It is strongly suggested that FIEs prepare well for the forthcoming 2010 annual joint examination.  

Foreign-invested enterprises (FIEs) should be prepared for the upcoming joint annual examination. On 12 February 2010, the Ministry of Commerce (MOFCOM), the Ministry of Finance (MOF), the State Administration of Taxation (SAT), the State Administration for Industry and Commerce (SAIC), the National Bureau of Statistics and the State Administration of Foreign Exchange (SAFE) jointly promulgated the Notice on Implementing 2010 Joint Annual Examination of Foreign-Invested Enterprises (Notice 2010).

Since the original Notice on Implementing Joint Annual Examination of Foreign-Invested Enterprises was issued in 1998 by the MOF, SAT, SAIC, SAFE, General Administration of Customs, Ministry of Foreign Trade and Economic Cooperation (former MOFCOM), and State Economic and Trade Commission (later partially combined into MOFCOM), the joint annual examination has been facilitated for the purpose of reducing the FIE’s burden, and to create a more friendly investment environment for the rapidly increasing number of foreign investors in China in the recent years.

Notice 2010 provides specific implementing rules. The four main areas of note are examined here.

Office Opening Period for Joint Annual Examination

The Notice 2010 fixes the office opening period for the six government agencies to officially deal with the joint annual examination, which runs from 1 March 2010 through 30 June 2010.

No Charges for Electronic Signature

To encourage government agencies to adopt more modern information technology, which will also decrease the administrative-related burdens imposed on the FIEs, Notice 2010 expressly provides that no fees be imposed on FIEs for electronic signatures. Several jurisdictions, including Beijing, Shanghai and Suzhou Industry Park, have started to put this practice into use.

Grace Period for Capital Contribution

Notice 2010 stipulates that each involved government agency should properly use this annual examination to communicate with FIEs and acknowledge their operation status. For those FIEs that did not apply for annual examination, failed to submit full and/or genuine information, or engaged in any illegal or noncompliant activities, the relevant government authority should deal with them in accordance with the law.

However, Notice 2010 also stipulates that government agencies should provide efficient and quality services to FIEs, and assist them with real difficulties. At this point, Notice 2010 provides that SAIC is entitled to grant a grace period for the capital contribution to either of the following:

  • FIEs that contributed the first instalment of capital when the stated contribution dates are after 1 July 2008, and which are not able to inject the money because of finance issues. SAIC can allow them to renew the capital contribution term until the end of 2010 upon the proper application.
  • FIEs that did not have an open business for more than six months upon the establishment, or had an open business that was shut down voluntarily for more than six months because of the international financial crisis. SAIC can allow them to continue their non-operational business status until the end of 2010.

Accounting Firms Must Provide Services Lawfully

Notice 2010 also explicitly provides that the accounting firms involved in the joint annual examination must conduct the verification objectively, genuinely and impartially, subject to the Accounting Law of the People’s Republic of China, Certified Public Accountant Law of the People’s Republic of China, Regulation of Enterprise Finance and Accounting Report, and the relevant financial regulations.

In sum, it is strongly suggested that FIEs prepare well for the forthcoming 2010 annual joint examination.