★ Regulations of the Supreme People’s Court on Relevant Issues on Trying Cases of Letter of Credit Disputes
★ Latest Laws and Regulations:
1 Notice of the Ministry of Administration of Tax on Relevant Issues of the Return of
1 Relevant Issues on Transferring Administrative Power to Put on Records of and Grant Certificate to Enterprises with Investment and further simplify the Approval Proceedings
1 Notice on Policies about Value-added Tax
1 Tentative Measures on Administration of Processing and Trading of Export Processing Zone
Regulations of the Supreme People’s Court on Relevant Issues on Trying Cases of Letter of Credit Disputes
The Supreme People’s court promulgated “Regulations of the Supreme People’s Court on Relevant Issues on Trying Cases of Letter of Credit Disputes” on November 14, 2005. It will come into force on January 1, 2006.
The Regulations requires the people’s court to try the cases of letter of credit disputes in accordance with “Uniform Customs and Practice for Documentary Credits ”, if the parties have not agreed otherwise.
The Regulations confirms the principle in UCP that letter of credit is separate from the sales or other contracts. If the documents are in accordance with the letter of credit and the documents are in accordance with each other, the bank shall have the payment obligation. The Regulations also set up the principle that the bank shall examine the letter of credit independently, which means the bank may decide on whether to accept the discrepancy under the letter of credit independently, no matter whether the appliers to issue the letter credit accept it or not.
The Regulations provides the issue of fraud in letter of credit specifically. It enumerates four examples of fraud in letter of credit, and points out that the appliers to issue letter of credit, the issuing bank and other persons who have interested in have the right to apply to the courts for injunctions on payment. And so long as they meet the relevant conditions, they may apply for injunctions even before they file the suit. The people’ courts may decide on terminating or pausing payment basing on the applications, except for four circumstances, when the issuing banks, the confirming banks and the negotiating banks have paid it bona fide. The people’s courts shall make a ruling within 48 hours after the receipt of the application, and if it’s a ruling of pausing, it shall be enforced immediately.
The Regulations also provides on the liabilities of the guarantors. It points out that the guarantors shall not exempt their liabilities by reason that the issuing bank or the appliers to issue the letter of credit accept the discrepancy without their approval. However, if the issuing banks or the appliers to issue the letter of credit amend it without the approval of the guarantors, the guarantors shall only be liable within the previous guarantee scope or the scope and term that the laws and regulations provide.
Notice of the Ministry of Administration of Tax on Relevant Issues of the Return of
The Ministry of Administration of Tax promulgated “Notice of the Ministry of Administration of Tax on Relevant Issues of the Return of Enterprise Income Tax” on November 17, 2005, and it comes into force on that day. This Notice has no retroactive effect on cases where the taxpayer enjoyed the preferential tax treatment.
The Notice states it clearly that the foreign investors acquire the shares of the enterprises with foreign investment by means of consignment, then after the consignment of the shares, the foreign investors re-invest in China with the profits gained from that investment and realized before the consignment, the profits gained from the re-investment shall not enjoy the preferential tax treatment on return of the tax provided by Article 80 of Rules for the Implementation of the Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment.
However, the Notice provided an exception. If an foreign investors consign the shares from (1) the foreign investment which is directly or indirectly owned by him or the whole share is owned by one person; or (2) the enterprises with foreign investment which carry on investment specially and enjoy the preferential treatment, and the consignment is made at a cost price of the shares, then if the foreign investor re-invests with the profit allotted before the consignment of share, he may enjoy the preferential return of tax treatment as provided by relevant provisions.
Relevant Issues on Transferring Administrative Power to Put on Records of and Grant Certificate to Enterprises with Investment and further simplify the Approval Proceedings
Ministry of Commerce promulgated “Relevant Issues on Transferring Administrative Power to Put on Records of and Grant Certificate to Enterprises with Investment and further simplify the Approval Proceedings” on November 14, 2005, and it shall be effective on January 1, 2006.
State Council transferred some of its departments’ power to examine and approve the foundation of enterprises with foreign investment within a limitation to provincially administrative departments of ministry. The Notice pronounced relevant issues. The Notice provides that if the relevant departments of State Council examine and approve the foundation or alteration of the enterprises with foreign investment, they the reply or relevant contracts and articles of association shall be put on record in provincially administrative departments of commerce; if they approve new programs with foreign investment, the contracts and articles of association shall be approved by provincial people’s governments and the certificate shall also be granted by them.
