Regulations to Encourage Regional Headquarters in Shanghai

On July 25, 2019, the People’s Government of Shanghai Municipality issued the Revised Regulations to Encourage the Establishment of Regional Headquarters (RHQs) by Multinational Corporations (MNCs) in Shanghai (Hu Fu Gui [2019] No. 31). This 2019 Establishment of Regional Headquarters Regulations will take effect on September 1, 2019, and have a validity term until August 31, 2024. The Notice has simultaneously abolished the 2017 version of the Regulations to Encourage the Establishment of Regional Headquarters.

Article 1 Purposes and Basis

For the purposes of implementing the Foreign Investment Law of the People’s Republic of China, the Several Opinions of the CPC Central Committee and the State Council on Building a New Open Economic System (No. 13 [2015], CPC Central Committee), the Notice of the State Council on Several Measures for Expanding Opening Up and Vigorously Using Foreign Capital (No. 5 [2017], State Council), the Notice of the State Council on Several Measures for Promoting Growth of Foreign Investment (No. 39 [2017], State Council), the Notice of the State Council on Several Measures for Actively and Effectively Utilizing Foreign Investment to Promote High-Quality Economic Development (No. 19 [2018], State Council), and the Several Opinions of Shanghai Municipality on Promoting the Development of the Regional Headquarters (RHQs) (RHQs) of Multinational Corporations (MNCs) (No. 30 [2019], Shanghai Municipal People’s Government) issued by the Shanghai Municipal People’s Government, encouraging multinational corporations to establish Regional Headquarters (RHQs) and quasi-headquarters in Shanghai Municipality, supporting Regional Headquarters (RHQs) and quasi-headquarters in Shanghai in gathering business, expanding functions, and improving competence levels, and actively participating in the development of “Five Centers” in Shanghai, these Provisions are developed in accordance with relevant laws and regulations.

Regional Headquarters Ceremony

Article 2  Definitions

The Regional Headquarters (RHQs) of a Multinational Corporation (hereinafter referred to as a “Regional Headquarters”) means a sole head office established in Shanghai by a Parent Company registered overseas to perform the management and service functions for the enterprises within a region covering more than one country in the form of investment or authorization. A multinational corporation shall establish a Regional Headquarters (RHQs) in this Municipality in the organizational form of an investment company, a management company, or any other enterprise with independent legal entity status.

The Multinational Companies’ Headquarters Institutions (hereinafter referred to as a “HIs”) means a foreign-funded enterprise (including a branch) which, though failing to meet the standards for the Headquarters of a Multinational Corporation (MNC), assumes multiple functions among management decision-making, capital management, procurement, sales, logistics, settlement, research and development, training and other support services of the parent company registered overseas within a region covering more than one country.

Article 3 Scope of Application

The Regional Headquarters of foreign transnational corporations established within this Municipality (hereinafter referred to as Regional Headquarters) shall be governed by these Provisions.

Article 4 Administrative Departments

Shanghai Municipal Commission of Commerce shall be in charge of the determination of Regional Headquarters (RHQs) and the Multinational Companies’ Headquarters Institutions (HIs), and coordinate with relevant departments to provide administrative services for Multinational Corporation’s Regional Headquarters and Headquarters Institutions.

The Departments of Market Regulation, Finance, Tax, Foreign Affairs, Science and Technology, Human Resources and Social Security, Exit and Entry Administration of public security, Foreign Exchange Management, the People’s Bank of China, the Customs and other departments shall provide effective administrative services for Regional headquarters and Headquarters Institutions (HIs) within the scope of respective duties.

