Since the outbreak of COVID-19, the central government of the People’s Republic of China (PRC) as well as the provincial and city level governments across the country have enacted numerous policies and measures to
- ensure health and safety of workers and the population in general,
- create incentives and support to assist affected companies; and
- facilitate resumption of production and operation of enterprises.
All of these policies and measures also apply to foreign invested enterprises (FIEs).
This newsletter furnishes you with an exemplary overview out of more than 50 reviewed policies and measures from national and local governmental agencies. The overview is sorted according to industries, regions and types of companies to facilitate your analysis of which policies and measures might provide an incentive or relief for your China business.
As a general summary, it can be seen that a good share of the measures and policies provides for exemptions, waivers and reductions of payments, as well as opportunities to defer payments. Almost all of these measures must be or can only be taken during the so called “epidemic period”, which is oftentimes determined to last until at least June 30th, 2020. Following this period, deferred payments will have to be settled, while exemptions, waivers and reductions may mean factual subsidies. Enterprises may, therefore, want to assess which of the available measures will temporarily secure their liquidity and which measures will create actual benefits.
Please note that, for the policies and measures listed below and applicable on a national level, there may be different and more favourable policies and measures available in the locality of your China business. In particular, exemptions, reductions and waivers of payments are more likely to be granted on a local than on the national level.
|Small and Medium Enterprises (SMEs)
The majority of policies and measures aimed at stabilizing the production and operation of businesses addresses small and medium enterprises (SMEs). The below list contains a few examples of such policies and measures:
- SMEs can make applications with their banks for deferred repayment of loan principals and interests that became or become due between January 25th to June 30th;
- During such period, certain SMEs shall further be allowed to defer payment, or in parts even be exempted from payments, of electricity, water and gas required for the production and operation (for exemptions please cf. the measures at the local level);
- For new loans, government-backed financing guarantee and re-guarantee agencies are encouraged to halve the guarantee fees and to generally keep the guarantee fees below 1 percent of the total loan amount.
The governmental agencies in various provinces and cities have enacted additional and more favourable measures, such as reduction and exemption of taxes (e.g. value-added tax), administrative fees, rent payments for premises, or social security contributions (please cf. the examples for Beijing, Shanghai and Guangdong below).
All banking institutions and insurance institutions are required to take the following measures to support the development of the real economy:
- Extending or renewing loan periods and effectively reducing interest rates and fees (banking institutions);
- Cancelling foreign debt limits, among others, and encourage handling of foreign debt registration through online application systems to facilitate enterprises to carry out cross-border financing (banking institutions);
- Facilitating settlement and payment of capital project income related to epidemic prevention and control, particularly by means of strengthening post-examination of documentary materials regarding the authenticity of the use of enterprise funds;
- Reducing insurance fees and interests and extending premium payment dates, etc. (insurance institutions);
|| Intellectual Property
Several governmental agencies, in particular the State Administration for Market Regulation and its affiliated offices the National Medical Products Administration and the State Intellectual Property Office, have announced to implement facilitative measures with respect to licenses, certifications and intellectual property rights, such as:
- For products the manufacture of which requires licenses, or the re-production or conversion of which (to new products) requires compulsory certification, the processing time for the examination and the time limits for the application shall be reduced;
- The examination and approval of medical device registration licenses as well as production licenses for enterprises that converted their production to produce medical devices, shall be handled with priority;
- The examination and approval of medical drugs required for the control and treatment of the new COVID-19 pneumonia epidemic shall receive preferential treatment;
- Patent and trademark applications for items pertaining to the prevention and treatment of the new COVID-19 pneumonia epidemic, shall, upon request, receive preferential treatment;
- Certain processing fees and technical service charges shall be reduced.
Taxes and Duties
|The General Administration of Customs of China announced several relieving measures with respect to duty and tax payments due during the epidemic period, such as:
- The payment date for some duties and taxes due after February 3rd, 2020, has been postponed until 15 days after the enterprise returns to work;
- Fines incurred because of the delayed reporting of declarations submitted after February 3rd, 2020 will be waived until the date the enterprise resumes work;
- The deadlines for certain tax filings, commissioned withholding and collection of taxes, among others, have been postponed;
- For enterprises from certain industries, the carryover period of losses incurred in 2020 was extended from 5 years to 8 years;
- Certain donations of cash or materials made to help fight the disease outbreak may enjoy deductions from the corporate income tax;
- Enterprises from certain industries may enjoy an exemption from value-added-tax (VAT) payments, or a refund of VAT;
- For eligible products, enterprises may apply for a rebate, or refund of VAT and consumption tax exported to overseas markets.
