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June 30, 2016
Expansion into China
Corporate compliance in China:
Secure your investment
Page 1
About Your Speaker
Kristina Koehler-Coluccia, director, Koehler Group
Kristina is one of the leading experts in ent...
Page 2
About Koehler Group
CSC BLU CSC NAVY CSC LIGHT BLUE
Koehler Group, a CSC® company, provides a wide range of market ...
Page 3
Annual Inspection/Report
Business License/Registration Certificate Renewal
3-in-1 Business License
Renewal of Licen...
Page 4
Page 5
Important Note:
In addition, a site visit of the RO’s premises will be conducted
within three months from the date ...
Page 6
Business License/Registration Certificate Renewal
Requirement for a Limited Liability Company
• A LLC must renew an...
Page 7
Key features of circulars 160 and 482 include:
• Transition from the taxpayer identification number (TIN) system to...
Page 8
Page 9
Operational versus Non-Operational Branch Company
Key considerations
• If I employ one person in another city from ...
Page 10
• The transfer of shares automatically involves an Evaluation Report that
must be drafted and issued by a real est...
Page 11
• Due to the limited activities available to an RO, foreign investors may want to close their
representative offic...
Page 12
Key points for consideration when amending your Articles
of Association (AoA’s):
• All basic details must be updat...
Page 13
In China each company, whether a LLC or a representative office, must
have “one office address, one legally regist...
Page 14
Whether you are looking to transfer shares (i.e. changing the shareholding
entity), OR just changing the name of t...
Page 15
The positions that need to be appointed in the company are:
Shareholder – As the highest authority, the shareholde...
Page 16
Key points for consideration:
1.What is a legal representative, and what are the role and responsibilities
of this...
Page 17
Key points for consideration:
1. Switching banks – procedures for opening new accounts and closing accounts
2. Add...
Page 18
Examples of business scopes are:
• Management Consulting Company: investment consulting, enterprise
management con...
Page 19
Key points for consideration:
1.Can I change, update, add, remove items from my business scope?
2.Will I need addi...
Page 20
Key points for consideration:
1. Who is the State Administration of Industry and Commerce?
2. Am I able to increas...
Page 21
Annual Compliance Procedures
1. Annual audit requirements
2. Annual individual income tax (IIT) filing
3. Annual p...
Page 22
1. Be prepared that the application forms are in Chinese.
2. Organize that documents are signed in English and Chi...
Page 23
Questions and Answers
Page 24
Koehler Group China Headquarters
Ms. Kristina Koehler-Coluccia
4/F Cross Tower
318 Fuzhou Road
Shanghai, 200001, C...
Page 25
Subscribe FREE today
to our monthly magazine and webinars on investment, tax, and
operational issues for foreign c...
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Expansion into China - Corporate compliance in China: Secure your investment

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This is a complimentary recording: In this complimentary Corporation Service Company® (CSC®) webinar, Kristina Koehler-Coluccia of Koehler Group—a CSC company—shares her expertise on China’s corporate compliance regulations.

This webinar is for anyone responsible for the operation and compliance of China wholly-owned subsidiaries, joint ventures, and representative offices. Join us for:

• Updates on compliance regulations and how to navigate the endless introduction of new laws and circulars
• Tips on understanding guidelines and their various interpretations by central government, local government, and corporate service providers, including lawyers, accountants, and auditors
• General entity and document management in China

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Expansion into China - Corporate compliance in China: Secure your investment

