China Law Update - December 2008

This final issue of China Law Update for 2008 examines four sets of rules and regulations that affect foreign investors and foreign-invested companies doing business with and in China.

Our first summary looks back to August, at an effort by China's Ministry of Commerce, the Circular on Delegating the Power of Approving the Establishment and Alteration of Foreign-Invested Joint Stock Enterprises, to streamline the approval process for foreign-invested joint stock enterprises in China. (See page 4.) This circular in many respects parallels one we summarized in last month's issue (the Circular on Delegating the Power of Approving Foreign-Invested Commercial Enterprises, China Law Update, November 2008), as both appear to reflect the Ministry of Commerce's desire to make it easier for foreign investors to do business in China.

More timely are our summaries of three tax reform measures that were drafted and passed by the State Council in November as part of China's broader response to the ongoing global economic crisis: the Provisional Regulations of the People's Republic of China on Value-Added Taxes (page 5); the Provisional Regulations of the People's Republic of China on Business Taxes (page 10); and the Provisional Regulations of the People's Republic of China on Consumption Taxes (page 12). Of the three, the amendments to China's VAT system are clearly the most important, but their shared purpose is just as clearly aligned: China has shifted—and likely will continue to shift—its overall tax regime away from taxes on production and towards taxes on consumption.