The Ministry of Human Resources and Social Security has enacted various relieving measures regarding the administration of payments into the social security schemes. In response to these measures, several local Social Security Bureaus have also enacted their own measures. The measures include, in particular, the following:
- Contributions to certain of the social security schemes (e.g. pension, unemployment and work-related injury insurance) may be exempted, reduced, waived or payment may be deferred, depending on the size of the enterprise (SME or large company) and the province or municipality of its location;
- Certain social insurance contributions already collected for previous months (e.g. February and March 2020) will be classified and may be eligible for a (partial) refund;
- The calculation period for social security contributions (generally lasting from April 1 through March 31 of the following year) was extended to June 30, which means that the social security contribution base will only have to be adjusted beginning from July 1 and employers and employees may continue to make contributions based on the old contribution base until such date;
- Employers and employees may be allowed to defer payments to their mandatory housing fund.
|The Ministry of Commerce has urged its affiliated agencies to make every effort to effectively improve services for foreign-invested enterprises and to strengthen the attraction of foreign-investment. The enacted measures include, in particular, the following:
- The negative list for foreign investments is set to be reduced and the catalogue of industries in which foreign investment is encouraged is set to be expanded;
- Commercial insurance companies are encouraged to offer short-term export credit insurance and to lower their premium rates;
- Strengthening paperless application for import and export licenses;
- Simplifying materials required for application.
|The central government of the city of Beijing has enacted 16 preferential policies and specific measures to facilitate the resumption of production and operation of SMEs, such as:
- Rent exemptions or reductions: SMEs leasing state-owned premises in Beijing, may, under certain circumstances,be exempted from rent payments, or have their rent payments reduced by 50 percent;
- Exemptions from administrative fees: SMEs may be eligible for waived state administrative fees, such as sewage treatment fee or road occupation fee;
- R&D subsidies: SMEs located in certain industrial parks may be eligible for subsidies for R&D costs.
|Several agencies of the Shanghai government have rolled out more than 28 policies and measures to stabilize the production and operation of local businesses, in particular of SMEs, such as:
- Rent exemptions or reductions: SMEs leasing state-owned premises in Shanghai, may, under certain circumstances, be exempted from rent payments, or enjoy reduced rent payments; commercial landlords are encouraged to waive or reduce rental payments for tenants, for which they may, in turn, enjoy a reduced property tax or land use tax;
- Social security contributions may be further lowered, such as the employees’ medical insurance contribution rate of enterprises, which shall be reduced by 0.5 percentage points in 2020.
|The government of the province of Guangdong has enacted 20 policies and measures to facilitate the production and operation of local businesses, in particular SMEs, such as:
- Deferred payment of social security contributions: Contributions for all five schemes of social security contributions (pension insurance, medical insurance, unemployment insurance, injury insurance and housing fund) may be deferred until three months after the epidemic period;
- Enterprises may enjoy a refund of up to 50 percent of unemployment insurance premiums paid by itself and its employees in the previous year under certain circumstances;
- Rent exemptions or reductions: SMEs leasing state-owned assets in Guangdong province, may, under certain circumstances, be exempted from rent payments, or enjoy reduced rent payments;
- Wages paid by the enterprise during a period in which an employee received medical treatment or was quarantined may be subsidized at a rate of up to 50 percent of the employee’s basic pension insurance contribution base.
All of the above-listed measures are subject to a corresponding application on the basis of the relevant detailed conditions precedent and the respective consent or approval of the competent governmental agency. We would gladly assist in analysing your particular scenario in more detail so as to support you in applying for the applicable beneficial treatments. This would include the identification and prioritisation of potentially available subsidies (e.g. exemptions, reductions, etc.) over mere liquidity reliefs (i.e. deferred payments). For potential reliefs on the employment side (e.g. reduction of working time and pay, etc.) we already have advisory expertise in place. In case of any questions please don’t hesitate to contact us.