Archives: China law

This definitely holds true for China copyrights takedowns.
This definitely holds true for China copyright takedowns.

 

This is the fourth in a series about online copyright takedowns. Copyright Takedowns in China was a general summary of the regulations that establish the takedown procedures. These regulations enable enforcement of the “right of communication through an information network” as it applies to sound recordings and audiovisual recordings. Copyright Takedowns in China Part II: Searching, Linking or Storing? looked at how providers of storage space encounter more liabilities than those merely providing searching or linking services. The application of the takedown regulations to cloud service providers was covered in Copyright Takedowns in China Part III: Audiovisual and Sound Recordings in the Cloud.

Our China lawyers are handling more and more takedown work these days and one thing is very clear: if you ever expect to have infringing content taken down the single most important thing you should do is register your copyright in China in advance. The reason for this is simple. If you attempt to invoke China’s notice and takedown system the internet service provider will put you to proof. If you don’t have a Chinese copyright registration certificate ready to go you will need to prove your copyright ownership. Though Chinese network service providers all have their own requirements for this, all of them will require you to provide a bunch of chain of title documents that have been translated into Chinese. These documents will be essentially the same as those required to obtain a registration anyway. Once you have proven your ownership to a network service provider, you will have nothing to show for all the work, except, we would hope, the taking down of the infringing content in one instance. You will need to repeat the exercise again and again if numerous sites are involved or if your content goes back up again on a site from which it was taken down.

So speed up the takedown process, and have something to show for your work, by registering your copyrights in China. If you have your chain of title ducks in a row it will be quick and inexpensive to get a registration. You will then be ready to strike.

We started a China Law Blog Group on Linkedin with the goal of creating a spam-free source for China networking, information and discussion. We now have nearly 8,500 members and, more importantly, a number of lively discussions.

We have had some absolutely terrific discussions, both based on the numbers (a number of the discussions have received around 100 comments and some have gone over 200) and on their substance. Our discussions have ranged from practical (such as, how do I open a China bank account or what are the best practices for a China Joint Venture or what is the most important thing to do for doing business in China) to deep think (such as, what is the future of rule of law in China? or what are the differences in how Chinese companies and French companies are run).

What also boosts the group is its diversity of membership. We have a large contingent of members within China and without. Some members are China lawyers, but the overwhelming majority are not. We have senior personnel (both China attorneys and executives) from both large and small companies and a whole host of junior personnel as well. We have students and we have professors. This mix only contributes to the high level of discussions.

I am most proud of how (at least as far as I know) no spam item has yet lasted on the site for anything even approaching 24 hours.

If you want to learn more about China law or business, if you want to discuss China law or business, or if you want to network with others doing China law or business, I suggest you check out our China Law Blog Group on Linkedin and join up. The more people in our group, the better the discussions.

We will see you there. Click here and join us.

I am about to heartily recommend a book that I have not read, nor even seen.

The book is The Big Four and the Development of the Accounting Profession in China (Studies in the Development of Accounting Thought, by Paul Gillis. And despite not having read the book, I am quite certain it will make for a helpful read. I am certain of this because Paul Gillis knows as much about the big picture China accounting issues as any other English language speaker out there. Paul has written extensively and well (both on his blog and elsewhere) about the Big Four in China and about China big picture accounting issues and if his book were nothing but a compilation of previous writings (which it is not), it would still be well worth the read. Paul is to whom I refer journalists and others seeking answers to China accounting questions because he is the guy with the answers.

So if China accounting is your thing, read the book.

For a pretty comprehensive list of recommended English language books on China (with a slant towards those that are instructive for doing business in China or practicing China law) check out A New China Book List.

I am going to be speaking at USC this weekend and in poring over old PowerPoints (to create a new PowerPoint for my talk), I came across one with a fairly extensive China law bibliography of some of our most helpful posts.  This bibliography is definitely slanted towards the legal issues that confront foreign companies doing business in China.

Here it is:

CHINA CONTRACTS

CHINA LICENSING AGREEMENTS/CHINA DISTRIBUTOR AGREEMENTS/CUSTOMS

CHINA COMPANY FORMATION/CHINA WFOE FORMATION/CHINA JOINT VENTURES

NEGOTIATING WITH CHINA

CHINA —INTELLECTUAL PROPERTY

I am always getting emails asking for the English language version of this or that Chinese law.  My usual response is to say that I do not know where to find English language versions of Chinese laws because we do all of our research in Chinese.

