"Opinions Regarding the Regulation of Foreign Investments Admitted to the Real Estate Market and the Administration"
To the people's governments of all provinces, autonomous regions, the cities under the direct jurisdiction; all ministries and commissions, all subordinative departments:
Since this year, foreign investments in the real estate sector of China have increased abnormally, whereas the attempts made by overseas institutions and individuals to purchase properties within the territory of China are getting relatively over active. In order to promote a healthy development of the real estate market, upon the approval by the State Council the opinions regarding the regulation of foreign investments admitted to the real estate market and the administration are herewith proposed as follows:
1. The regulation of foreign investments admitted to the real estate market
(1) Overseas institutions and individual persons that have the intention to invest in or purchase real estate for the purpose of non-self use should follow the principle of commercial existence, they need to lodge their applications for setting up foreign invested enterprises in compliance with relevant regulations of foreign investments in the real estate sector of China, and may operate to carry out relevant businesses in line with the scope of business operations upon the approvals by relevant departments and after completion of respective registration matters.
(2) If a total amount of foreign investments intended for setting up real estate enterprise exceeds US$ 10 M (including US$10 M) the registrated capital is not allowed to be less than 50 % of the total amount. If a total amount of investments is lower than US$10 M, then the registration capital is still operated in the same way as the respective provisions of existing regulations.
(3) The establishment of foreign invested real estate enterprise is subject to the approvals by the authority in charge of commerce and the authorized banking department of ICBC, and a formal registration procedure, then successful applicant would be issued an one year valid "Certificate of Approval for Foreign Invested Enterprise" and the "Operating License". Firm which has paid off the charges on conveying of title for land use, needs to present these documents with land administration authority so as to apply for the "License for Use of State-owned Land", and is eligible to exchange the "License for Use of State-owned Land" for a formal "Certificate of Approval for Foreign Invested Enterprise" at relevant administration authorities of industry and commerce and an "Operating License" which has the same validity term as the "License for Use of State-owned Land", then needs to visit an office of the taxation authority to handle the matters relating to corporate taxation.
(4) The transfer of shares and project for foreign invested enterprise or overseas investor intending to acquire or merger with domestic real estate enterprise is subject to strict assessment which is conducted by the authority in charge of commerce or department according to relevant laws and regulations. Investors should lodge the declaration statement for assurance as concerning to the performances of the "Contract for Remising the Using Right of State-owned Land", "License for Planning of Land', "License for Planning of Construction Project" etc. legal documents, and "License for Use of State-owned Land"; provide the proof issued by the department in charge of development (real estate) in respect of the verification on information stored in file, and relevant group certificates issued by taxation authority.
(5) An overseas investor which acquires domestic real estate enterprise in the form of equity transfer or an alternative, or purchases the share holdings of a Chinese party, needs to properly allocate redundant employees and treat its debts at bank, and needs to pay an once-off lump sum of charges on transfer. However, for those investors that bear bad credit records, no such kind activities as mentioned above are allowed inside the border of PRC.
2. The enhancement on the business administration of foreign invested enterprise and real estate developer
(6) Overseas real estate investor holding with no "Certificate of Approval for Foreign Invested Enterprise" and "Operating License" is not permitted to carry out any activity related to the development and operations in the real estate sector.
(7) Foreign invested real estate enterprise is not allowed to carry out applications for China or foreign based loans, foreign exchange administration authority would not approve any settlement of foreign exchange transaction for foreign borrowings under the circumstances that they haven't fully placed registration capital, haven't obtained the "License for Use of State-owned Land", and the principal fund of a project development hasn’t reached 35% of its total investment value.
(8) Both Chinese and foreign parties of a foreign funded real estate enterprise must not, in any format, conclude any provision in contract, charter, agreement on share transfer, and any other legal document, making attempts to guarantee a fixed return or alternative fixed return generated to any party.
