CBL Team’s Introduction
CBL’s translation of these Chinese government reporting guidelines offers comprehensive guidance for businesses navigating China’s foreign investment landscape. The Reporting Guidelines clarify China’s reporting mandates, outlining crucial processes, systems, and legal obligations under the Foreign Investment Act. This information is helpful for facilitating compliance, safeguarding investor interests, and avoiding potential penalties.
Note that the CBL team selected a walkthrough done by the Qingdao government because other regions did not provide a walkthrough of how to file an information report. While each region has its own web portal and URL, each province has a relatively similar process and therefore this walkthrough is useful for any business operating in China. This guidance is translated to American English using the User Centered Translation approach.
Foreign Investment Reporting Walkthrough
1. What is the foreign investment information report？
The Foreign Investment Act of the People’s Republic of China provides for the creation of a national foreign investment information reporting process. As of January 1, 2020, foreign investors and their entities that directly or indirectly invest in China are required to submit investment information to the commerce agencies with jurisdiction via the business filing system and the National Business Entity Credit Lookup System.
2. What types of commercial enterprises are required to report foreign investment information?
Foreign investors and their entities need to submit foreign investment information reports for the following: 1. Direct investment by foreign investors forming companies or partnerships in China (particularly, those involving banking, securities, insurance, and other financial industries); 2. Foreign entities engaging in production and business activities in China; 3. Foreign entities setting up a local representative office for production and business activities in China; and 4. Entities that have foreign investors, and form Chinese entities as a vehicle for reinvestment (including reinvestment through intermediaries). Furthermore, the Administrative Regulations provide that investment by investors from the Hong Kong, Macau, and Taiwan Special Administrative Regions, and Chinese citizens living overseas are governed by the Foreign Investment Act and the Administrative Regulations, including the information report process.
3. How should foreign investors and their business entities submit their information reports?
1. When forming an entity that will have foreign investment or merging and acquiring an entity that does not yet have any foreign investors, the foreign investor must use the business filing system to submit a primary report. 2. Entities that have foreign investors must submit a change report in the business filing system for any changes made to the information reported in the primary report. These change reports must include the changes made to the business’ general information and any changes made to the investors and the ultimate beneficiaries. 3. Entities that have foreign investors must submit their annual report for the previous year to the National Business Credit Lookup System between January 1 and June 30 of each year. The report must include general information about the business, in addition to specifics about, investors, ultimate beneficiaries, business operations, and business assets & liabilities. 4. The market regulator must report information on the dissolution or conversion of foreign owned entities to domestic business entities to the commerce agency in their jurisdiction, and investors are not required to submit separate reports. 5. Entities that have foreign investors or companies investing in Chinese entities (including investments made through intermediaries) are not required to submit separate reports, and market regulatory agencies will submit all necessary information directly to the commerce agency in their jurisdiction.
4. What systems are available for foreign investment information reporting?
The current foreign investment information reporting systems include the business filing system (i.e., Qingdao Business Filings Smart Platform) and the National Business Entity Credit Lookup System. Primary reports and change reports are filed via the business entity filing system. The system automatically shares these reports with the appropriate agencies, and there is no need for businesses to file multiple termination or conversion reports. Annual reports can be filed via the National Business Entity Credit Lookup System.
5. How can applicants file primary reports in the system?
Applicants may log in to the Qingdao Municipal Administrative Approval Service Office’s official website (http://qdsxzspfwj.qingdao.gov.cn/), select “Qingdao Business Filings and Dissolution Smart Platform,” click “I want to form a company” to navigate to the business page and log in to the Business Filings System. Next, select “Formation Registration” and follow the prompts to apply for the business name. After the business name passes the initial review, follow the prompts to fill out the basic information, statutory representative, originating shareholders, members of the board of directors, president, and members of the board of supervisors, power of attorney issued for sending and receiving legal documents, contact person information, consolidated licenses, and commercial filings (foreign investment information reports). Select whether the company’s business subject to the Special Administrative Regulations for Admission of Foreign Investments (Exception List) and fill out the commitment letter. Finally, choose the business registration application submission method and click the submit button. Note: Information marked with an asterisk must be completely filled out when submitting the foreign investment information, and ultimate beneficiary details must be filled out if the investor is not a natural person.