But today I was reminded of an excellent Chinese legal research guide that “resides” right here in my back yard.  The guide is put out by the University of Washington’s Gallagher Law Library, and it is really quite comprehensive and up to date — it was last updated about a month ago.

If you wish to conduct legal research in English on China law, I am not aware of a better place to start than the University of Washington’s China Legal Research Guide.

What do you think?

I love our China Law Blog Linkedin Group.  Love it.

Most of the time.

It’s a great way for those interested in China law and China business issues to converse with each other and to learn from each other.  We have countless great discussions every week. Commonly, people ask great questions and get great answers.  Legal questions get asked and answered.  Mostly correctly.  I almost never weigh in as I do not see it as my role.

But the other day I couldn’t resist.

Let me explain.

A group member posed the following question:

Any tips on repatriating inter-company loans or profits out of China?

Wondering if anyone can provide insight or point me in a direction for information on how to repatriate money back to the home country. I understand that dividends are an option but are subject to tax from China as well as the home country. How about loaning money back or other inter-company charges or transfers?

I winced.  I winced because I knew what would be coming and I knew I would not like it. I winced because I know that this is an incredibly complicated question and I know that there are all sorts of “home remedies” for this that can be worse than the bite itself.  I winced because the best answer to questions regarding getting money out of China is probably going to be that it cannot be answered at all in a general way and that the only smart way to answer is to tell the questionnaire to consult with a China accountant, a China tax specialist, or a China tax lawyer.  But nobody wants to hear that.  So I said nothing.

But the answers started pouring in and they caused me to wince even more. Especially after the person who posed the question clarified that what he needed help with was figuring out how to repatriate China WFOE profits back to the parent company overseas.  Someone made the following suggestion:

Suppose the parent company provide service to the WOFE….

Then another someone confirmed this as a potentially good way to go:

Royalties or technical service fees charged to the China operating company might be another option.

Then the person who originally posed the question hinted that his company might do as advised above:

Thanks for the suggestions. The service or royalty fees approach is an interesting concept.

I could no longer take it and I just had to chime in, and I did, with the following:

It may be interesting, but it’s also incredibly complicated and could be disastrous. First off, the tax on services and royalties (especially royalties) can be very high. So your doing this could cost you up to 42% of whatever funds leave the country. You also will need to document this entirely correctly or the funds might never leave. See Service Companies In China. How To Get Paid. for more on this. And, even worse, the Chinese tax authorities could argue that your US company, by performing whatever services it performed, has become permanently established in China, and then you will need to deal with that. Honestly, if I were you, I would retain a really good international accountant because if you don’t you could find that your machinations will cost you way more than any amount you are trying to save. This stuff is not for lay-people.

At which point, Matthew McKee, a tried and true tax lawyer previously based in China added the following great advice:

Kevin, this can be a very complex issue and usually involves an interaction between Chinese tax laws, the tax laws of the company in which the parent is resident (and sometimes the country in which the controlling shareholder(s) of the parent company is resident). I agree with Dan and would recommend that you speak with an accounting firm that can provide advice on Chinese tax law and the tax laws of the country in which the parent company is resident.

The attractiveness of royalties and services fee options ultimately depends upon the location of the parent and the circumstances. Service fees can attract business tax (which has recently been incorporated into the VAT system) which may negate any benefit in avoiding withholding tax on the dividends. This can work out worse as many countries provide a tax offset for foreign income tax paid. This would apply to the withholding tax on dividends but not to business tax.

When looking at tax issues on international transactions it is imperative to look at the outcome from the application of the tax laws of all countries involved and not simply China.

Amen.

What do you think?

In going through my draft posts, I came upon a completed one from 2012 that I unintentionally failed to post.  More than a bit late, but here goes.

Oxford University Press contacted me many months ago to ask if I would be interested in receiving a review copy of the book, Corporate Income Tax Law and Practice in the People’s Republic of China. I hesitated.

I typically love receiving free law books as it combines three of my favorite things, “free”, “law”, and “books.” But tax. Ugh. “Okay,” I told them, “but it may take me a while to get through it.”  

It did take me a while to get through it, but only because it took me a while to steel up the courage even to open it. Once I opened the book though, I could hardly put it down. Not kidding. Now I am going to admit that I did not even come close to reading the book word for word, but I did skim the whole thing and I did find myself actually reading well over half of it. Most importantly, I did so because I found the contents so incredibly valuable.

