Funding Sources for Thai Businesses in China 6 July 2012 1 1
China Map 2 2
Type of Foreign-Invested Enterprises in China Representative Office Registered Company - Wholly Owned Foreign Enterprise (WOFE) - Sino-Foreign Equity Joint Venture (EJV) - Sino-Foreign Cooperative Joint Venture (CJV) 3 3
Representative Office According to PRC Law, a foreign Rep Office is not permitted to conduct direct business activities such as sign contracts in its own name, issue invoice etc; it may only engage in indirect business activities specifically prescribed by PRC laws such as business liaison, product presentation, market survey, etc. No capital requirement. 1-2 months time to process an application to open a Rep Office. A Rep Office pays tax based on its expenses occurred. Its revenues shall be calculated and determined by converting its costs and expenditures and be taxed thereon. The conversion formula is: Revenues = total costs and expenditures / (1-profit rate of 10% - business tax rate of 5%); Income tax = revenues * profit rate of 10% * tax rate of 25%; Business tax = revenues * tax rate of 5%; Total tax = Income tax + Business tax. (Circular of the State Administration of Taxation on Relevant Issues in respect of Taxation Administration of Representative Offices of Foreign Enterprises, effective as of March 12, 2003) 4 4
Registered Company A foreign Registered Company can conduct business as permitted in the Business License. Minimum registered capital is RMB 30,000 (RMB 500,000 for a trading firm). It takes 3-4 months to register a company. A Registered Company s tax payment is directly tied with its income. A foreign Company registered in PRC could be in one of the following forms: 1. Wholly Owned Foreign Enterprise (WOFE) 2. Sino-foreign equity joint-venture (EJV) 3. Sino-foreign cooperative joint-venture (CJV) 5 5
Wholly Owned Foreign Enterprise Total invested by foreign party in PRC in accordance with PRC laws. The foreign funded enterprises often take the form of limited liability company. As an independent legal person, it can conduct direct business activities in PRC. It is allowed to sign business contracts in its own name and collect fees or payments. It can conduct activities such as project management, manufacturing, trade financing or lending as long as it obtains relevant approvals. Comparing with the procedure of setting up a Rep Office, it is a more timeconsuming and costly approach. 6 6
Sino-foreign Equity Joint Venture EJV is formed in China with joint capitals by foreign party with Chinese companies. The main feature is that the joint parties invest together, operate together, take risk according to the ratio of their capitals and take responsibility of losses and profits. The capitals from different parties are translated into the ratios of capitals, and in general the capital from foreign party should not be lower than 25%. 7 7
Sino-foreign Cooperative Joint Venture CJV is formed in PRC with joint capitals or terms of cooperation by foreign parties with Chinese companies. The rights and obligations of different parties are embedded in the contract. To establish a cooperative business, the foreign party supplies all or most of the capital while Chinese party supplies land, factory buildings, and useful facilities. Some may supply certain amount of capital. It can be a joint venture either with a legal person status or without a legal person status. Profit sharing in a CJV does not have to conform rigidly to the ratio of parties capital contributions. Consequently, CJVs are considerably more flexible than EVJs permitting schemes whereby after tax profit-sharing of parties is not necessarily tied to the value of the contributions. 8 8
Setting Up a Legal Entity in PRC - FIE Applied by proposer of Foreign-funded Enterprise Preliminary examined by local county governments or commercial charging department at the urban level Preliminary examination of the enterprise name (Local Industrial and Commercial Bureau) Preliminary examination of the environmental report (Local Environmental Protection Agency) Preliminary examination of land-use (Local Land and Resources Bureau) Preliminary examine the setting up of enterprises(local Bureau of Commerce) ( 市 商 务 局 ) Examination and approval of setting up enterprises (Local Bureau of Commerce) Project Approval (Local Development and Reform Commission) (Relevant departments) shall pre-examine and approve, refer to the regulation of relevant departments Registration of enterprises (Local Industrial and Commercial Bureau) Organizational code Certificate (Local Department of Quality Supervision) 9 9 Enterprises Foreign Exchange Registration (Local SAFE Branch) Register at the State Administration of Taxation (Local State Administration of Taxation) Register at the Administration of Land Taxation (Local Land Tax Bureau) ( 市 地 税 局 ) Registration of consignee and consignor of imported and exported (Conduct in Customs)
