Domestic information

1. Regulatory issuance of supporting policies for the "three classifications" of trusts

After the formal implementation of the "Notice on Standardizing the Classification of Trust Business of Trust Companies" on June 1 of this year, regulatory authorities have issued relevant supporting policies - the "Guidelines for Industry Concentration Issues". The Guiding Principles cover three issues: asset management trusts, asset service trusts, and other issues, with a total of 20 questions answered. It is worth noting that the 'Guidelines' clarify the standards for asset management trust repurchase and derivative business development, which has become a direct benefit for trust companies' standard business; Regarding non-standard investments, asset management trusts should, in principle, diversify risks through portfolio investments. Regulatory authorities have stated that they will improve relevant supporting systems and clarify requirements for portfolio investments; Clarified the classification and characterization of cross business between Life insurance trust and other wealth management trusts. (Source: Securities Times, Shanghai Trust Circle)

Lawyer's recommendation: The introduction of the "Guiding Guidelines" has focused on responding to the classification issues of trust business under the new regulations on the three categories of trust, reflecting the attention and support of regulatory authorities for trust companies to carry out specific business, and effectively assisting trust companies to better implement the requirements.

2. The State Administration of Financial Supervision of the People's Republic of China issued the Notice on Matters Related to the Application of Personal income Tax Preferential Policies for Commercial Health Insurance Products

On July 6, the National Administration of Financial Regulation recently issued the Notice on Matters Related to Products Subject to Personal income Tax Preferential Policies for Commercial Health Insurance. First, the Notice expands the scope of commercial health insurance products applicable to Personal income tax incentives to more types of insurance, including medical insurance, long-term care insurance and disease insurance; Secondly, in response to the current situation of insufficient protection for people with past illnesses, it is required to include them in the medical insurance coverage, and encourage the development of long-term care insurance and disease insurance products targeting specific populations such as past illnesses and the elderly; The third is to expand the group of product insured, where the policyholder can insure themselves, as well as their spouse, children, and parents; Fourth, put forward clear requirements for the owner's equity and Solvency adequacy ratio of life insurance companies; Fifth, establish information accounts for policyholders through a unified commercial health insurance information platform in the industry. (Source: Official website of the State Administration of Taxation)

Lawyer's recommendation: As early as May 2015, China's commercial health insurance applicable to Personal income tax preference has been piloted and promoted nationwide in July 2017, but it has been in an awkward situation of "cheering but not cheering" for a long time. The expansion of the scope of commercial health insurance products and the breaking of the restrictions on the insured group are conducive to promoting the commercial health insurance applicable to Personal income tax preferential policies to benefit more people, promoting the orderly connection of multi-level medical security, and effectively reducing the burden of medical expenses.

3. Li Jianwei, Development Research Center of the State Council: Study and issue legacy tax as soon as possible to weaken the trend of wealth polarization

On July 2, the 17th China Economic Growth and Cycle Summit Forum (2023) and China Urban Quality of Life Index Conference, hosted by the Institute of Economics of the Chinese Academy of Social Sciences and Capital University of Economics and Business, were held in Beijing. The theme of this forum is "Boosting confidence, unleashing potential, and preventing and controlling risks". Li Jianwei, head of the Social and Cultural Development Research Department of the Development Research Center of the State Council, said that the core of urban and rural economic development is to solve the income problem of rural residents first, so as to narrow the gap between urban and rural areas. In addition, it is necessary to study and introduce a legacy tax as soon as possible to weaken the trend of wealth polarization and the negative impact of intergenerational inheritance on the wealth income gap of residents. (Source: Daily Economic News)

Lawyer's recommendation: Minister Li Jianwei's statement on "legacy tax" is not a slip of the tongue, but comes from his previous opinion in the article co authored with others that "gift tax and Inheritance tax should be set up together to explore simplification into a single tax category". As early as the founding of the People's Republic of China, our country had the idea of taking Inheritance tax as the main tax category for unified collection nationwide, which has not been implemented due to the national conditions. Minister Li's suggestion that "gift tax and Inheritance tax should be set up together" can effectively avoid the risk of Inheritance tax due to the transfer of wealth before death, and to a certain extent, it can prevent the accumulation of wealth in intergenerational inheritance, leading to the concentration of resources and the widening gap between the rich and the poor.

