The Administrative Measures for establishing partnership enterprises in China, promulgated on November 25, 2009 and on force from March 1, 2010, are the first legal framework for foreign invested partnership (FIP) in the country. China adopted the Measures aiming to attract “advanced technologies and management expertise (…) to boost the development of the modern service society” (article 3 of Measures). Regulation about FIP refers to: areas of applicability of FIP, set-up procedures, procedures for amendments, changes and closing. The following questions/answers will be useful to clarify FIP’s peculiarities.

How is a FIP?
According to Article 2 of Measures, FIP can be made of two or more companies or foreign individuals (wholly foreign FIP, WFO-FIP) or one or more foreign companies or individuals in partnership with one or more companies or individuals in China (sino-foreign FIP).

Who is allowed /not allowed to be partner of a FIP?
Publicly-listed enterprises, State-Owned Enterprises, Government-sponsored public welfare institutions, other social institutions involved in public welfare, both foreign and Chinese can not be partner of a FIP.

How to register a FIP?
According to article 5, a FIP can be registered directly with provincial or local branches of the State Administration of Industry and Commerce (SAIC), without any prior approval by PRC Ministry of Commerce (MOFCOM). The registration has only to be notified to MOFCOM. MOFCOM prior approval in compulsory just when FIP’s business scope is defined as restricted according to Foreign Investment Industrial Guidance Catalogue.

Which is the minimum registered capital?
There isn’t a minimum for FIP’s registered capital.

About capital contributions: are they allowed just in cash?
Capital contributions are allowed in: cash (foreign currencies or legally obtained RMB) or other assets (including labor, know-how, other rights). Contributions to FIPs are not subject to statutory time limits.

What about bearing liability by partners?
FIP’s partners can be limited partners or general partners. Limited partners bear liability according to capital contributions; general partners bear joint and several liability of partnership debt. General partners conduct business on behalf of FIP, while limited partners can not do this. Shares’ transfer is quite easy and doesn’t need approval by other parties.

Has a FIP a favourable tax treatment?
Taxes are not mentioned in the Document. FIP is subject to Partnership Enterprise Law: it is exempted from corporate income tax. Enterprise partners themselves are subject to 25% corporate income tax. Individual partners are subjected to 5-35% individual income tax. For limited individual partners, there is a 20% tax rate on interests and dividends. FIP represents a way easier and more flexible than others to access Chinese market.