Establishment of a Legal Entity in PRC- Sino-foreign JV Applied by proposer of Sino-foreign joint venture Preliminary examination of the enterprise name (Local Industrial and Commercial Bureau) Preliminary examination the enterprise name (Local Industrial and Commercial Bureau) Preliminary examination of the environmental Preliminary examination of land-use report (Local Environmental Protection Agency) Preliminary examine the environmental influence (Local Environmental Protection Agency) Preliminary examine the setting up of enterprises(local Bureau of Commerce) ( 市 商 务 局 ) Examination and approval of setting up enterprises (Local Bureau of Commerce) Examine and approve of setting up enterprises (Local Bureau of Commerce) (Relevant departments) shall Registration prefix examine and approve, of enterprises refer to the regulation of (Local Industrial and relevant departments Commercial Bureau) Register enterprises (Local Land and Resources Bureau) Preliminary examine land-use (Local Land and Resources Bureau) (Local Industrial and Organizational code Certificate (Local Department of Quality Supervision) Commercial Bureau) Project Approval (Local Development and Reform Commission) 10 10 Enterprises Foreign Exchange Registration (Local SAFE Branch) Register at the State Administration of Taxation (Local State Administration of Taxation) Register at the Administration of Land Taxation (Local Land Tax Bureau) ( 市 地 税 局 ) Registration of consignee and consignor of imported and exported (Conduct in Customs)
Major Taxes in PRC Type of Tax Description Income Tax >> Enterprise Income Tax ("EIT") - The standard rate is 25% but it can be reduced to 20% and 15% for those specific industries and companies supported and encouraged by government, such as high-tech enterprises (15%). >> Witholding Income Tax on payments to non-residents - A concessionary rate of 10% is currently applicable to interest, rental and royalty and other income. >> Individual Income Tax ("IIT") - Progressive rates range from 5% to 45%. 11 11 Transaction Tax (Turnover Tax) Specific Objectives Tax Resources Tax Property Tax >> Value Added Tax ("VAT") - The general tax rate is 17%, while certain necessities are taxed at 13%, 11% (transportation & construction), 6% (service). >> Consumption Tax - Tax rates range from 3% to 56%. >> Business Tax - Tax rates range from 3% to 20%. >> Land Appreciation Tax - Enterprises or individuals who generate gains realized from transfer of real properties and its attachments will be taxed at progressive rates ranging from 30% to 60%. >> Resources Tax - A tax levied on natural resources. >> Urban Real Estate Tax - A tax imposed on the owners, users, or custodians of houses and buildings at the rate of either 1.2% of the original value with certain deduction or 1.2% of the rental value.
Major Taxes in PRC Type of Tax Behaviour Tax Description >> Vehicle and Vessel Usuage and License Plate Tax - A tax generally levied on vehicles and vessels used in the PRC at a fixed amount. >> Motor Vehicle Acquisition Tax - 10% of the taxable consideration will be levied on any purchase will be levied on any purchase and importation of cars, motorcycles, trams, electric buses, carts and certain types of trucks. >> Stamp Tax - Enterprises or individuals who execute or receive "specified documentation in PRC will be taxed, with rates varying between 0.005% to 0.1%. Customs Duties Finance Dept. Tax Incentives >> Customs Duties - Enterprises or individuals who import or export goods will be taxed at various rates. >> Deed Tax - Transferees or assignees of the ownership of land use rights or real properties will be taxed, with general rates ranging from 3% to 5%. >> Various EIT incentives are currently available for FIEs in special economiczones; export, hi-tech and infrastructure projects. 12 12