  1. 1. June 30, 2016 Expansion into China Corporate compliance in China: Secure your investment
  2. 2. Page 1 About Your Speaker Kristina Koehler-Coluccia, director, Koehler Group Kristina is one of the leading experts in entity incorporation in China. She has worked in the Chinese legal and accounting industry since 2003, and advises and represents Western clients with their business interests in China. She has worked on numerous complex transactions including foreign direct investments, corporate (re)structuring, company liquidations, and M&A deals. She frequently advises on, and represents, foreign clients in tax, accounting, and trade related matters. Kristina is the author of Koehler Group’s monthly magazine, ChinaInvest.biz, and has also contributed to numerous other publications relating to the Chinese legal, accounting, and business practices. She frequently holds seminars, webinars, and gives presentations at business groups and government institutions around the world.
  3. 3. Page 2 About Koehler Group CSC BLU CSC NAVY CSC LIGHT BLUE Koehler Group, a CSC® company, provides a wide range of market entry consulting, incorporation, tax, accounting, and human resource services to organizations interested in entering and expanding their business throughout Hong Kong, Singapore, and China. • Koehler Group was established in 1979, and is managed by an international and local team of over 120 consultants, accountants, and legal professionals in 10 offices throughout these regions. • From our offices in Beijing, Chengdu, Dalian, Guangzhou, Hangzhou, Hong Kong, Shanghai, Shenzhen, Singapore, and Tianjin, we offer services to small-to-medium sized privately owned companies, as well multinational corporations. • Our objective is to provide an efficient and cost-effective service tailored to each client’s specific needs, developing a lasting partnership with our customers with a focus on protecting their investments, and maximizing their returns. • Our international desks speak English, German, Spanish, French, Italian, Portuguese, Russian, and Japanese. • By joining U.S.- based Corporation Service Company®, we now offer more services to our local clients, as well as expanded offerings to clients in the Americas, Europe, and Australia.
  4. 4. Page 3 Annual Inspection/Report Business License/Registration Certificate Renewal 3-in-1 Business License Renewal of Licenses and Contracts Registration of a Branch Company Transfer of Shares of the LLC Liquidation of a LLC versus the Representative Office Updates to the Articles of Association Change of the Registered Office Address Change of the Name of the Shareholding Entity Change within the Corporate Structure Switching Banks and Changing the Bank Signatory Change to the Business Scope Increasing Registered Capital or Foreign Debt Loan Annual Compliance Procedures Tips for Preparing and Maintaining the Documentation Agenda
  5. 5. Page 4
  6. 6. Page 5 Important Note: In addition, a site visit of the RO’s premises will be conducted within three months from the date of issuance of the RO Inspection Certificate. • What happens if there are delays? • What are the consequences if one does not complete the Annual Inspection • Can it be done online? • What happens if there is no staff member at the office for the site inspection? Annual Inspection/Report
  7. 7. Page 6 Business License/Registration Certificate Renewal Requirement for a Limited Liability Company • A LLC must renew and have its business license chopped on an annual basis. • In addition, the LLC has a term of validity of minimum 10 years and up to 50 years. Six months prior to the end of term, a formal renewal process of the LLC must occur. Requirement for a Representative Office • A Representative Office (RO) must perform a “RO Renewal” based on the renewal of the parent company’s business license. The process involves the renewal of all major certificates associated with the RO, such as the registration certificate, enterprise code certificate and tax certificate. Documents from the parent company must be notarized.
  8. 8. Page 7 Key features of circulars 160 and 482 include: • Transition from the taxpayer identification number (TIN) system to the unified social credit code (USCC) system • Transition related to the integration of three certificates • Procedures for implementing the integration of three certificates Key point for consideration: • Is the shareholder and/or legal representative required to be present in China to deal with the various government bureaus for the corporate compliance procedures of the LLC, or can a power of authority be signed? 3-in-1 Business License
  9. 9. Page 8
  10. 10. Page 9 Operational versus Non-Operational Branch Company Key considerations • If I employ one person in another city from the LLC, must I register a branch company? • Must I have an office address, or can this individual work from home? • What would be the business scope of the branch company? What is the ultimate purpose of having a branch company? • What are the requirements of the LLC in terms of consolidations for accounting, tax, payroll, and other administrative functions? Registration of a Branch Company of a China LLC
  11. 11. Page 10 • The transfer of shares automatically involves an Evaluation Report that must be drafted and issued by a real estate and asset appraisal company. The tax office has to verify this report and agree on the final price. The price will depend on the profits that the company made, and in any event, cannot be lower than the registered capital amount. • A share transfer agreement must be signed and registered with the Administration of Industry and Commerce, and the process involves the re-issuance of all company certificates. Transfer of Shares of a LLC
  12. 12. Page 11 • Due to the limited activities available to an RO, foreign investors may want to close their representative office and set up a limited company in the form of a WFOE, FICE, or JV. • An RO should check whether there are any outstanding tax liabilities. • If there are any liabilities, or the office does not have record of any of the official receipts (fa piao) of payments that need to be submitted to the tax bureau, then the bureau may arrange an on-site office inspection followed by a closure audit. • If the tax bureau believes that illegal work has been conducted, they will remove the company's books and computers for further examination. As a result, the company will be liable for any outstanding tax payments and late payment fines of up to five times the amount that was due. • If the company did not register with the local tax bureau within 30 days of receiving its business license then another late payment will be due. This time it is 0.2% of the outstanding amount per day. • If the company has conformed to all the local and national rules and regulations by proving that it has no tax liabilities, which can be verified via its bookkeeping records and certificates and receipts issued by the local and national tax bureaus, then the company only needs to submit the required documents to the Administration for Industry and Commerce (AIC). The tax bureau will still require that the company go through a tax audit report signed by an official certified public accountant, which would also be submitted to the AIC. Liquidation of a LLC versus the Representative Office
