The Ministry of Commerce and other ten departments issued a notice on several policies and measures to further support foreign institutions to invest in domestic science and technology enterprises
Shang Cai Fa [2024] No. 59
In order to further optimize the policy environment, actively attract foreign institutional investors to increase investment in China, and better support the financing and development of domestic science and technology enterprises, the Ministry of Commerce and other ten departments have studied and formulated the "Several Policies and Measures on Further Supporting Foreign Institutions to Invest in Domestic Science and Technology Enterprises", which are hereby issued to you.
Annex:
1. Circular .pdf on Several Policies and Measures to Further Support Overseas Institutions to Invest in Domestic Science and Technology Enterprises
2. Facilitate overseas institutions to enjoy preferential tax treaty .pdf
Ministry of Commerce, Ministry of Foreign Affairs
National Development and Reform Commission, Ministry of Science and Technology
Ministry of Industry and Information Technology
People's Bank of China
General Administration of Taxation
General Directorate of Financial Supervision
China Securities Regulatory Commission
State Administration of Foreign Exchange
March 22, 2024
Several policies and measures to further support foreign institutions to invest in domestic science and technology enterprises
In recent years, the mainland has accelerated the construction of a new open economic system, continued to expand foreign market access, and steadily promoted the opening up of the financial sector. In order to implement the decisions and arrangements of the CPC Central Committee and the State Council, further promote high-level opening-up, increase financial support for scientific and technological innovation, facilitate and encourage overseas institutions to invest in domestic science and technology enterprises, and focus on supporting the financing and development of science and technology enterprises in the start-up stage, the following policies and measures are hereby proposed.
1. Optimize management services and facilitate the investment and operation of institutions
(1) Facilitate applications for access. Efficiently approve qualified foreign institutional investor (QFII) and renminbi qualified foreign institutional investor (RQFII) qualification applications in accordance with the law. We will continue to optimize relevant management requirements to better facilitate the investment operations and capital exchange of overseas institutions.
(2) Optimize foreign exchange management. Improve foreign exchange management for direct investment, and facilitate foreign institutions to carry out domestic equity investment. Support overseas institutions to invest in domestic technology-based enterprises through Qualified Foreign Limited Partners (QFLP). Support technology-based enterprises to make full use of the centralized operation and management policies of cross-border funds in domestic and foreign currencies in cross-border business activities, improve the efficiency of capital operation, and reduce financial costs.
(3) Implement differentiated regulation. For venture capital funds (enterprises) established by overseas institutions in China, they enjoy the same treatment as domestic venture capital funds (enterprises), and implement differentiated self-discipline management that is different from other private funds in terms of registration and filing, change of matters, etc. Implement differentiated supervision and management of relevant venture capital funds that legally raise funds, invest in compliance with regulations, and operate in good faith, in terms of fund raising, investment operations, risk monitoring, and on-site inspections.
2. Increase financing support and enrich the sources of funds for science and technology
(4) Supporting the issuance of bonds. Support qualified foreign institutions to issue RMB bonds in China and invest in the technology sector.
(5) Broaden financing channels. Support technology-based enterprises invested by overseas institutions to issue corporate credit bonds in accordance with laws and regulations, and actively expand the scale of issuance. The country will promote the pilot project of cross-border financing facilitation, include start-up technology-based enterprises in the scope of the pilot, and encourage eligible enterprises to borrow foreign debts within the quota, so as to better support the innovation and development of enterprises.
(6) Optimize the financing structure. Under the premise of compliance with laws and regulations and controllable risks, we will support domestic banks to strengthen cooperation with overseas institutions, standardize and explore business models such as "loans + external direct investment", and enrich financial products and services in science and technology.
3. Strengthen exchanges and cooperation and promote efficient investment docking
(7) Improve cooperation mechanisms. Support domestic and foreign institutions to strengthen docking, and jointly set up relevant investment cooperation and communication platforms. Improve the special working mechanism to support science and technology enterprises and project financing, implement the special project of "financial integration of science and technology industry", give full play to the role of hard science and technology attribute evaluation, enterprise listing cultivation, local policy support and other guiding mechanisms, and provide services for overseas institutions to explore and evaluate start-up science and technology enterprises through the national industry and finance cooperation platform, innovation and entrepreneurship competition, public roadshow platform, etc.