Capital Contribution The minimum ratio of capital contribution for fixed asset investment project in each industry Industry % Steel and electrolytic aluminum 40 Cement 35 Coal, calcium carbide, iron alloy, caustic soda, coke, yellow phosphorus, corn deep-processing, airports, ports, coastal and inland water transportation 30 Railways, highways, urban rail transportation and fertilizer (excluding potash) 25 Affordable housing and ordinary housing 20 Other real estate development 30 Other projects 20 -With the State Council's approval, minimum capital ratio may be appropriately reduced for individual important national construction project with special conditions. - For independent innovation and high tech investment made by small and medium enterprises that are supported by State, the minimum capital ratio can be appropriately reduced. - Foreign investment projects are implemented under the existing relevant laws and regulations. (Notice of State Council on Adjustment of the Proportion of Capital in Fixed-Asset Investment Projects 25 May 2009) 13 13
Stock Exchange The People's Republic of China has two stock exchanges. -Shanghai Stock Exchange -Shenzhen Stock Exchange The China Securities Regulatory Commission (CSRC) sets policies and oversees their activities. Year 2011 Shanghai Shenzhen No. of Listings (companies) 1,691 1,411 Turnover in Value (RMB mil) 4,546,515,598.96 19,318,832.67 Daily Average (RMB mil) 18,633,260.65 79,175.54 14 14
Shanghai Stock Exchange Listing Requirements Approval from State Council Securities Management Department. Capital must not be less than RMB 50 million. More than 3 years in business Profitable over the last three consecutive years. Publicly offered shares must be more than 25% of the company s total share capital. For company s whose total share capital exceeds RMB 400 million, the ratio of publicly offered shares must be more than 15%. Not guilty of any major illegal activities or not have false accounting records in the last three years. Other conditions stipulated by the State Council. 15 15
Shenzhen Stock Exchange Listing requirements on the Main Board and SME Board (1) Profitable in the last three consecutive years with net profits of no less than RMB 30 million in aggregate. (2) The net cash flow from business operation in the last three years shall exceed RMB 50 million in aggregate; or the revenue in the last three financial years shall exceed RMB 300 million in aggregate. (3) Total capital shall not be less than RMB 30 million before the offer. (4) No major illegal activities or no false accounting records in the last 3years. (5) Meet the relevant provisions of the Measures on the Administration of Initial Public Offerings and Listings of Shares issued by the CSRC on May 17, 2006, and other conditions stipulated by CSRC. Listing requirements on the ChiNext (1) Profitable in the most recent two consecutive years, with accumulated profits no less than RMB 10 million. No less than RMB 5 million net profits and no less than RMB 50 million revenues in the most recent year (2) Net assets of no less than RMB 20 million. (3) Total capital of no less than RMB 30 million after the IPO. (4) No major illegal activities or no false accounting records in the last 3years. (5) Meet the relevant provisions of the Measures on the Administration of Initial Public Offerings and Listings of Shares issued by the CSRC on March 31, 2009, and other conditions stipulated by CSRC. 16 16
17 17 Corporate Bond Conditions for issuance - Companies must comply with requirements according to order No. 49 of CSRC <The Pilot Rules on the Issuance of Corporate Bonds> - 1) The production and business operations of the company shall comply with the provisions of laws, administrative regulations and articles of association of the company, and comply with the state industrial policies. - 2) The company shall have a sound internal control system, which shall be free of any material defect in its completeness, reasonableness and effectiveness. - 3) Good bond credit rating rated by a credit rating agency. - 4) The company s latest term-end audited net asset value shall comply with the relevant provisions of laws, administrative regulations and the CSRC. - 5) Average annual distributable profits achieved in the last 3 fiscal years shall not be less than the oneyear interest on the corporate bonds. - 6) Cumulative corporate bond balance of the company after the present issuance shall not exceed 40% of the last financial year net asset value. Procedure - CSRC shall examine the application for the issuance of corporate bonds. - Company shall make an initial issuance within 6 months and complete the remaining issuance within 24 months. - NDRC is in charge of approving sales of bonds. - CSRC is in charge of supervision of corporate bonds. NDRC = National Development and Reform Commission CSRC = China Securities Regulatory Commission