(9) Foreign invested real estate enterprise shall comply with the legislations and regulations relevant to the real estate industry, rigidly execute the agreements specified in contract for land conveying, time limit and conditions approved in respective licenses of planning. Relevant departments are reminded to enhance the monitoring on the activities as to the business development and sales etc, should timely carry out contegent inquiry in case that any of illegal behaviors against legislations and regulations as to over stocking up of lands and properties, manipulating of prices occurs.
3. Stringent administration specific to overseas institutional and personal buying of property
(10) Branch, representative entity (excluding enterprises approved for involving in the real estate industry) of institution from overseas, and individual who works, studies for the duration being more than one year within the border of PRC may be eligible to purchase suitable property (properties) for the needs of self-use or self-occupancy but not for non-self use or non-self occupancy. Meanwhile, for those institutions and individuals with less than one year duration within the border of PRC, purchasing of property is not permitted.
Resident from the regions of Hong Kong, Macao and Taiwan, or Chinese expatriate is allowed to purchase self-occupancy property with certain amount of floor space should they have real needs.
(11) Eligible institution or individual from overseas must use real true name in the purchasing of self using or self occupying property, and hold valid reference documents (overseas institution should hold a reference document issued by an relevant department of the Chinese government with respect to the approval of setting up branch in China's territory, individual should hold an approval reference issued by China for the purposes of working, study, the same in the followings), call on the department of land and real estate authority to go through registration procedures respective to the land using right and property asset ownership. The department for property asset registration must strictly adhere to the principle of self using and self occupancy in handling of the registration matters of institution or individual, no compromise would be rendered in this regard.
(12) Foreign exchange administration department shall make assessment on inflow remitted capital and settlement in strict accordance with relevant prescriptions and the requirements prompted by the opinions set forth herewith to foreign invested real estate enterprises, institutions from overseas and individual persons, in-flow capital transfer and settlement of foreign exchange are permitted as long as they meet the conditional requirements; RMB capitals earned respectively from property transfer are allowed to transfer upon the legal assessment and completion of tax lodgment procedure etc.
4. Further enhancement of supervision duty and to put it into effect
(13) Each region, especially the municipal people's government of each city is supposed to actually be accountable for the duties, highly regard the current issues prompted by foreign investments involved in the real estate market, further strengthen leadership, and put supervision duty into effect. Each region is no longer allowed to declare the policies favorable to foreign invested real estate enterprises, those policies that have been promulgated must be reviewed for amendment or revision. The ministry of Construction, the Ministry of Commerce, the National Development & Reform Commission, the Ministry of Land Resources, the Industrial & Commercial Bank of China, the State Administration of Taxation, the State Administration of Industry & Commerce, the China Banking Regulatory Commission, the State Administration of Foreign Exchange etc relevant organs need to timely draft respective details for operations, reinforce the guidance and the supervision on the "Opinions Regarding the Regulation of Foreign Investments Admitted to the Real Estate Market and the Administration", such behaviors as to reducing enterprise's registration capital and proportional ratio of project fund on own discretion, as well as other illegal behaviors caused by unqualified administrative practices, must be investigated pertinent to laws. Meanwhile, in-depth investigation on illegal cross border real estate deals and illegal behaviors of foreign exchange transfer need to be further strengthened.
(14) The mechanism for monitoring and analyzing the market needs to be perfected. The Ministry of Construction, the Ministry of Commerce, the National Bureau of Statistics of China, the Ministry of Land Resources, the Industrial and Commercial Bank of China, the State Administration of Taxation, the State Administration for Industry & Commerce, the State Administration of Foreign Exchange etc. relevant organs need to establish and make complete information monitoring system on all foreign investments involving in the real estate market, make perfection of the information network in respect of foreign investments in the real estate market. The collaborations among all relevant departments, strengthening of the monitoring on cross border capital movements, realizing the open information about the statistics on foreign invested real estate entities.
The Ministry of Construction;
The Ministry of Commerce;
The National Development and Reform Commission;
The Industrial and Commercial Bank of China;
The State Administration for Industry & Commerce;
The State Administration of Foreign Exchange.
Date: 11 July 2006
Translated by the World Investment Net, all rights reserved.