Article 5 Requirements for Determination of Regional Headquarters

The applicant for the determination of Regional Headquarters (RHQs) shall comply with the following requirements:

  1. The Foreign-Invested Enterprise (FIE) Should have an independent legal entity qualification;
  2. The minimum requirement on the total assets of the parent company is USD 200 million;
  3. With the authorization of the parent company, such enterprise assumes headquarters functions such as management, decision-making, fund management, procurement, sales, logistics, settlement, research and development, training, and other functions for a certain region covering more than one country;
  4. The minimum registered capital is USD 2 million;
  5. The enterprises basically meeting the preceding requirements with substantive contributions to local economic development may be determined as Regional Headquarters (RHQs) as appropriate.

Article 6  Requirements for Determination of Regional Headquarters Institutions (HIs)

The applicant for the determination of Regional Headquarters Institutions (HIs) shall comply with the following requirements:

  1. The Foreign-Invested Enterprise (FIE) should have an independent legal entity qualification or the branches of FIE;
  2. The minimum requirement on the total assets of the parent company is USD 100 million;
  3. With the authorization of the parent company, such enterprise assumes headquarters functions such as management, decision-making, fund management, procurement, sales, logistics, settlement, research and development, training and other functions for a certain region covering more than one country;
  4. The minimum registered capital of the Establishment of Regional Headquarters (RHQs) is USD 1 million. If the foreign-funded enterprise is the Headquarters Institutions (HIs), the operating capital allocated by the parent company shall be no less than USD 1 million.

Article 7 Application Materials

The applicant for the determination of Regional Headquarters (RHQs) and Headquarters Institutions (HIs) shall submit the following materials to the Shanghai Municipal Commission of Commerce:

  1. The Application letter signed by the legal representative of the enterprise;
  2. The Authorization document of Multinational Corporation’s Regional Headquarters (RHQs) or the Headquarters Institutions (HIs) signed by the authorized signatory of the parent company;
  3. The photocopy of Business License of Multinational Corporation for the Regional Headquarters (RHQs). If the applicant is Headquarters Institutions (HIs), except the photocopy of Business License of Shanghai branch, and the certificate of operating capital shall also be submitted.
  4. The audit report of the parent company for the previous year.
  5. The photocopies of the Business License or registration certificate of the domestic and foreign enterprises authorized for Regional Headquarters management.
  6. Other materials required to be submitted according to laws, rules and regulations.

Where submission of copies is not explicitly stated in the preceding articles, the original documents shall be submitted.

Article 8 Application Processing

Shanghai Municipal Commission of Commerce shall complete the application process within 8 working days upon the receipt of the application and other materials, and make the decision whether to pass or not to pass. When the applicant is determined qualified, the Certificate of Determination will be issued.

Article 9 Subsidies and Rewards

In accordance with relevant regulations, the Regional Headquarters may obtain subsidies for establishment and rent.

In accordance with relevant regulations, The Regional Headquarters with comprehensive operational functions such as business management, fund management, research and development, procurement, sales, logistics, and support services may obtain rewards if substantive contributions to economic development and good benefits have been achieved.

If the Multinational Corporations (MNCs) establishes Asian headquarters, Asian-Pacific headquarters, or headquarters for a larger region and is corresponding to relevant requirements, such Regional Headquarters may obtain subsidies in accordance with relevant regulations.

The specific procedures for the implementation of subsidies and rewards shall be further formulated by relevant government departments.

Article 10 Funds Operation and Management

Regional Headquarters (RHQs) and Headquarters Institutions (HIs) may establish a centralized internal fund management system to conduct centralized management of the internal fund. Where the operation of foreign exchange funds is involved, such operation shall be governed by relevant regulations on Foreign Exchange administration. Qualified RHQs and HIs may conduct centralized operation and management of cross-border funds such as centralized payments and receipts and netting settlement of foreign exchanges under current accounts, centralized operation, and management of domestic and foreign-invested funds, centralized settlement and sale of foreign exchange, and centralized quota allocation of foreign debts and overseas loans.

The Investment companies may establish finance companies to provide centralized financial management services for their Investment Enterprises in China in accordance with the Procedures for Administration of Finance Companies of Enterprise Groups.