(8) Sort out the list of needs. Relevant departments, localities and industry associations combine their own responsibilities and positioning, focus on industrial development, enterprise cultivation and achievement transformation, and actively promote the establishment of cooperation between advanced manufacturing enterprises, high-tech enterprises, manufacturing single champion enterprises, technology-based small and medium-sized enterprises, innovative small and medium-sized enterprises, and specialized and special new small and medium-sized enterprises.
(9) Enhance the level of cooperation. Overseas institutions are encouraged to strengthen cooperation with relevant domestic institutions and government guidance funds, and set up parent funds or specialized sub-funds for the fields and directions of new generation information technology, artificial intelligence, quantum technology, biotechnology, new energy and future energy, industrial machine tools, aviation and aerospace equipment, power equipment, new materials, core basic components and instruments. Support technology-based enterprises that have received investment from overseas institutions, and deepen industrial chain cooperation with relevant countries. Support overseas institutions to invest in the transformation and application of scientific and technological achievements.
(10) Facilitate personnel exchanges. Actively protect the visa needs of overseas agency personnel in China, and provide appointment-free "green channels" for short-term visa applications, fingerprint-free and other conveniences. Support the application of long-term visas for qualified operators of overseas institutions.
(11) Encourage localized operations. Support overseas institutions to increase their investment in China, and improve the level of localized operation by setting up offices and building teams in China.
Fourth, improve the exit mechanism to help a virtuous cycle of investment
(12) Support overseas listing. Maintain smooth and stable financing channels for overseas listings, and accelerate the filing of overseas listings of qualified technology-based enterprises in accordance with laws and regulations. Actively play the role of connecting Hong Kong's financial market and support technology-based enterprises to list in Hong Kong.
(13) Encourage mergers and acquisitions. Give full play to the role of the capital market as the main channel for mergers and acquisitions, support listed companies to comprehensively use shares, directional convertible bonds and other payment tools, mergers and acquisitions of science and technology enterprises, and smooth mergers and acquisitions exit channels. The Measures for the Administration of Strategic Investment by Foreign Investors in Listed Companies have been amended to further relax the investment conditions.
(14) Promote pilot projects for the transfer of private fund shares. Steadily promote the pilot project of private equity venture capital fund share transfer. Overseas institutions are encouraged to give full play to their professional advantages and expertise and actively participate in investment transactions.
(15) Protect the rights and interests of remittance. In accordance with the law, the lawful income of foreign institutions in China is guaranteed to be freely remitted in RMB or foreign exchange.
(16) Facilitate the enjoyment of preferential tax treatment. Optimize the procedures for withholding tax and settlement of dividends paid by listed companies, confirm the list of overseas institutions that meet the preferential conditions stipulated in the relevant tax agreements, and facilitate the exchange of information between government departments, settlement institutions and listed companies, so that listed companies can directly withhold and declare and pay dividends to relevant overseas institutions in accordance with the preferential provisions.
All relevant departments are requested to attach great importance to, strengthen cooperation, integrate resources, optimize services, do a good job in the investment of foreign institutions in domestic science and technology enterprises, promote the formation of a comprehensive science and technology financial service system, create a more optimized policy environment, better play the role of finance in supporting scientific and technological innovation, stabilize investment expectations, and boost investment confidence.
