CHINA FOREIGN INVESTED COMPANY
FOREIGN INVESTED COMMERCIAL ENTERPRISE
FICE APPLICATION PROCEDURES
Taxation, Bonded Area and Franchise
(I) Taxation for Foreign Invested Commercial (Distribution) Enterprises
According to the Notice of the State Taxation Administration of 1994 Regarding Tax Incentives to FIEs Engaged in Both Production and Non-production Activities and the Notice of the Ministry of Commerce on Matters Relating to Additions to Distribution Business Scope of Foreign Invested Non-commercial Enterprises, after an already existing production FIE is approved to make additions to its distribution business scope and within the period for tax reduction and exemption starting from the year in which the FIE profits, provided its operating revenues from productive activities exceed 50% of its total business revenues, it may apply for and enjoy tax reduction or exemption for the year upon the approval of a competent taxation authority.
In the event that a newly-established FIE has a business scope encompassing both production and distribution, it may apply for tax reduction and exemption to a competent taxation authority provided it complies with the Notice of the State Taxation Administration Regarding Tax Incentives to FIEs Engaged in Both Production and Non-production Activities.
(II) Applications by FIEs in Bonded Zones for Distribution Business
An FIE in a bonded zone may apply for distribution right in accordance with relevant laws. Once approved and the distribution right is gained, the FIE may proceed with customs declaration and foreign exchange check-out on its own and distribute its commodities out of the zone but within the Chinese territory in the capacity of a foreign trade operator.
Upon the approval of a competent commerce authority, an FIE in a bonded zone may set up an operational subsidiary outside the zone.
In the case that an FIE in a bonded zone makes an application to its initial approval authority for changing the registration location (outside the zone), its business scope has to be changed accordingly (the business activities which are only allowed in a bonded zone have to be removed). After the initial approval authority seeks the opinion of the competent commerce authority of where the enterprise is to be relocated and concedes to the change, the FIE may then change its registration location outside the bonded zone.
(III) Franchise Outlets
Upon approval, an FIE authorizing the outlets of another party to conduct commercial activities in the form of franchise is not subject to the restrictions set forth in Article 18 of Decree No.8 provided the accumulative number of authorized outlets is over 30.
Note: please refer to relevant regulations in the annexes for details
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