Regulatory change often comes quickly in China – and the year ahead will be no exception. Some major legal changes already came into effect on January 1st, 2019, whilst others are still in the pipeline.
Individual Income Tax Law
The revised Individual Income Tax Law took full effect on January 1st, 2019, alongside numerous regulations published at the very last minute in late December, 2018.
The higher monthly standard deduction of RMB 5,000 already took effect on October 1st, 2019, as did the new tax brackets for salaries and wages. From January 1st, 2019, taxpayers can apply for new special deductions in addition, in five categories.
For foreign taxpayers especially, the new law will bring significant changes with respect to the definition of tax-residency and by putting an end to favourable tax treatment for foreigners after a transition period of three years.
In 2018 China became the world’s largest e-commerce market, with a combined market revenue of an estimated 765 billion US$. The Chinese government responded to this rapid growth by enacting an e-commerce law, which took effect on January 1, 2019. It covers all major aspects of e-commerce, including delivery and payment methods. The law also is designed to strengthen IP rights and to punish infringements and retailers of fake products more effectively.
The law sets out rules for three categories of players in e-commerce: platform operators, operators on platforms and online sellers. All businesses engaging in e-commerce have to register as such. The law further creates a framework for cross-border e-commerce, for better protection of consumer data and of IP rights.
Foreign Investment Law (Draft)
In December 2018 the draft Foreign Investment Law was published and the public was invited to comment. It promises equal treatment of foreign companies operating in China, though limited by a right to review activities which may affect national security.
Once adopted, it will replace three current laws governing foreign investments. The National People’s Congress will already be consulting on the draft in its coming plenary session starting on March 5th, 2018. The timing and speed at which the Chinese government is pushing forward with the law is seen as an indicator of its willingness to avoid any further escalation of the US-China trade war, say Ecovis’ experts.
Richard Hoffmann, lawyer, ECOVIS R&G Consulting Ltd (BJ), Beijing, China