Law of the PRC on Joint Ventures Using Chinese and Foreign Investment

Updated : 2012-02-11 By : Source : cnhubei.com

 

Chapter 10 Foreign Exchange Control

Article 63. All matters concerning foreign exchange for joint ventures shall be handled according to the Regulations on Foreign Exchange Control of the People's Republic of China and relevant regulations.

Article 64. With the business license, a joint venture can open foreign exchange deposit accounts and Renminbi deposit accounts with domestic banks. The bank handling the account of the joint venture exercises supervision of receipts and expenditures.

Article 65. A joint venture shall get permission from the General Administration of Foreign Exchange Control or one of its branches to open a foreign exchange deposit account with an overseas bank or one in Hongkong or Macao, and report to the State General Administration of Foreign Exchange Control or one of its branches its foreign exchange receipts and expenditures, and provide account sheets.

Article 66. The sub-division set up by a joint venture in foreign countries or in Hongkong or Macao shall submit its annual statement of assets and liabilities and annual profit report to the State General Administration of Foreign Exchange Control or one of its branches through the joint venture.

Article 67. A joint venture can apply to domestic financial institutions for foreign loans and Renminbi loans according to its business needs, and can also borrow foreign exchange as capital from banks abroad or in Hong Kong or Macao, and shall go through the procedures for registration or record-keeping with the State General Administration of Foreign Exchange Control or one of its branches.

Article 68. After foreign staff and workers and staff and workers from Hongkong or Macao have paid income tax on their salaries and other legitimate incomes according to the law, they can purchase foreign exchanges and remit outside China the remaining foreign exchange after deduction of their living expenses in China according to the relevant provisions of the state..

Chapter 11 Financial Affairs and Accounting

Article 69. Procedures for handling financial affairs and accounting of a joint venture shall be formulated in accordance with China's relevant laws and procedures on financial affairs and accounting, and in consideration of the conditions of the joint venture, and then being filed with local financial departments and tax authorities.

Article 70. A joint venture shall employ a treasurer to assist the general manager in handling the financial affairs of the enterprise. If necessary a deputy treasurer can be appointed.

Article 71. A joint venture shall (small venture may not) appoint an auditor to be responsible for checking financial receipts, payments and accounts, and to submit reports to the board of directors and the general manager.

Article 72. The fiscal year of a joint venture shall coincide with the calendar year, i.e. from January 1 to December 31 on the Gregorian calendar.

Article 73. The accounting of a joint venture shall adopt the internationally used accrual basis and debit and credit accounting system in their work. All vouchers, account books, statistic statements and reports prepared by the enterprise shall be written in Chinese. A foreign language can be used concurrently with mutual consent.

Article 74. Principally joint ventures shall adopt Renminbi as the standard currency. In keeping accounts, however, another currency can be used through consultation by the parties concerned.

Article 75. In addition to the use of standard currency to record accounts, joint ventures shall record accounts in currencies actually used in payments and receipts, if such currencies in cash, bank deposits, funds of other currencies, creditor's right, debts, gains, expenses, etc. are inconsistent with the standard currency in recording accounts.

Joint ventures using a foreign currency in accounting shall work out a report of financial affaires and accounts in Renminbi.

The losses and gains of the standard currency used in the accounts caused by differences in exchange rates in the course of remittances shall be recorded in the year's losses and gains accounts. If the exchange rates change, the remaining sum on the book of related foreign exchange accounts shall be handled according to China's relevant laws and procedures on financial affairs and accounting on the settling day at the end of each year.

Article 76. Principles of profit distribution after payment of taxes in accordance with the Income Tax Law of the People's Republic of China concerning Joint Ventures with Chinese and Foreign Investment are as follows:

(1) Allocations for reserve funds, bonuses and welfare funds for staff and workers and expansion funds of the joint venture. Proportion of allocations is decided by the board of directors.

(2) Reserve funds can be used to make up the losses of the joint venture, and with the consent of examination and approval authority, to increase the joint venture's capital for production expansion.

(3) After the funds described in (1) of this article have been deducted and if the board of directors decides to distribute the remaining profit, it should be distributed according to the proportion of each participant's investment.

Article 77. Profits cannot be distributed unless the losses of previous years have been made up. Remaining profits from previous year (or years) can be distributed together with that of the current year.

Article 78. A joint venture shall submit quarterly and annual fiscal reports to the participants, the local tax authority, and financial department.

Article 79. Only after being examined and certified by an accountant registered in China can the following documents, certificates and reports be considered valid.

(1) Certificates of investment from all parties to a joint venture (lists of assessed value signed and agreed upon by all parties to the joint venture shall be attached to documents on investments involving materials, site use rights, industrial property and know-how);

(2) Annual fiscal reports of the joint venture;

(3) Fiscal reports on liquidation of the joint venture.