The Notice requires the regional departments of commerce to count the foreign investments according to the relevant provisions on foreign investments; it also requires the administrative departments of commerce to simplify the approval proceedings to facilitate the enterprises with foreign investment.
Notice on Policies about Value-added Tax
Ministry of Finance and State Administration of Taxation made clear provisions on relevant issues on value-added tax on November 28, 2005. The main contents are as follows.
If the taxpayers sell self-produced goods, providing value-added tax services as well as construction services, the beginning of their obligations to pay the tax shall be in accordance with Article 33 of “Rules of Implementation of Provisional Regulations of the People’s Republic of
In the process of consignment sales, (1) if the taxpayer sells goods by means of consignment and he receives the whole or part of payment for goods before receiving the bills of consignment sales, the obligation to pay tax starts from the day that he receives the payment; (2) if the taxpayer delivered the goods more than 180 ago but have not received the bills of consignment sales or payment, the sales is regarded as realized, the VAT shall be levied and the beginning of the obligation to pay tax is the 180th day since he delivered the goods.
The Notice also provides, once a taxpayer is regarded as a general taxpayer, he shall not be transferred to small-scale taxpayer. Issues on transferring the general taxpayer in tutorship period to small-scale taxpayer shall conform to the provisions “Urgent Notice of State Administration of Taxation on Relevant Issues on Reinforcing the Administration of Imposition of VAT on Newly setup Trading Enterprises”. If the general taxpayer is rescinded or cancelled it its capacity of general taxpayer in tutorship period and transfer to a small-scale taxpayer, then its stock shall be dealt with as input tax, and the excess VAT shall not be returned.
To the one-time fees charged by the VAT payer engaging in public utilities such as heating, electricity, gas and tap water, if the fees have direct relation with the sales of goods, they shall be levied; otherwise they shall not.
In addition, to the computer software, the Notice points out (1) embedded software does not belong to the software, which is provided by “Notice of Ministry of Finance and State Administration of Taxation on Encouraging the Development of Software Industry and Integrate Circuit” and enjoys the preferential VAT tax treatment. (2) if an taxpayer sells software and charges for the installation of software, maintenance and training, then the income shall be levied VAT in accordance with the provisions of mixing sales and it also enjoys “imposed-and- promptly returned” policy. After the delivery of software, the fees charged periodically or by time for maintenance, technical services and training shall not be levied. (3) On premise that the taxpayer is commissioned to develop software, he shall be levied if the copyright belongs to him, but not if it belongs to the consignor or both of them.
Tentative Measures on Administration of Processing and Trading of Export Processing Zone
“Ministry of Commerce promulgated Tentative Measures on Administration of Processing and Trading of Export Processing Zone” on November 22, 2005 and it shall be effective on January 1, 2006. The previous “Notice of Department of Foreign Trading and Economic Cooperation on Printing and Distributing ‘Tentative Measures on Administration of Processing and Trading of Export Processing Zone’” shall be rescinded when this Measures comes into force.
The Measures defines the export processing zone. It is a specific zone which is approved to set up by State Council and closely supervised by the customs.
The management of the trading business of export processing zone belonged to every provincially administrative departments of foreign economic trading. Now the Measures provides that the Ministry of Commerce is the political managing department of processing and trading of export processing zone. The administrative commissions take charge of the processing and trading management. The admimistrative departments of commerce of provinces, autonomous regions, municipalities directly under Central Government and cities with independent planning, Xinjiang Production and Construction Corps, Harbin, Changchun, Shenyang, Nanjing, Guangzhou, Chengdu, Xi’an and Wuhan where the zone is located, shall manage their processing and trading business.
The Measures requires the enterprises in export processing zone to attract the processing and trading enterprises which have high technical level and increment room, and big enterprises which have strong systematic ability to the zone. The provisions about the industries in eastern part are different from those in middle and western part: it’s much higher to the eastern, and the middle and western is mainly to accept the industries transferred from the east.
The Measures reinforces the management of administrative commissions and the customs to advance the efficiency of the governments. It requires the administrative commissions to sign and grant the “Approval Certificate for Processing and Trading Business in Export Processing Zone” and the attached lists. The customs shall register the enterprises basing on the approval certificate stamped by the administrative commissions.
About the exporting and importing of export processing zones, the Measures reserves the previous provisions and adds two aspects of contents. One is to forbid disconnection or face-lifting in the zone. The other is to allow the export processing zone to develop after-sale maintenance services of the machine exported from