Final Appeal (“CFA”) in HKSAR v Yeung Ka Sing Carson (“Carson Yeung Appeal”) serves as a timely reminder of the potential substantial risks in failed AML efforts. The CFA has confirmed, among other things, that on a charge of dealing with proceeds of crime contrary to s 25 (1) of the Organized and Serious Crimes Ordinance (“OSCO”), the prosecution only needs to show that when an accused dealt with certain property, he or she knew, or had reasonable grounds to believe that such property represented the proceeds of an indictable offence. The property does not need to be actual proceeds of crime. It is said by the CFA that there are strong policy reasons favouring this conclusion. This alert will discuss the Carson Yeung Appeal and what clients can do when faced with suspicious transactions.
【中国】 China Introduces New Transfer Pricing Documentation Rules to Implement BEPS Country-by-Country Reporting
On 13 July 2016, the State Administration of Taxation (SAT) finally released the long-awaited Bulletin 42 to revise the transfer pricing documentation requirements under Circular 2. By introducing the key recommendations under Action Plan 13 of the Base Erosion and Profit Shifting (BEPS) Project, Bulletin 42 will have a far-reaching impact on taxpayers.
In this alert, we will first look at who is affected by Bulletin 42. We will then discuss key provisions introduced under this bulletin and their implications on multinational companies (MNCs). Finally, we will provide some recommendations to MNCs on how to ensure compliance with the new transfer pricing documentation requirements and how to develop appropriate strategies to safeguard their tax interests in China.
【中国・香港】 China Tax Monthly
In this issue of the China Tax Monthly, we will discuss the following tax developments in China:
1. Hong Kong Tax Residency Certificate Valid for Three Calendar Years for Treaty Purposes
2. Jiangsu Case: Transfer Pricing Adjustments on Related-party Transaction Between Domestic Affiliates
3. Ningxia Case: Share Transfer Price Adjusted Based on Internal Comparable Transactions
4. Shandong Case: Transfer Pricing Adjustments to Outbound Royalty Payments
5. Guangdong Case: China’s First Tax Litigation Case on Dual Employment Arrangements
【香港】Employers Beware: Court of Appeal Upholds the Implied Term of Anti-Avoidance in Banker’s Employment Contract
In Tadjudin Sunny v Bank of America, National Association (CACV 12/2015), the Court of Appeal (“CA”) recently confirmed the decision of the Court of First Instance (“CFI”), which had held that the Bank of America, National Association (“Bank”) was in breach of an implied term when it terminated the employment of Ms Tadjudin (“Tadjudin”), thwarting her ability to earn a bonus for 2007.
Following the CA’s decision, employers in Hong Kong could face claims for breach of the implied term of anti-avoidance if they engage in conduct to prevent the operation of an express term in a contract, which would otherwise confer a certain or conditional benefit on the employee.
【中国】Changes in Customs Declaration Requirements Herald Greater Scrutiny in China
From 30 March 2016, importers and exporters are required to provide additional information when making customs declarations in China which could result in further scrutiny from Customs on the valuation of imported goods.
Pursuant to the Amendments to the Standards of PRC Customs for the Completion of Import and Export Customs Declaration Forms issued by the General Administration of Customs (“GAC”) and effective from 30 March 2016 (“Announcement No. 20”), GAC amended the types of information that importers and exporters are required to provide when making customs declarations. Among the various additional items, the following items are of particular concern:
a. Whether there is a special relationship between buyer and seller in the transaction;
b. Whether the special relationship influenced the transaction value; and
c. Whether there are any royalty payments.
【中国・香港】 China Tax Monthly
In this issue of the China Tax Monthly, we will discuss the following tax developments in China:
1. China Signs the MCAA for Automatic Exchange of CbC Reports
2. The SAT Issues New VAT Exemption Measures
3. The SAT Revises Measures on Publishing Tax Noncompliance Cases
4. Recordal Procedure Applies to Software and Integrated Circuit Enterprises Claiming EIT Incentives
5. Shandong Case: Offshore Upstream Merger Disqualified from Notice 59 Exemption
6. Taizhou Case: PRC Target Company Enterprise Required to Withhold Tax on Capital Gains
7. Guiyang Case: Management Fee Deemed to be Distributed Dividends
8. China Issues Tax Rules on Cross-border B2C E-commerce
【中国・香港】PBOC Has Expanded Inbound Financing Regime Prevailing in FTZs to Nationwide
On 22 January 2016, the People’s Bank of China (“PBOC”) published the Notice on Expanding the Trial Implementation of Full-blown Macro Prudential Administration of Cross Border Financing (《中国人民银行关于扩大全口径 跨境融资宏观审慎管理试点的通知》, Yin Fa No. 2016-18, the “Notice 18”) for the expansion of the new macro prudential administrative regime on inbound financing to the four free trade zones in China, which was first introduced in the Shanghai Free Trade Zone in early 2015.