Financial Institutions in China 18 18 Financial Institutions in China in 2011 Large commercial banks 5 Policy banks & the CBD 3 Joint-stock commercial banks 12 City commercial banks 144 Rural credit cooperatives 2265 Rural commercial banks 212 Rural cooperative banks 190 Finance companies of corporate groups 127 Trust companies 66 Finance leasing companies 18 Auto financing companies 14 Money brokerage firms 4 Consumer finance companies 4 New-type rural financial institutions & Postal savings bank 692 Banking asset management companies 4 Foreign financial institutions 40 Total 3800 Foreign banking establishments in China in 2010 Foreign banks Wholly banks foreignowned Jointventure banks Wholly foreignowned finance companies Locally incorporated institutions 37 2 1 40 Foreign bank branches 94 94 Total 94 37 2 1 134 Source: CBRC Annual Report 2010 Five large commercial banks 1. Industrial & Commercial Bank of China 2. China Construction Bank Corporation 3. Bank of China Limited 4. Agricultural Bank of China 5. China Development Bank Total
Business Scope Take public deposits Domestic and International Remittance Foreign Exchange services Grant short-term, mid-term and long-term loans Syndicated loans Provide credit services and guarantees Invoice Financing, Forfeiting, Banker s Acceptance Handle international and domestic settlements Other business approved by the CBRC 19 19
Business Scope Deposit Accounts Savings Account Current Account Call Deposit Fixed Deposit Account Non-resident accounts Currencies: RMB, USD, HKD, etc. Remittance Domestic Remittance International Remittance 20 20
Business Scope Loan Facilities 1) Working Capital Short-term loan Revolving short-term loan Invoice financing Discount of Banker s Acceptance Syndicated loan 2) Capital Expenditure Long-term loan Project Finance Syndicated loan 21 21
Business Scope Trade Finance Facilities 1) Import Services Letter of Credit Shipping Guarantee Trust Receipt Documentary Collection (D/A, D/P) 2) Export Services L/C Advising Packing Loan Discount of Export Bills 3) RMB Cross Border Trade Settlement Settlement of Goods and Services 22 22
Business Scope Guarantee Facilities Bid Bond, Performance Bond, etc. Standby L/C Banker s Acceptance 23 23
RMB Deposit and Lending Rate Rate as of 8 Jun 2012 Unit: % RMB Deposit Rate PBOC BBC Demand 0.40 0.40 Call- 1 day 0.85 0.85 Call- 7 day 1.39 1.39 3 mth 2.85 3.10 6 mth 3.05 3.30 1 year 3.25 3.50 2 year 4.10 4.10 3 year 4.65 4.65 5 year 5.10 5.10 Agreed deposit 1.21 1.31 RMB Lending Rate PBOC 6 mth 5.85 1 year 6.31 1-3 year 6.40 3-5 year 6.65 5 year above 6.80 Deposit The upper limit of the floating range of deposit rates can be adjusted to 1.1 times of PBOC benchmark rate. Lending rate The lower limit of the floating range of lending rate can be adjusted to 0.8 times of PBOC benchmark rate. 24 24
Contact Us 25 25 Head Office Bangkok Bank Building, No. 7, Zhongshan, East Road 1, Shanghai 200002 CEO: Mr. Suwatchai Songwanich Tel: (86-21) 2329-0100 Email: suwatchai.son@bbl.co.th Business Development Manager: Ms. Yaowaluck Pawijit Tel: (86-21) 2329-0100 Email: yaowaluck.paw@bbl.co.th Shanghai Branch Bangkok Bank Building, No. 7, Zhongshan, East Road 1, Shanghai 200002 Branch Manager: Mr. Jason Wu Tel: (86-21) 2329-0100 Email: jason.wu@bbl.co.th Xiamen Branch Jian Ye Building, Ground Floor, 28 Hubin North Road, Xiamen, Fujian 361012 Branch Manager: Mr. Simon Yan Tel: (86-592) 511-8833 Email: simon.yan@bbl.co.th Beijing Branch New China Insurance Tower (NCI Tower), 1 st Floor, No. 12A Jianguomenwai Avenue, Chaoyang District, Beijing 100022 Branch Manager: Khun Chiravit Supatanakul Tel: (86-10) 6569-0088 Email: chiravit.sup@bbl.co.th Shenzhen Branch: Hua Rong Building, Unit 12, 1 st Floor, 178 Mintian Road, Futian District Shenzhen Municipality, Guangdong 518048 Branch Manager: Khun Watcharapong Pornchaichanakit Tel: (86-755) 3396-5800 Email: watcharapong.por@bbl.co.th
Thank You Bangkok Bank (China) Company Limited Bangkok Bank Building Floor 3, No.7 Zhongshan E-1 Road, Huangpu District, Shanghai Tel: (86 21) 2329 0100 Fax: (86 21) 2329 0162