(This article has been abridged)
Operational Guidelines to Facilitate Overseas Institutions to Enjoy Tax Treaty Incentives
If some foreign institutions invest in a large number of listed companies in mainland China, and can enjoy preferential income tax treatment according to the tax treaties signed between their country of residence and the mainland, the listed companies can directly withhold and declare and pay dividends to the relevant overseas institutions in accordance with the preferential provisions, and the relevant overseas institutions are not required to submit relevant information reports to each listed company each time. The specific operation process is as follows:
(1) Overseas institutions that invest in the shares of domestic listed companies and meet the preferential conditions stipulated in the relevant tax treaties may, if necessary, directly contact the International Taxation Department of the State Administration of Taxation and submit the "Report Form on Information on the Benefits of Non-resident Taxpayers", securities accounts and other relevant information;
(Contact: Wang Zengguang, International Taxation Department of the State Administration of Taxation, Tel: 010-61989071)
(2) After confirmation by the State Administration of Taxation, the relevant information shall be provided to the clearing institution, i.e., China Securities Depository and Clearing Corporation Limited;
(3) When each listed company distributes dividends, if the above-mentioned overseas institutions are involved, the clearing institution will notify the listed companies in a timely manner through electronic channels;
(4) Each listed company shall withhold and pay dividends in accordance with the preferential provisions under the circumstances that it has obtained the "Information Report Form for Non-resident Taxpayers Enjoying the Benefits of the Agreement" after receiving the relevant notice from the clearing institution, so that the relevant overseas institutions can directly enjoy the tax incentives.
After the overseas institution directly enjoys the benefits of the agreement in accordance with the above-mentioned operation procedures, it is required to retain the relevant information for future reference in accordance with the current regulations and accept the follow-up management of the tax authorities.
The person in charge of the Finance Department of the Ministry of Commerce interprets the "Several Policies and Measures on Further Supporting Overseas Institutions to Invest in Domestic Science and Technology Enterprises"
Recently, the Ministry of Commerce, the Ministry of Foreign Affairs, the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the People's Bank of China, the State Administration of Taxation, the State Administration of Financial Regulation, the China Securities Regulatory Commission, the State Administration of Foreign Exchange and other ten departments jointly issued the "Several Policies and Measures on Further Supporting Foreign Institutions to Invest in Domestic Science and Technology Enterprises" (hereinafter referred to as the "Several Measures"). The person in charge of the Finance Department of the Ministry of Commerce interpreted the "Several Measures".
1. Background of the introduction of the "Several Measures".
The CPC Central Committee attaches great importance to promoting high-level opening-up and financial support for scientific and technological innovation. In recent years, relevant departments have conscientiously implemented the decisions and arrangements of the CPC Central Committee and the State Council, continued to optimize the foreign investment environment, increased efforts to attract foreign investment, steadily expanded the opening up of the financial sector, launched a number of facilitation measures, and supported foreign institutional investors (hereinafter referred to as overseas institutions) to invest in domestic science and technology innovation fields. At the same time, some overseas institutions have reported that they hope to have more stable expectations, more investment channels, smoother exit channels, and more convenient tax incentives when conducting business in China.
Scientific and technological innovation is the core element in the development of new quality productive forces. The Central Financial Work Conference requires that we do a good job in science and technology finance and devote more financial resources to promoting scientific and technological innovation. At present, technology-based enterprises are facing broad development opportunities, and the demand for greater strength, more levels and wider channels of financing support has also further increased. In this context, the Ministry of Commerce, together with relevant departments, has conducted special research and research, put forward specific work measures in response to the demands of industry enterprises, and formed the "Several Measures".
Second, the key measures of the "Several Measures".
The Measures actively respond to market demand, involving not only the various business links of "fundraising, investment, management and withdrawal" of overseas institutions, but also government management services such as supporting the docking of supply and demand, smoothing investment exit, and facilitating preferential treatment.
(1) Optimize management services. Combined with the situation reported by overseas institutions, further improve and clarify the relevant policy arrangements. With regard to application for access, applications for Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) qualifications will be efficiently reviewed and approved in accordance with the law, so as to better meet the willingness of foreign institutions to enter the domestic market. With regard to foreign exchange management, on the basis of implementing measures such as facilitating foreign institutions to invest in China's bond market and expanding capital account facilitation policies, we will continue to improve foreign exchange management under direct investment, facilitate overseas institutions to better carry out domestic equity investment, support overseas institutions to invest in domestic technology-based enterprises through qualified foreign limited partners (QFLP), and support technology-based enterprises to make full use of cross-border capital centralized operation and management policies such as the integrated capital pool of domestic and foreign currencies, so as to improve the efficiency of capital operation and reduce financial costs. With regard to business supervision, it is clarified that venture capital funds established by foreign institutions in China shall be treated the same as domestic venture capital funds, and the relevant policies set forth in the Regulations on the Supervision and Administration of Private Funds shall be equally applied.
(2) Increase financing support. Actively support overseas institutions and their invested technology-based enterprises to expand financing channels and enrich the sources of funds for science and technology. For foreign institutions, the issuance of bonds, especially RMB bonds, in China can help them replenish their sources of funds and reduce exchange costs. The relevant authorities will continue to promote the high-level two-way opening of the bond market in a steady and orderly manner, support qualified foreign institutions to issue RMB bonds in China, and invest in the technology sector. At the same time, the People's Bank of China and the State Administration of Foreign Exchange will implement the Notice on Matters Related to the Management of Funds Issued by Overseas Institutions in China, unify the management rules for the registration, account opening, remittance and use of funds, and statistical monitoring of panda bonds in the interbank and exchange markets, improve the requirements for the management of RMB bond funds issued by overseas institutions in China, and further facilitate the financing of overseas institutions in the domestic bond market. In 2023, foreign institutions will issue a total of 154.5 billion yuan of panda bonds in mainland China, a year-on-year increase of 82%. For technology-based enterprises, the issuance of bonds, especially credit bonds, can effectively alleviate the financing difficulties caused by insufficient collateral. As of the end of February 2024, a total of 632 science and technology innovation corporate bonds have been issued in the exchange market, with a scale of 591.7 billion yuan. Relevant departments will also promote the pilot of cross-border financing facilitation across the country, include start-up technology-based enterprises in the scope of the pilot, standardize and explore business models such as "loan + external direct investment", and enrich science and technology financial products and services.
(3) Strengthen exchanges and cooperation. Venture capital and equity investment are important ways for overseas institutions to cooperate with technology-based enterprises, and overseas institutions have rich experience and professional expertise in related fields. The Measures support overseas institutions to give full play to their own advantages, fully explore high-quality targets, and promote efficient investment docking.
The first is to improve the cooperation mechanism. Relevant departments will continue to play the role of the national scientific and technological achievements transformation guidance fund, in-depth implementation of the "financial integration of science and technology industry" project, organize special roadshow activities, build an in-depth docking platform for early hard science and technology projects and first-line investment institutions, promote the establishment of cooperation between high-quality small and medium-sized enterprises and overseas institutions, and support overseas institutions to increase the gradient cultivation of enterprises. Encourage overseas institutions to cooperate with relevant domestic institutions to set up relevant funds, support overseas institutions to invest in the transformation and application of scientific and technological achievements, and support technology-based enterprises invested by overseas institutions to deepen industrial chain cooperation with relevant countries.
The second is to sort out the list of needs. We will continue to sort out and put forward a list of needs, provide convenience for overseas institutions, and empower enterprises to enhance their financing and credit. The Ministry of Commerce, the State Administration of Financial Supervision and other departments will continue to carry out the activity of "Visiting Ten Thousand Enterprises, Improving Confidence and Excellent Service" to promote the precise docking between financial institutions and small and medium-sized enterprises, including technology-based enterprises; The Ministry of Industry and Information Technology will further play the role of the national industry-finance cooperation platform, rely on the advantages of data resources, explore a full-dimensional information sharing mechanism, and provide credit reference for financial institutions, and has helped enterprises to raise more than 780 billion yuan in the past three years. Diversified relay financial services.
The third is to encourage localized operations. Relevant departments will actively support overseas institutions to strengthen the development and operation of the three international science and technology innovation centers in Beijing, Shanghai, the Guangdong-Hong Kong-Macao Greater Bay Area and the three regional science and technology innovation centers in Xi'an, Wuhan and Chengdu and Chongqing in light of the development needs of science and technology enterprises, and set up venture capital funds around cutting-edge technologies. In addition, the Ministry of Foreign Affairs will facilitate the exchange of personnel by providing an appointment-free "green channel" for short-term visa applications and supporting the application of long-term visas for personnel who are involved in the investment and operation of overseas institutions.
(4) Improve the exit mechanism. Whether the investment exit can be achieved smoothly and efficiently is a common concern of overseas institutions in the preliminary investigation, and it is also the key content of the "Several Measures". The China Securities Regulatory Commission and other departments have launched a series of supporting measures around exit channels such as overseas listing, mergers and acquisitions, and share transfers.
The first is to support overseas listings. We will continue to improve the quality and efficiency of overseas listing filing management, accelerate the progress of filing processing, and continue to smooth the channels for overseas listing of technology-based enterprises. At the same time, we will continue to promote the deepening of practical cooperation between the capital markets of the Mainland and Hong Kong, and strengthen Hong Kong's role as an international financing platform for technology-based enterprises. From March 31, 2023, when the Trial Measures for the Administration of Overseas Issuance of Securities and Listing by Domestic Enterprises came into effect, to the end of March 2024, 122 enterprises have completed the filing of overseas initial public offerings and listings, of which 71 companies plan to list in Hong Kong.
The second is to encourage mergers and acquisitions. The China Securities Regulatory Commission (CSRC) has successively promulgated rules for the restructuring of targeted convertible bonds, revised the rules for major asset restructuring, appropriately improved the inclusiveness of restructuring valuation, supported listed companies in mergers and acquisitions of technology-based enterprises, and smoothed the exit channels of investment institutions. In the next step, we will continue to promote the market-oriented reform of mergers and acquisitions, give full play to the function of the capital market as the main channel for mergers and acquisitions, and provide smooth exit channels for foreign institutions to invest in domestic science and technology enterprises. The Ministry of Commerce is taking the lead in revising the Administrative Measures for Strategic Investment by Foreign Investors in Listed Companies to further relax the restrictions on strategic investment by foreign investors in listed companies.
The third is to promote the pilot transfer of private equity fund shares. We will continue to optimize the process and pricing mechanism for the transfer of private equity shares, promote the coordinated development of private equity funds and regional equity markets, broaden the exit channels of private equity funds, and form a virtuous circle of "investment-exit-reinvestment". In recent years, the mainland has successively carried out pilot private equity share transfer pilots in regional equity markets such as Beijing, Shanghai, Guangdong, Zhejiang, Ningbo, Jiangsu, and Anhui, and introduced some supportive policies and measures to promote the construction of market ecology and build a blockchain-based trading system. Up to now, 7 provinces and cities have achieved 23.172 billion yuan of private equity share transfer and 31.607 billion yuan of private equity share pledge financing.
Fourth, it is convenient to enjoy tax incentives. According to the tax treaties signed between the mainland and relevant countries, qualified foreign institutions investing in listed companies in the mainland can enjoy preferential income tax. At present, when an overseas institution participates in the dividend payment of the listed company in which it invests, it is required to submit the "Information Report Form on the Benefits of Non-resident Taxpayers Enjoying the Benefits of the Agreement" before they can enjoy the preferential treatment under the agreement, otherwise the listed company will withhold and pay on behalf of the listed company, and then apply for supplementary preferential treatment and tax refund afterwards. Recently, some overseas institutions have reported that when a large number of listed companies are invested, the operating cost of enjoying the relevant preferential treatment is relatively high, and the overall convenience is not enough. In response to the needs of overseas institutions, the State Administration of Taxation, the China Securities Regulatory Commission and the Ministry of Commerce conducted in-depth research and actively studied to further optimize the tax withholding and settlement procedures for listed companies. By smoothing the information exchange between government departments, clearing institutions and listed companies, listed companies can directly withhold declarations and pay dividends to relevant overseas institutions in accordance with the preferential provisions, without the need to withhold and pay tax before the overseas institutions apply for tax refunds, and overseas institutions do not need to submit relevant information reports to each listed company each time. For details, please refer to the "Operational Guidelines for Facilitating Overseas Institutions to Enjoy Preferential Tax Treaty Treatment" issued in conjunction with the Several Measures.
In the next step, the Ministry of Commerce will work with relevant departments to guide relevant departments and institutions in various localities to implement policies and measures, better attract foreign institutions to increase investment in China, and support the financing and development of domestic science and technology enterprises.
Source: Ministry of Commerce. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!