The procedures for non-trade foreign exchange payments shall be optimized. The tax payment guidance and services for RHQs and HIs shall be strengthened. The RHQs and HIs shall be provided with the green channel for contract recordation and tax payment determination of non-trade foreign exchange payments.

RHQs and HIs may open free trade accounts in accordance with relevant regulations, and conduct cross-border receipts and payments of domestic and foreign currencies and domestic receipts and payments of RMB in accordance with the principle of convertibility.

Article 11 Simplify the Foreigner Exit and Entry Procedures

The qualified Chinese employees of RHQs or HIs may apply for APEC Business Travel Card. For business travel to Hong Kong, Macau, and Taiwan or Foreign countries, the relevant departments shall provide exit convenience.

The foreign employees of RHQs or HIs who need multiple temporary entries may apply for multiple-entry visas with a validity period within 1 year and a duration of stay within 180 days.

The foreign employees of RHQs or HIs who need Temporary Entry in Shanghai shall apply for Entry Visas in the Chinese Embassies or Consulates abroad. If time is urgent, the foreign employees may apply to the Exit and Entry administration department of Shanghai Municipal Bureau of Public Security for Port Visas in accordance with relevant regulations.

The foreign employees of RHQs or HIs who need a long-term residence in Shanghai may apply for Residence Permit of Foreigner with a validity period of 3 to 5 years.

The Legal Representatives and the senior executives of RHQs or HIs will be preferentially recommended as applicants for Permanent Residence Permits, in accordance with the Procedures for Administration of Approval on Permanent Residence in China.

The Customs of Shanghai (The Exit and Entry Inspection and quarantine department) shall provide the Green Channel for the Legal Representatives and the senior executives of RHQs or HIs who apply for the healthy certificate.

Article 12 Talent Introduction

The Department of Human Resources and Social Security and the Department of Science and Technology shall provide the facility for the foreign talents by RHQs or HIs who work in Shanghai or apply for relevant certificates.

The Chinese talents who are adopted by RHQs or HIs can apply for the Registered Residence in Shanghai.

For the Overseas students who have Bachelor degree or above undergraduate level or with special talents, and the overseas students or professionals with long-term or permanent residences in foreign countries and Chinese passports in China has been canceled, and professionals from the Hong Kong, Macao or the Taiwan region, they can apply for Shanghai Residence Permit (Type B) in accordance with relevant regulations if they are employed by RHQs and HIs. Meantime, the spouses and children under the age of eighteen or in high school of the preceding personnel may apply for certificates of accompanying personnel.

Focus on trade facilitation, Shanghai Customs shall innovate the supervision system and supervision mode, and improve customs clearance efficiency so as to facilitate the import and export of goods of qualified RHQs and HIs.

Where distribution centers are established for logistics integration by RHQs and HIs, the Departments of Customs and Foreign exchange shall adopt facilitating regulatory measures.

The Shanghai districts where the RHQs and HIs located shall provide convenience for the Talents’ children to the school, Medical Care, Applying for Talent Apartments, etc.

Article 13 Trade Facilitation

Focus on trade facilitation, Shanghai Customs shall innovate the supervision system and supervision mode, and improve customs clearance efficiency so as to facilitate the Import and Export of goods of qualified RHQ and HIs.

For the distribution centers established for logistics integration by RHQs and HIs, the Departments of  Customs and Foreign Exchange shall adopt facilitating regulatory measures.

Article 14 District Government Support

According to the actual circumstances, all the district’s governments may formulate policies and measures and improve the business environment to support the development of RHQs and HIs.

The investors from Hong Kong, Macau, and Taiwan who establish RHQS and HIs in Shanghai shall be governed with reference to these Provisions.

Article 16 Effective Date and Validity Period

These Provisions shall be effective as of September 1, 2019, and expire on August 31, 2024.

 

Mao

Hi, I'm Mao Lida, Executive Director, 15 years international project manager with a strong, in-depth background in business relations, finance operation, Legals, project management.

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