  13. 13. Page 12 Key points for consideration when amending your Articles of Association (AoA’s): • All basic details must be updated should there be any changes – for example, registered office address, corporate structure changes, registered capital increases, etc. • They are very important documents for making the company remain compliant – copies of the amendments must be kept on file. • When an amendment is made, a chopped and signed version must be kept. • What ever happened to the Feasibility Study Report that was used during the incorporation of the entity? Updates to the Articles of Association
  14. 14. Page 13 In China each company, whether a LLC or a representative office, must have “one office address, one legally registered company,” hence virtual offices are not permitted. Your registered office address is the contact address for all government bureaus. Key points for consideration once your LLC or representative office is established: 1.Implications of your registered office address NOT being your operational office 2.Implications of changing your registered office address 3.Implications of changing your district in the city in which you are established 4.Implications in changing the city in which you are established Change of the Registered Office Address
  15. 15. Page 14 Whether you are looking to transfer shares (i.e. changing the shareholding entity), OR just changing the name of the shareholding entity is an important and yet bureaucratic step that must be taken. Key points for consideration 1. Application procedures in China to approve this step 2. Challenges which may exist with the Administration of Industry and Commerce Change of the Name of the Shareholding Entity
  16. 16. Page 15 The positions that need to be appointed in the company are: Shareholder – As the highest authority, the shareholder appoints: Board of directors (minimum of 3 people) or executive director (one person) – Sets the agenda of the company’s operations according to the shareholders decisions. Board/executive director appoints: General manager – Appointed by the board of directors/executive direction, the general manager to performs day-to-day operations of the China entity. (A board member/executive director can hold the position as legal representative and/or general manager.) Legal representative – Holds all power within an entity in China, therefore held accountable for any issues that arise within the China entity. Supervisor – Supervises the execution of company duties by the directors and senior management, ensuring there is no conflict of interest. A supervisor cannot concurrently hold the position of a board member/executive director, legal representative, or general manager. Chief representative – For ROs, must be appointed by the parent company. The responsibility of the chief representative is that of a legal representative for a LLC. Change within the Corporate Structure
  17. 17. Page 16 Key points for consideration: 1.What is a legal representative, and what are the role and responsibilities of this position? 2.How to select the legal representative. 3.What is a supervisor? 4.Recommendations and tips for choosing the corporate structure 5.Terminating individuals within the corporate structure 6.Resignation of individuals within the corporate structure Change within the Corporate Structure
  18. 18. Page 17 Key points for consideration: 1. Switching banks – procedures for opening new accounts and closing accounts 2. Adding bank signatories 3. Terminating bank signatories Switching Banks and Changing the Bank Signatory
  19. 19. Page 18 Examples of business scopes are: • Management Consulting Company: investment consulting, enterprise management consulting, enterprise planning consulting (excluding advertising), trade information consulting, environmental information consulting, economic information consulting, scientific and technical consulting (related to administrative licensing with license management). • Wholesale Trading Company: wholesale of certain product; commissioned distribution (excluding auctions); import and export; and other related services (related to administrative permit for operation). An RO can only observe the market conditions, including: • Market research, product display and publicity activities relating to the foreign company’s products or services, and • Liaison activities relating to the sale of products or provision of services, and local procurement or investments, by the foreign company. Change to the Business Scope
  20. 20. Page 19 Key points for consideration: 1.Can I change, update, add, remove items from my business scope? 2.Will I need additional licenses if I update or add items into the business scope? 3.What are the implications if I move from a consulting company, to a trading company, to a manufacturing company, to doing retail and eCommerce? 4.If I have an RO today, and I want to start offering consulting services, trading services, or manufacture, how can I change my business scope? Change to the Business Scope
  21. 21. Page 20 Key points for consideration: 1. Who is the State Administration of Industry and Commerce? 2. Am I able to increase my registered capital and total investment? 3. Is registered capital utilized as working capital? 4. What is foreign debt loan? Total Investment Capital – Registered Capital Amount 1. How am I able to apply to obtain the foreign debt loan? 2. Can I apply for loans locally in China? 3. Can I apply for loans overseas? Increasing Registered Capital or Foreign Debt Loan
  22. 22. Page 21 Annual Compliance Procedures 1. Annual audit requirements 2. Annual individual income tax (IIT) filing 3. Annual profits tax filing 4. Annual inspection 5. Business license/registration certificate renewal
  23. 23. Page 22 1. Be prepared that the application forms are in Chinese. 2. Organize that documents are signed in English and Chinese. 3. Be prepared to sign numerous copies of resolutions and application documents for submission. 4. Sign with a BLACK INK PEN. 5. Remember how you signed the original incorporation documents – what signature did you use? 6. In some cities, applications are done online followed by original documents submitted thereafter, and in other cities, its an “old-school style” application procedure where everything is done in person and original documents are submitted. 7. A record of the online filing can be obtained. 8. It is important to obtain the approved and amended Articles of Associations which receive a government chop, and to keep copies of all submitted documentation. 9. There is no requirement to file board resolutions or amendments of Articles of Association – this is something that should be updated and filed by oneself. 10. Appoint a compliance officer and keep track of the DOCUMENTATION! Tips for Preparing and Maintaining the Documentation
  24. 24. Page 23 Questions and Answers
  25. 25. Page 24 Koehler Group China Headquarters Ms. Kristina Koehler-Coluccia 4/F Cross Tower 318 Fuzhou Road Shanghai, 200001, China Tel: +86 21 6391 3188 Fax: +86 21 6391 2032 Email: kristina.koehler@koehlerservices.com Contact Us
  26. 26. Page 25 Subscribe FREE today to our monthly magazine and webinars on investment, tax, and operational issues for foreign companies entering or operating in Hong Kong, Singapore, and China at: www.koehlerservices.com. Follow us and subscribe to our LinkedIn and YouTube Channels! ChinaInvest.biz Information Series

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