4. The policy of adding deductions promotes technological innovation

Recently, the Income Tax Department of the State Taxation Administration, in conjunction with the Department of Policies, Regulations and Innovation System Construction of the Ministry of Science and Technology, issued the Guidelines for the Implementation of the R&D Expense Plus Deduction Policy (Version 2.0) (hereinafter referred to as the "Guidelines"), which comprehensively sorted out the current R&D expense plus deduction related policies, and comprehensively interpreted the policies from the main contents of the policy, R&D expense accounting requirements, declaration and subsequent management. (Source: Economic Daily)

Lawyer's recommendation: Innovation is the first driving force for development. In recent years, the policy of adding and deducting research and development expenses has been continuously optimized and improved, showing the characteristics of increasing efforts year by year, gradually expanding, and progressing layer by layer. It plays an important role in supporting enterprises to invest in research and development and encouraging technological innovation. The government will increase the pre tax deduction ratio of R&D expenses for eligible industry enterprises from 75% to 100% as an institutional arrangement for long-term implementation. For example, a certain enterprise incurred 1 million yuan in research and development expenses in 2023. On the basis of deducting 1 million yuan based on the actual situation, an additional deduction of 1 million yuan can be added, which means that the enterprise can deduct 2 million yuan in research and development expenses in 2023, thereby reducing the taxable income of the enterprise and achieving the goal of paying less taxes and saving cash flow. However, it should be noted that the preferential policy of deducting research and development expenses requires specific conditions to be met.

5. The National Conference on Promoting the Joint Strike against Tax Related Violations and Crimes by Seven Departments was held in Beijing

On July 3, the State Taxation Administration, the Ministry of Public Security, the Supreme People's Procuratorate, the Supreme People's Court, the General Administration of Customs, the People's Bank of China and the State Administration of Foreign Exchange held a meeting in Beijing to promote the work of seven departments in the country to jointly crack down on tax related crimes. The meeting pointed out that since the establishment of a normalized joint crackdown on fraudulent tax payment in October 2021, various departments have focused on illegal and criminal activities such as "fake enterprises" issuing false invoices, "fake exports" fraudulently obtaining export tax refunds, and "fake declarations" fraudulently obtaining tax incentives, and have achieved significant results. As of the end of May this year, a total of 270000 suspected tax fraud enterprises were inspected, and 10.4815 million invoices were found to have been falsely issued. The loss of export tax refund was recovered by 11.78 billion yuan. Among them, from January to May this year, a total of 65000 suspected tax fraud enterprises were inspected, 1.8462 million invoices were found to have been falsely issued, and the loss of export tax refund was recovered by 4.459 billion yuan. At the same time, we will strictly investigate and crack down on the illegal activities of fraudulently obtaining tax refunds and refunds. In 2022, a total of 7813 enterprises suspected of fraudulently obtaining or illegally obtaining tax refunds and refunds were identified, and a total of 15.5 billion yuan in tax losses were recovered, effectively deterring illegal criminals and maintaining economic and tax order. (Source: www.gov.cn, Legal Daily)

Lawyer's recommendation: In recent years, seven departments, including the State Taxation Administration, have launched joint efforts to crack down on such illegal and criminal acts as "fake enterprises", "fake exports", "fake declarations" and so on, such as falsifying invoices, defrauding export tax rebates, and defrauding tax rebates. Accurately cracking down on tax related crimes is conducive to creating a legal and fair business environment.

Overseas information

1. The amendment to the Singapore Companies Act takes effect on July 1st

The Companies, Commercial Trusts and Other Institutions (Miscellaneous Amendments) Act 2023 (Amendment) came into effect on July 1, 2023, aiming to create a more favorable business environment while maintaining market confidence and public interest. (Source: morganlewis)

Lawyer's Recommendation: The Amendment calculates the threshold for mandatory acquisition of shares in accordance with Article 215 of the 1967 Companies Act, and updates the relevant provisions on disqualification of directors in accordance with Article 155A, as well as the penalties imposed on company directors for failing to prepare and submit financial statements in accordance with Singapore's accounting standards. The Amendment Law also includes provisions that provide companies, commercial trusts, and variable capital companies with the option of conducting fully virtual or hybrid meetings.

2. UKSC: Banks are not responsible for application fraud

The Supreme Court of the United Kingdom unanimously ruled in the case of Barclays UK v. Philip ([2023] UKSC 25) that banks do not have the obligation of Quincecare to individual customers. (Source: newlawjournal. co.uk)

Lawyer's recommendation: In this case, the Supreme Court of the United Kingdom (UKSC) ruled that even if the bank had reasonable reasons to believe that there was fraud, the bank would not be responsible for the account holder who was the victim of the authorized push payment (APP) fraud. The Supreme Court clarified that Quincecare's obligation is limited to situations where the fraudster, on the surface, acts as the victim's agent to instruct the bank to make payments from the victim's account, rather than the broader responsibility determined by the appellate court when the victim issues instructions themselves. This means that APP victims cannot request the long-term established Quincecare obligation to seek relief from banks or other Payment service provider.