European Chamber request clarification on liaison offices Go back »

2006-05-16 | Beijing

On 8th May the European Chamber submitted a letter to the State Administration of Industry and Commerce (SAIC) and MOFCOM requesting clarification of a number of issues related to the new interpretation of the regulations governing the registration and renewal of liaison offices.

In the past, the rules applied by SAIC and local AICs have allowed FIEs to establish and register liaison offices in a uniform manner throughout the country. However, as we currently understand the situation, SAIC has changed its interpretation and principle no longer accepts any applications to amend, renew and establish liaison offices for incorporated FIEs. Though, a company wanting to set up a new (or continue operating a deregistered) office doing liaison type work, they are free to do so without registering it.

In principle new interpretation may have a number of benefits. However, in order for these benefits to be realized, a number of outstanding issues must be clarified, and in its letter the European Chamber highlighted the following concerns:
- There are disparities in how the regulations are interpreted and implemented at local level
- Operating without registration results in numerous practical problems, especially in the areas of legal and tax compliance
- The definition of the term "perational activities"?is unclear and is subsequently open to misinterpretation
- The manner in which the new interpretations came into place lacked transparency.

In light of these concerns the European Chamber requested to get the following points clarified:
- What are the exact details of the new interpretation, under which FIEs are permitted to operate Liaison Offices
- What will be done to ensure that the interpretation is implemented uniformly across China
- How will the new interpretations be coordinated and implemented with other relevant authorities
- What does the definition "perational activities" cover
- Will branch offices conducting liaison office type activities be allowed to operate in the same way as liaison offices operate today

SAIC publishes clarifications

On 10th May the SAIC released the Implementing Opinion on the Implementation of the Management Regulations for Approving and Registering Foreign-Invested Enterprises (FIEs). The announcement, which was approved by the Ministry of Commerce, the State Administration of Foreign Exchange, and the General Administration of Customs before its publication, reconfirms that SAIC will no longer accept any new liaison office applications and that offices conducting liaison type work does not need to register. However the announcement did not resolve the operational problems related to operating a non-registered office.