On 29 April 2016, PBOC published the Notice on the Nationwide Implementation of Full-blown Macro Prudential Administration of Cross Border Financing (《中国人民银行关于在全国范围内实施全口径跨境融资宏观审慎管理的通知》, the “Notice”1). The Notice, effective from 3 May 2016, further expands the new macro prudential administrative regime on inbound financing (the “New Regime”) on a nationwide basis.
【中国・香港】Hong Kong Court Refers Parties to Arbitration in Dispute Involving Jurisdiction and Arbitration Clauses
Parties entering into related contracts should carefully consider how future disputes ought to be resolved. This alert will look at a recent Hong Kong decision in Bluegold Investment Holdings Limited v Kwan Chun Fun Calvin  HKEC 532 (“Bluegold Case”) involving the construction of inconsistent dispute resolution clauses in related contracts. We will also discuss how to avoid jurisdictional disputes in this context, and associated cost and delay.
【中国】China: Major Policy Changes to Cross-border E-Commerce Program and the Implications on Sale of Unregistered Products
In the end of March, China’s Ministry of Finance (“MOF”), General Administration of Customs (“GAC”) and State Administration of Taxation jointly promulgated the Circular on Taxation Policy on Cross-Border E-Commerce Retail Importation (Circular Cai Guan Shui  No. 18, or“Circular 18”). Circular 18 entered into force as of April 8, 2016.
【中国】China Employment Law Update
· Government Considers Amending Employment Contract Law to Make Employment “More Flexible”
· Social Insurance and Housing Fund Costs to be Reduced throughout China
· New Family Planning Rules Issued in Beijing and Other Key Locations
· Further Guidance Issued on Work Related Injury Issues
· Sichuan Province’s Highest Court Issues Guiding Opinion on Labor Disputes
· Beijing Case Clarifies Issues Regarding Female Employees’ Retirement Age
· Chongqing Court Dismisses Employee’s Claim for Severance Pay due to Company Relocation
· Recent Cases on Collective Contract Issues
· Foreign Movie Star Ordered to Pay Back Income Tax in Beijing
【中国】Comprehensive VAT System to Cover All Industries
On 1 May 2016, China will complete its VAT pilot program and end the bifurcated value-added tax (VAT) and business tax (BT) system that has been in place since 1994. A comprehensive and uniform VAT system will apply to all industries, and business tax (BT) will be swept into the dustbin of history.
【中国・香港】New Rules Offer Greater Protection and Incentives to Whistleblowers in China
On 30 March 2016, the Supreme People’s Procuratorate (“SPP”), Ministry of Public Security and Ministry of Finance released Several Provisions on Protecting and Rewarding Whistleblowers for Reporting Duty Crimes (“New Regulations”) offering greater protection and incentives to the whistleblower. This is likely to encourage more whistleblower reports and further strengthen the government’s efforts to crackdown on corruption involving government officials.
【中国・香港】Use of Predictive Coding in Electronic Discovery in England Provides Useful Reminder for Hong Kong Cases
In a recent landmark decision concerning the discovery of electronic documents (“English Case”), the English High Court approved the use of a predictive coding program to narrow the scope of relevant documents.
The development is significant for litigants in Hong Kong, as this is the first time an English court has approved the use of predictive coding in the discovery of electronic documents (“e-discovery”).
【シンガポール】The Model Constitution: an opportunity for private companies to achieve regulatory alignment
The Companies (Model Constitutions) Regulations 2015 (“2015 Regulations”) was passed on 3 January 2016, to coincide with the coming into force of nearly all of the remaining Phase 2 amendments to the Companies Act. As prescribed under section 36(1)(a) of the Companies Act, the 2015 Regulations provide in their First and Second Schedules two forms of model constitution:
* one for private companies (“Model Constitution”); and
* the other for companies limited by guarantee.
This client alert will focus on the Model Constitution for private companies.
【香港】Comprehensive Guidance on Cybersecurity Controls Issued by SFC
The Securities and Futures Commission (“SFC”), Hong Kong’s securities regulator, recently released comprehensive guidance on suggested cybersecurity controls within Licensed Corporations (“LCs”). Though it only applies to LCs regulated by the SFC, it represents the most comprehensive guidance issued by a Hong Kong authority on cybersecurity, and provides useful insight on how organisations can effectively guard against cybersecurity threats.
【香港】Impact of Fourth Protocol to Hong Kong / China Double Tax Arrangement
Following ratification by the respective governments of both sides, the Fourth Protocol to the double tax arrangement between Hong Kong and Mainland China (“HK-China DTA”) is now in retroactive effect as of 29 December 2015.
The changes introduced under the Fourth Protocol are designed to realise two objectives: first, they are intended to boost Hong Kong’s attractiveness as a platform for investment into China via targeted tax incentives. Second, they counteract abuse of benefits under the HK-China DTA and facilitate information exchange by tightening anti-abuse provisions and expanding the scope of taxes covered under the information exchange provision.