I am not a China tax lawyer and I am never going to be a China tax lawyer; when it comes to tax, I am a big believer in the old adage that a little knowledge is a dangerous thing. I view tax as a speciality and I view international tax and/or China tax as a sub-speciality. There are incredibly few people who really know what they are doing in these arenas and those who do are in constant demand, either on the law side and on the accounting side.

Trust me when I tell you that Fuli Cao, the author of Oxford Press’s new book, Corporate Income Tax Law and Practice in the People’s Republic of China, knows what he is doing when it comes to China corporate tax law. Better yet, he does an excellent job in conveying what he knows. As regular readers of this blog know, I have become a big fan of the Oxford Press’s China law books and one of the reasons I like them so much is because they not only do an excellent job in terms of relevant and helpful commentary, they also do an excellent job in pulling together in a highly readable format the underlying applicable laws. This book deserves strong kudos for pulling off both of these feats and if you have an interest in China tax or a need to know more about it, this is the book for you and I cannot recommend it highly enough. I found the chapter on tax audits particularly interesting.

For a list of the top English language books on China law, check out Chinese Commercial Law Books In English. An Update.

The number of American law students who speak Chinese is increasing.  The number of American law students who can read Chinese is increasing as well, though that number is considerably less than those who can speak it.  The number of American law students who can read Chinese legal documents with anything approaching their ability to read those documents in English is exceedingly small.

So how does someone make the leap from being able to read general interest publications in Chinese to being able to read legal documents in Chinese?  I am constantly being asked this question and my answer is usually that they should try to take a legal Chinese course at their law school if it has one or otherwise, just learn Chinese legal terminology on the job.  They invariably then ask me if I can recommend a book to them and I would invariably say no.

Until now. Until China Law Reader.  China Law Reader is written by Lawrence Foster, a Professor of Law at the University of Hawaii, Tiffany Yajima a licensed lawyer who was formerly with AmCham in Shanghai, and Yan Lin, a Professor of Law at Jiaotong University in Shanghai. In its introduction, China Law Reader describes its purpose and its ideal reader as follows:

The primary purpose of the CLR is to introduce you to the language of Chinese law.  The ideal user is someone who has completed at least two years of Chinese language study and is now ready to read actual law-related Chinese language texts in order to learn the specialized language of Chinese law.

I completely agree.  If you already are able to read Chinese fairly well and you are going to be working with legal text, get the book.  Now.

 

 

 

A loyal reader sent me an article this morning regarding a Chinese citizen who had fabricated his ownership in a US bank and used that fabrication to gain power in his hometown. This happened about a year ago so not sure why it was sent to me today, but the reader sent it with a request that we highlight “the fake service businesses that are all over China.”

I am not even sure what the reader means by fake service businesses all over China and I have an email out to him to clarify.  In the meantime though, I will write about the two fake service companies we see most often in our China law practice: the fake entity registration company and the fake trademark registration company.

Every few months or so we are retained by a foreign company (almost always a US-based company) to have us figure out what they have in in terms of a China company and about half the time, we have to go back to them and tell them that they don’t have a thing.  The big problem with most of the fake company registration services we have encountered is that they not only fail to register the company, as promised, they also run off with the registered capital. We also are sometimes asked to check on China trademarks and we are finding that about half the time the registration that was paid for was never done.  Our numbers are no doubt high because those who come to us already have suspicions, but if you have any doubts about what was done for you, it would certainly behoove you to find out.

Do you-all have any good stories to add?

I have always hated book and movie reviews that focus on what the book or movie should have been about, but wasn’t.  For example, the movie Lincoln, which I loved, took heat from some critics for not focusing nearly enough on the conditions of slavery, as opposed to its abolition.  My thinking whenever I see something like that is always two-fold:

  1. A movie can only be so long, and
  2. Dude, write your own movie.

I am constantly getting emails asking me (often in an accusatory or conspiratorial tone) why we didn’t write about such and such.  For some unknown reason, the number of those has been picking up of late and so I am going to respond to a random bunch of them here, so I can simply link back to this post on the next ones.  Here goes, with the typical question in bold font and my typical answer in regular:

1.  Why do you never write anything bad about China?  Is it because you are concerned it will hurt your business?  What are you even talking about?  Would it surprise you to learn that I often get emails asking me why I never have anything nice to say about China?  Anyway, in answer to your question, I never think about whether my post is China-positive or China-negative, I simply write it and let the chips fall where they may.  In fact, I have been accused of being negative when I write what I see as a positive piece, and being a pollyanish China panda when I write what I see as a negative piece.  In other words, the spin is often in the eyes of the beholder.  I will say that my views of China are that I love the place and it is absolutely central to my business and because of that, I may be too critical of it sometimes and not critical enough of it other times, but I am trying.

