RCEP: Asia-Pacific Countries Form World’s Largest Trading Bloc With China

China and 14 other countries have agreed to form the world’s largest free-trade bloc, encompassing nearly a third of all economic activity, in a deal many in Asia are hoping will help hasten recovery from the shocks of the coronavirus pandemic. The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN). The Regional Comprehensive Economic Partnership (RCEP) Agreement is an agreement to broaden and deepen ASEAN’s engagement with Australia, China, Japan, Korea, and New Zealand.  

RCEP’s economic significance

RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030. According to ET, RCEP aims is to lower tariffs, open up trade in services, and promote investment to help emerging economies catch up with the rest of the world.

 

Member States

Member states of ASEAN and their FTA partners are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and New Zealand.

 

The Objectives of RCEP

Specifically, RCEP is expected to help reduce costs and time for companies by allowing them to export a product anywhere within the bloc without meeting separate requirements for each country. The objective of the RCEP Agreement is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.

China’s Role

RCEP was pushed by Beijing in 2012 in order to counter another FTA that was in the works at the time: The Trans-Pacific Partnership (TPP). The US-led TPP excluded China. However, in 2016 US President Donald Trump withdrew his country from the TPP. Since then, the RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing. The accord is a coup for China, by far the biggest market in the region with more than 1.3 billion people, allowing Beijing to cast itself as a “champion of globalization and multilateral cooperation” and giving it greater influence over rules governing regional trade, Gareth Leather, senior Asian economist for Capital Economics, said in a report.

Now that Trump’s opponent Joe Biden has been declared president-elect, the region is watching to see how US policy on trade and other issues will evolve.

Share with friends:

Understanding China’s Tax Laws & Regulations for Foreign Companies

Taxation in China is administered by the State Administration of Taxation. This government body establishes the tax laws in China and sets the tax rates for all companies. Foreign companies doing business in China need to comply with the Chinese tax system. Often it becomes overwhelming for the foreign businesses to understand the China tax system. This is the reason having a qualified and experienced China business lawyer by your side will simplify your operations in China.

Understanding China’s Tax System for Foreign Companies

Amid the COVID-19 crisis, from 1 May 2020 to 31 December 2020, the payment of corporate income tax of small and thin-profit enterprises can be deferred to the first tax filing period in 2021. As a foreign national, you are required to register with the State Administration of Taxation (SAT) as soon as you are eligible for taxation in China. According to the Greenback Expat Tax Services, income from employment is taxed monthly at a progressive tax rate that caps at 45%. Companies in special industries need to comply with the special regulations issued by the relevant government agencies.

 

Taxable Base

The taxable base for a resident enterprise or a non-resident enterprise with an establishment or business site in China is taxable income.

Taxable income equals

  • Gross income less non-taxable income
  • Tax-exempt income
  • Various deductions
  • Net operating loss (NOL) carried over from previous years

 

Deductions

In general, all expenses, costs, taxes, losses and other payments incurred by an organization are deductible to the extent of reasonableness and direct relevance to that enterprise’s income. As of January 1, 2018, the five-year limit has been extended to 10 years for new high-technology enterprises and for small and medium-sized scientific enterprises. Losses cannot be carried back.

The Corporate Income Tax (CIT) Law in China

The Corporate Income Tax Law was drafted on the first of January 2008. In this law, domestically-invested enterprises and the other set for foreign-invested enterprises (FIEs) and foreign enterprises (FEs) has been merged together. CIT applies to what is officially called a tax resident enterprise (TRE) of China. This is deemed to be a company that is established in China or a foreign company that has its effective management located in China.

 

Businesses must register with the customs authorities if importing or exporting. The General Administration of Customs or GAC supervises the collection of customs duties, import VAT and import consumption tax, which are all directly attributed to the central fiscal revenue. It also oversees the operation of bonded zones.

Share with friends: