CEPA Foreign Enterprise

The implementation of the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macau Closer Economic Partnership Arrangement (hereinafter referred to as "CEPA", an acronym for Closer Economic Partnership Arrangement) enlightens the eyes of many Hong Kong and Macau corporations falling under the "Definition of Origin", and enables them to find immeasurable business opportunities in mainland China. Therefore, more multinational companies are also being solicited to invest strategically in Hong Kong and Macau.

Advantages for CEPA Foreign Enterprises

• They are entitled to zero-tariff cargo import in China, which increases the competitiveness of Hong Kong and Macau products in mainland markets
• There are more multinational companies solicited in Hong Kong and Macau to make strategic investments
• They are entitled to the reduction or abolishment of cargo trading tariffs, which liberalizes trade services
• They are entitled to the reduction or abolishment of all measures of discrimination, which facilitates trading investment
• They can enjoy easy clearance which reduces costs

Preconditions

• They have gained the certificates of service suppliers issued by Hong Kong and Macau Governments
• They shall comply with the industries planning of the Chinese Government.
• The registered capital is suitable to the investing scale

Requirements for Application for the Certificate of Service Supplier

• They shall be enterprises incorporated under Hong Kong or Macau laws
• They shall be enterprises operating in Hong Kong or Macau engaged in substantial business operations (with different operating periods as required by different industries) for more than three years
• They shall pay a profits tax as provided by the law (an enterprise incurring losses also meets the requirement provided that it's engaged in substantial business operations in Hong Kong and Macau)
• They own or rent grounds/offices for their substantial business operations, which are in accordance with their business scopes and scales
• They employ free Hong Kong or Macau residents, and this portion of staff will account for more than 50% of the total number of employees

Application Procedures

The procedures in the application for incorporation of CEPA Foreign Enterprises in China are mainly classified into three categories as follows:

• For industries free from approval by the Ministry of Commerce of the People's Republic of China (MOFCOM), such as real estate, management consulting, restaurants, foods & beverage as well as warehousing operations, Hong Kong and Macau investors shall submit their applications directly for examination and approval by the local competent commerce authority at the places where they intend to set up these kinds of enterprises with foreign investment; and the local competent commerce authority will report investment project totaling more than USD30 million to the MOFCOM for examination and approval.
• For industries subject to examination and approval by the MOFCOM or subject to project establishment by the competent industry authority, including mainly medical and dentistry, advertisement, convention and exhibition, telecommunications, audiovisual products distribution, cinema, construction, distribution, travel agency, Ocean Freight, road transport, cargo agency, and logistics service, among which, the investments in construction, convention and exhibition, cargo agency, logistics service and other industries involved in earlier setup examination and approval, shall be subject to the examination and approval for project establishment at first by the competent industry authority.
• For industries subject to examination and approval at first by the competent industry authority and then issuance of the Certificate of Approval for Establishment of Enterprises with Foreign Investment in the People's Republic of China by the MOFCOM, including, mainly banking, insurance, and securities, Hong Kong and Macau investors shall apply directly to China Banking Regulatory Commission ("CBRC"), China Insurance Regulatory Commission ("CIRC") and China Securities Regulatory Commission ("CSRC") for setting up this kind of enterprises with foreign investment, and then hold the approval document from the competent industry authority to claim the Certificate of Approval for Establishment of Enterprises with Foreign Investment at the office buildings of the MOFCOM.

Branches Setup

Other than cargo agency industry which demands capital-in-cash in setting up branches (wholly-owned shipping companies have time limits in setting up branches), enterprises in all industries can set up branches at any time after its normal operation according to the demands of business development.

Some Industries have set up companies in China through CEPA, as follows:

• Construction & Design Company
• Management Consulting Company
• Advertising Company
• Convention & Exhibition Company
• Transportation Company
• Ocean Freight Company
• Shipping Service Company
• Cargo Agent Company
• Logistics Company
• Travel & Related Service Company

If you would like further information concerning CEPA Foreign Enterprise Incorporation, please contact our professionals and we will provide you with free advisory.