6.How can applicants file change reports in the system?
Applicants may log in to the Qingdao Municipal Administrative Approval Service Office’s official website (http://qdsxzspfwj.qingdao.gov.cn/), select “Qingdao Business Filings and Dissolution Smart Platform,” click “I want to register a change” to navigate to the business page and log in to the Business Filings System. Next, select “Change Filing” and follow the prompts to complete the change filing. Only fill out the information that needs to be changed in the foreign investment information report. Select the last option, “Only change business records” in the drop-down menu if the changes do not involve business filings, then fill out the “Foreign Investment Information Report” and click submit.
7. What kind of information needs to be included in foreign investment information reports?
The company’s basic information, capital contribution details, ultimate beneficiary, incentive program details, acquired company details, information on PRC investments made by the acquired company, strategic investments, and foreign entity basic information.
8. How can businesses find out whether their foreign investment information reports were approved?
The market regulatory agency for the province will review and approve information submitted via the business filing system and forward it to the National Administration for Market Regulation. The national administration will then send the information down to the commerce agency in the jurisdiction.
9. How can a foreign owned business submit their annual reports?
Entities that have foreign investors can submit their annual report for the previous year to the National Business Credit Lookup System between January 1 and June 30 of each year. The report must include general information about the business, in addition to specifics about investors, ultimate beneficiaries, business operations, and business assets & liabilities.
10. How can companies get a receipt their information reports were received?
Companies requiring confirmation that their information reports were received may contact their local commerce agency. Local commerce agencies may then provide confirmation of the receipt of the submitted information reports in the manner requested by the company once they confirm all information meets the requirements.
11. When do companies receive SMS notifications for information reports?
Commerce agencies may send an SMS notice to the company’s contact person if they discover that the information reports submitted are not in the form required during their review. Companies can then use the code sent via SMS to log in to the commerce agency’s business filing system and check the filing processing results, after which they can log into the business filing system for the commerce agency in the jurisdiction to correct or modify the information submissions.
12. How can companies change their contact person’s mobile number?
Please log in to the commerce agency’s business filing system to update contact person details. The commerce agency will then share such with the commerce agency for the jurisdiction.
13. How can companies search for information reports?
Companies can query report information via the foreign investment information lookup system once such information is approved by the commerce agency.
Public report information lookup portal: Ministry of Commerce Public Portal.
http://wzxxbg.mofcom.gov.cn/gspt/
14. What are the legal consequences for not reporting foreign investment information as required?
The commerce agency for the jurisdiction will require foreign investors and foreign owned entities who fail to submit corrections or supplemental materials pursuant to Article 19 of the Procedures after receiving notice to submit the necessary corrections or materials within 20 business days; the penalty for non-compliance is between 100,000 and 300,000 Yuan. Foreign investors or foreign-invested entities who fail to make the necessary corrections within the time limit are subject to a penalty between 300,000 Yuan and 500,000 Yuan in the following circumstances:
(I) Foreign investors or business entities that have foreign investors intentionally violate their reporting obligations, make omissions, or make misrepresentations when reporting information;
(II) Foreign investors or foreign owned entities intentionally submit incorrect industry information, regardless of whether the industry in question is governed by the Special Administrative Regulations for Admission of Foreign Investments, or submit incorrect investor or ultimate beneficiary information;
(III) Foreign investors or foreign owned entities violate the requirements of these Procedures within 2 years of receiving administrative penalties for failing to report investment information pursuant to the same requirements;
(IV) Other major circumstances specified by the commerce agency for the jurisdiction.
Any failures by foreign investors or their entities to fulfill legally required reporting obligations will also be recorded in the foreign investment information reporting system to improve credit oversight pursuant to law.
The commerce agency for the jurisdiction may also publish instances of foreign investors or foreign owned entities receiving administrative penalties for failing to fulfill reporting obligations on the foreign investment information reporting system. The agency may also add it to the entity’s record in the national business entity credit lookup system pursuant to law.
Data on foreign investors or foreign owned entities’ fulfillment of information reporting obligations and any administrative penalties imposed, may be shared from commerce agency for the jurisdiction, to other interested agencies, including those for market oversight, foreign exchange, customs, and tax.