Foreign Investment Information Reporting System in China
In 2020, foreign investment in China will be facing new changes with the implementation of the Foreign Investment Law (FIL) and its Implementation Regulations. When several significant investment policies and measures are introduced to boost foreign investment, compliance requirements have also been lifted for foreign investment in China, one of which is the Foreign Investment Information Reporting System, provided in Article 34 of the FIL and further elaborated in the Foreign Investor information Reporting Measures and Notice Regarding Foreign Investor Information Reporting Related Matters. This marks that the era of Approval and Filling System has become history and been replaced by the new Information Reporting System simultaneously. Under this new system, foreign investors are obliged to submit the relevant investment information to the competent authority, which are the Ministry of Commerce (MOFCOM) and the State Administration for Market Regulation (SAMR). More specific information is as follows:
Who are obliged to report investment information?
The foreign investors here refer to the foreign natural persons, enterprises or other organizations directly or indirectly invest in China, including:
- Foreign investors establishing companies and partnerships (including banking, securities, insurance and other financial fields, same as below) in China;
- Foreign (regional) enterprises engaging in manufacturing and operating activities in China;
- Foreign (regional) enterprises establishing representative offices in China;
- Foreign enterprises investing in setting up enterprises in China (including multi-level investment).
It is important to point out that the investment of Chinese citizens residing abroad are also obliged to report investment information.
What information is required to be reported?
- Initial Report: newly established foreign-invested enterprises in China and enterprises acquiring a domestic company in China shall submit their basic information, information of the investors and its actual controllers, investment transaction information, etc.
- Change Report: this have to be submitted when there is any changes of the content in the Initial Report.
- De-registration Report: When the foreign-invested enterprises deregister or are converted into a domestic company.
- Annual Report: all the foreign-invested enterprises shall submit such a report containing the basic information, information of the investor and its actual controllers, information of the operation, assets and liabilities of foreign-invested enterprises, information regarding obtaining relevant industry license.
Where the information shall be submitted to?
- Online enterprise registration system
- The National Enterprise Credit Information Publicity System
Violation of such an obligation without further correction by foreign enterprises will lead to an administrative penalties of up to 500,000 yuan (around 66,000 euro) concerning the seriousness of the violation. Therefore, to avoid unnecessary administrative fines and other negative impacts on the enterprises, foreign investors shall keep the track of the investment information reporting obligation.
This article is written by Miss Peiying Li, China Practice of Kneppelhout.