2.  Why do you hate China?  Why do you only have bad things to say about China?  Is it because you know the United States is falling and China is rising?  See above.  You greatly over-estimate me if you think that I think so deeply as to be influenced in my day to day behaviors by something so abstract as countries rising and falling.  If you want to psychoanalyze my writing, you would probably be accurate using what I had for lunch that day as opposed to geopolitical positioning.

3.  Why didn’t you write about this or that murderous/horrible incident that happened in China today?  Why do you never examine China’s moral rot? My most recent email along these lines was about the kindergarten poisonings in Hebei.  There are many reasons we don’t cover stories like this, starting with the fact that we really don’t have anything to say about them beyond the trite and obvious.  We are not philosophers.  We are not journalists.  We are not ethicists.  We are not sociologists.  If I were to write about something like that, about all I would say is that I have two kids of my own and so I can at least imagine how awful the parents of the two kindergartners killed must feel and as a parent, I feel for them.  Since hundreds of millions feel the same way, my writing that wouldn’t contribute a thing.

4.  Why do you always criticize China and never criticize the United States?  Because this is a blog about China, not about the United States.  See the Lincoln movie example above.  If you want a forum for criticizing the United States, start your own blog and go ahead and call it USLawBlog.com. The funny thing about this criticism though is that in real life (to include Facebook, etc.), I am always harping on how civil rights in the United States have been in a constant state of decline since 2000.

5.  Why don’t you ever link to my blog?  Why isn’t my blog in your blogroll?  We have one criteria for what we write about, what we link over to and what goes into our blogroll.  What we as the blog czars think would best serve our readers.  Yes, I know we are sometimes wrong on that, no doubt, but we do the best we can and that’s all we can do.

6.  Why do you never link over to any foreign blogs/foreign sites?  Why don’t you do anything to counter the Western bias of your blog?  Two reasons.  One, I admit a strong preference for good writing, and, let’s face it, native English speakers generally write in English better than non-native speakers.  Two, this blog does have its own viewpoints on China and on everything else and that viewpoint is a Western one.  See the Lincoln example if you want another viewpoint. Having said this, however, we are always seeking pieces from contributors from outside my law firm and one of the reasons we seek those people is to bring divergent views to our site.  Admittedly, however, we are more focused on getting the views of someone who really knows China retail (just by way of example) than someone who really knows how to examine China’s social structure from a non-western perspective. And that is simply because of how we see our mission and our audience.

7.  Why do you never talk about such and such a blog/website?  Why is this website not on your blogroll?   No big plan here.  We just try to write something every day and if some blog or website doesn’t get covered, it’s because we didn’t choose to cover them on that particular day.  Our blogroll is for blogs, not websites.

8.  Why do you never mention China news/web aggregators? Is it because you know they will put your blog out of business?  I actually got this email today regarding China AllTop, from someone who accused us of ignoring it because it never links over to us because it knows we inflate our readership by using proxies and because it is based on quality, not quantity.  What?  We do just fine on China AllTop, which by the way I absolutely love (along with Hao Hao Report) as a super-quick way to get an overview on China’s trending stories.

9.  Why do you always do posts linking to stories/posts/articles written by your friends?  If I see another post about _______, can I shoot you?  I plead guilty to this one and I can’t help it.  I have biases like everyone else.  Also, my friends often bring their stories/posts/articles to my attention so some of this is just a top of mind thing.  No, you can’t shoot me.

10.  Why do you write about things other than China law?  Why do you write only about China law?  Our focus is and will always be on China law issues as they relate to foriegn companies doing business in China.  We sometimes stray from that just because we feel like it.

11.  Why do you always end your posts by asking “What do you think?”  Don’t you think that is a little bit stupid because everyone knows they can leave a comment without your asking that question?  I do that because I want to emphasize how important I find it for there to be discussion.  I do that because I want everyone to know that no matter how confident we may seem in whatever points we make in our posts, we are not 100% certain of much at all. We do that because I am convinced that when we do that we do get more discussion.  I do that because it is one of our signatures.  And I do it even though I know it is a little bit stupid.

What do you think?