A new view on the legal nature of the work permit for foreigners working in China

Every foreigner who works in China is supposed to hold a Work Permit issued by local labor department. Otherwise, the employment of the foreigner is illegal. The consequences of this illegality will be (1) penalties that may be imposed by local labor department and local police, and (2) more importantly, the change of the relationship between the foreigner…

Your employers no longer able to secretively cancel your work permit in Shanghai

Recently, I scored a big victory in a case against Shanghai Labor Department (“SHD“) in which we sued SHD for wrongly cancelling the work permit of my client, an American individual. The court judgment, coming after long period of intentional delay, declared that SHD’s cancellation of alien work permit based on the unilateral application…

Clarification on two points regarding China inheritance practice

China themed information is pervasive throughout the web. Randomly, I came across an article discussing China inheritance or succession system, entitled “facts about Chinese society’s inheritance“.

While the bulk of the information contained in the article is correct, it will be useful to clarify some of the points made therein.…

China MOFCOM and SAFE issued new rules for foreign invested investment companies

On December 8, 2011, China Ministry of Commerce and Chins State Administration of Foreign Exchange jointly issued a new circular further regulating the business of foreign invested investment companies.

A foreign invested investment company refers to a foreign invested company that is engaged in direct equity investment acitivities in China, often employed…

Do I enjoy the tax credit benefit under China-USA income tax treaty?

Recently, an American expat working in China approached me for advice about his situation where he was ordered by local tax authority to pay individual income tax that is inadvertently evaded in the past five years.

The USA expat was originally dispatched by American parent company to offer engineering support to Chinese plant. He was however paid by the parent…

Individual Income Tax Liabilities for Expatriates in China

For foreigners lured into China labor market, there are many things for them to ponder over before heading to China soil. One of the critical things that need to be clearly addressed is the tax implication of working in China, namely, whether you need to pay individual income tax in China, and how and how much you need to pay China individual income tax.

For those…

Q&A relating to Individual Income Tax for Foreign Individuals(外国人个人所得税)

I. What kinds of foreign individuals shall pay Individual Income Tax (“IIT”) in China?

Pursuant to the PRC IIT Law and its Detailed Implementation Rules:

  1.Foreigners, residents of the regions of Hong Kong, Macau and Taiwan (hereinafter referred to as “Foreign Individuals“) who derive income from working or…

Single member company and the lifting of corporate veil in China corporate law practice

Most foreign investors have come to choose to go alone when investing in China. As a result, more and more WFOE companies (limited liability companies) have appeared in market. Among those WFOEs, there is a considerable portion being single or one member companies that, namely, have only one shareholder, either a natural person or a legal person.

Recently,…

China Supreme Court clarifies the criteria for filing a bankruptcy case

On September 9, 2011, China Supreme Court issued its first judicial interpretation on China Bankruptcy Law clarifying under what conditions a China court should accept a bankruptcy case filed by related parties.

Article 2 of China Bankruptcy Law sets out the criteria for triggering bankcruptcy proceedings (inclusive of reorganization, composition…

employee self-dealing, an embezzlement crime?

A corporate client approached us recently for advice on a tricky situation as follows:

The company A has been purchasing serveral accessary parts for their machinery. These articles are purchased at inflated prices (say RMB 20) from their original manufacturer. The  procurement department manager (not the general manager of the Company A) found…

VAT Tax refund/rebate for trading companies in China

Tax refund or tax rebate policy has been a focal point with which foreign investors are mostly concerned when intending to set up a trading company in China engaged in exporting activities.

Assuming that a foreign invested trading company with the general VAT taxpayer status (opposite to the small-scale VAT tax payer status) (the “Company”) …

Scams aimed at expats in Shanghai/China

[Notes: This is an article quoted from Global Times website (click here for details). Expats often fall victims to such scams and deceptions. Very often, there is no way to recover your loss either because you don’t even know where the bad guys are, or because it is such a small amount that you don’t bother to find it back. Hower, in particular, I would

Legal issues regarding dormant investment by foreign investors in China

Just came across an article on the Internet, entitled “Protection for the Rights & Interests of Dormant Shareholders” discussing the protection of legal interests of dormant shareholders. While this article cast some lights on the issue, but some of its points do not apply to foreign investors being a “dormant shareholder”.…

The Concept of Legal Representative in China Corporate Laws

When advising foreign investor clients (esp, those from common law jurisdictions) on corporate governance structure of the company they invest, the concept of legal representative often causes great confusion and puzzle. There have been also frequent inquiries from people on what it means to them to be a legal representative of a company in China, as such…

Tips for drafting business contracts to be used in China

Doing business in China can be so much different that you may feel it hard to adapt in your initial interaction with Chinese business people. As a business lawyer working for foreign clients, I have personally witnessed and experienced such differences in various occasions.

One of the conspicuous differences is the perception of the significance of business…

bargain for a liquidated damages clause in your employment contract

Very often, foreign employees feel screwed by China labor laws in the case of labor dispute with their companies.

A typical case will be like this: an expat employee with a high monthly salary well above RMB 23,375, is unlawfully dismissed lately before expiry of the one year labor contract term, say with another two or three months left. Now, the company or …

How a personal injury case is handled in Chinese courts?

With more and more foreigners coming into China for work or for travel, it has seen a number of cases where foreigners fall victim to personal injuries (typically in road accidents), and it is often inevitable to resort to courts in China to settle the compensation disputes arising therefrom.

It is terrible to be caught in a road accident in a foreign country, …

Spiritual damages in tort cases in Shanghai, China

[This is an old post written by the blogger of this blog. What is discussed about in this article has been remaining unchanged.]

Under Chinese laws, in a tort case involving severe violation of personal interests (bodily integrity, fame, privacy etc.), victims are often granted both economic damages and spiritual damages.

If you are unfortunately caught …

sell your real property in China before it is too late

vA piece of news run on Ifeng.com caught my attention but with no surprise.

According to the news, a dozen of American individual real estate investors are selling their hotel units bought six years ago. It made news because of its sensitivity in a time people are waiting to see where the Chinese property market is heading, or put it clearly how much the prices can…

Don’t jeopardize the good chemistry with your landlord

I was helping a Turkish client to negotiate a lease contract for premises on which my client wants to open a Turkish restaurant. The two parties are in a really friendly and amicable atmosphere.

As always, the most difficult part of negotiation is the contract price. We know the landlord needs money and we try to cut landord's initial quote. Apparently, the two…