The article was first published in Asian-Counsel magazine, issue September 2009 www.pbpress.com
The government of Beijing has published the "Several Provisions on Encouraging Multinational Companies to Establish Regional Headquarters in Beijing" on 21 May 2009 which update the previous version from 1999. Rules regarding the implementation of the new policies were further issued in June 2009 to clarify recognition criteria and details of the incentives available to regional headquarters by multinational companies in Beijing.
Beijing was the first Chinese city to publish policies on encouraging multinational companies to establish regional headquarters in 1999, offering regional headquarters preferential policies on taxation, foreign currency management as well as entry and exit administration etc.. With the development of the economy in Beijing, some provisions have become common polices and others became outdated. Thus, the government of Beijing, worked nearly nine months with the relevant departments to complete the latest amendments.
I. Recognition of Regional Headquarters by Multinational Companies
The new policies lower the threshold for establishing regional headquarters in Beijing, reducing the cumulative amount of paid-in registered capital contributed by foreign parent companies from USD 30 million to USD 10 million.
Under the new implementation rules, foreign-invested holding companies and foreign-invested management companies may apply for the recognition as regional headquarters, where the foreign-invested management companies should satisfy the following conditions:
- the total assets of the parent company shall be no less than USD 400 million;
- the aggregate capital actually contributed by the parent company in China shall be no less than USD 10 million and the parent company shall invest in (or authorize the management to manage) at least three domestic or overseas companies, alternatively the parent company shall invest in (or authorize the management to manage) at least six domestic or overseas companies;
- the registered capital of the management company shall be no less than USD 2 million; and
- the management company shall have the highest administrative authority over all the Chinese subsidiaries of the parent company.
II. Government-funded Subsidies and Awards
One-off subsidy shall be granted to regional headquarters newly registered in or relocated to Beijing after 1 January 2009. The subsidy amounts from RMB 5 million to 10 million based on the level of the registered capital of the regional headquarters and such subsidy shall be paid during a three year period at 40%, 30% and 30%. Moreover, existing regional headquarters may also be eligible for these incentives depending on the extent of the capital increase. The accumulated amount of the subsidy shall not exceed RMB 10 million.
Starting from 2009, regional headquarters that reach a certain annual turnover for the first time can be granted a one-off reward of RMB 1 million, RMB 5 million or RMB 10 million. For office rent, office construction and office purchase, regional headquarters shall also be granted certain subsidies.
New policies provide incentives for regional headquarters personnel as well. For instance, for the top-10 regional headquarters with the largest increase of paid corporate income taxes within one year, one of its principals shall be rewarded by the government.
III. Expansion of Business Scope
Under the new policies, regional headquarters of multinational companies are not only permitted to engage in investment, operation management, fund operation and management, technical support and R&D, marketing services, personnel training and management activities, but also to be involved in import and export, domestic distribution, logistics and service outsourcing.
IV. Talent Introduction
The new policies also include measures to facilitate talent introduction, entry and exit administration, residence and transfer of personnel. For instance, foreign senior executives and technical personnel of regional headquarters, e.g. legal representatives, general manager, vice general manager and financial controller may be granted a visa with multiple entries for no more than five years or a residence permit for expatriates valid for five years. Moreover, expatriates of regional headquarters are allowed to purchase real estate in Beijing without a restriction related to their working period in China.
At present, there are over 160 foreign-invested companies with their headquarters in Beijing, among which 41 companies have been recognized as regional headquarters. The new policies will enhance the functions of the regional headquarters by multinational companies and promote the economic development in Beijing.
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