New Rules by the Supreme Court of China on Private Loans Effective from Sept 1

The Rules on the Application of Law in the Adjudication of Private Loan Cases issued by the Supreme Court of China (the “Rules”) became effective from Sept. 1st. The Rules were made to replace the previous ones that were made in 1991 and have been out of date under the current situation that private loaning is very active and popular.

I.  Companies borrowing/lending among one another is lawful

Under the previous rules that govern the private loaning for the past 24 years, inter-company loaning is taken as in violation of the finance supervision of the state and thus null and void. This is totally changed by the Rules. The Rules provided that it is lawful and protected by law that companies borrow/ lend money among each other, or borrow money from staff, for the purpose of running business (other than financing business).

II.     Maximum interest rate

The Rules provide that the maximum interest rate that is supported by court is 24% per annual. That is to say, as long as the interest rate agreed between the parties is not higher than 24% per annual, the claim of interest will be supported by court; while if the interest rate agreed between the parties is higher than 24% per annual, the part of interest claim exceeding 24% per annual will not be supported by court.

The interest rate between 24% and 36% per annual is the natural debt, which means if the borrowing party voluntarily pays the interest up to 36% per annual, such payment cannot be recalled, and any cause of action to claim back the voluntary payment of such interest will not be supported by court. However, the part beyond 36% per annual is invalid agreement and shall be restored. If the voluntary payment of interest is beyond 36% per annual, the exceeding part can be claimed back through a civil action.

III.   Where unlawful raise of fund is involved in a private loaning case

Where the borrowing/loaning facts of a private loaning case is actually suspected of the crime of unlawful raise of fund, the court shall decide not to accept the case or dismiss it, and then transfer the clues and evidences of the facts to public security or procuratorate authorities.

Where a crime is related to the private loaning case but not arising out of the same fact, the court shall continue to adjudicate the private loaning case while transferring the clues of the crime to the investigation authority.  

Policies Adjusted on Market Access and Administration of Foreign Investment in Real Estate Market

Recently, six departments including the Ministry of Commerce and the Ministry of Housing and Urban-rural Development have jointly issued the Circular on Adjusting Policies on the Market Access and Administration of Foreign Investment in the Real Estate Market (the "Circular").

According to the Circular,

I. Regarding the requirement on the ratio between the registered capital and total investment of a foreign-invested real estate company. The previous requirement of no less than 50% is cancelled. Under the new policy, the general rules on the ratio between the registered capital and total investment of ordinary foreign-invested enterprises apply to foreign-invested real estate companies too. In the case of the projects with total investment of more than 30 million, the ratio can be as low as 1/3.

II. The requirement that the registered capital shall be fully paid up by foreign-invested real estate enterprises to apply for domestic loans, overseas loans, and the settlement of foreign exchange loans is cancelled.

III. The Circular clarifies that branch offices or representative offices of foreign entities and foreign individuals living in China may purchase houses in China for their own use or living, subject to the local policies of the cities that implement rules on house purchase limits.

IV. Foreign-invested real estate enterprises may, in accordance with relevant administrative provisions on foreign exchange, directly handle the relevant foreign exchange registration under the direct foreign investment item with the banks.

(Source: http://www.mofcom.gov.cn/article/b/f/201508/20150801093662.shtml)

Implementing Proposal for Promoting Random Check of Tax Inspection

Recently, the State Administration of Taxation has formulated and promulgated the Implementing Proposal for Promoting Random Check of Tax Inspection (the "Proposal").

The Proposal provides that the objects and contents of the random check are fulfillment of obligation of tax payment and withholding and other tax compliance, by taxpayers, withholding agents and other tax-related parties (collectively the "Tax Inspection Object"). All objects to be inspected must be chosen at random through a lottery from the list of tax inspection objects classification and list of abnormal tax inspection objects, unless those whose clues are apparently suspected of evading, cheating and revolting tax and falsely making out invoice tax and other taxation offences are directly filed for investigation. The Proposal defines that the ratio and frequency of random check shall be reasonable and moderate, and directional random in combination with non-directional inspection shall be adopted for national, provincial and municipal key tax source enterprises. The proportion of random check is about 20% each year, and the check in principle shall be conducted every five years.

(Source: http://www.chinatax.gov.cn/n810341/n810755/c1789546/content.html)

Revised Advertising Law to Come into Force from September 1

On April 24, the 14th session of the Standing Committee of the 12th National People's Congress passed the revised Advertising Law of the People's Republic of China (the "Law") for implementation as of September 1, 2015.

Consisting of six chapters of General Provisions, Criteria for the Content of Advertisements, Code of Practice for Advertising, Supervision and Administration, Legal Liability, and Supplementary Provisions, the revised Law lays down stricter rules for medical, pharmaceutical, health food, and tobacco advertisements, among others. The new Law stipulates that a minor under the age of 10 shall not be employed as an advertising spokesperson and that an advertising spokesperson shall not recommend or endorse a product or service which the spokesperson himself or herself hasn't used. The Law also prohibits the publication of tobacco advertisements in mass media as well as in public places, on means of public transportation and in outdoor spaces, along with the delivery of tobacco advertisements to minors in any form. According to the revised Law, the illegal release of any false advertisement shall be subject to a penalty which is between three times and five times the advertising cost and where the advertising cost cannot be ascertained or is apparently too low, the penalty shall be between CNY200,000 and CNY1 million.

(Source: www.npc.gov.cn)