Back to Work: Yesterday, February 10th, was the first official day back to work after the extended Lunar New Year holiday, but cities across the country saw only a fraction of workers return to their posts. Many businesses are asking employees to work from home, and factories face stringent disinfection requirements and inspections before they can reopen.
Government Regulations on Resumption of Company Operations
The State Council released on February 8 a specific "Circular on Effectively strengthen scientific prevention and control of epidemic situation” guiding local governments to promote orderly resumption of company operations to support a stable economy . Companies in various districts should check their local governments for specific implementation regulations. Some of the local governments will carry out an inspection of applicants before approving applications. The government will give priority to industrial companies, medical companies and companies related to people’s livelihood.
As companies rush to re-open their factories and businesses, they must comply with a series of local government regulations to obtain permission to open. These regulations exist at all levels of the government from the provincial govenrments to the neighborhood committees and can be very confusing. While there are a number of differences in the policies from location to location, they share some things in common.
- Companies must apply to their local government for permission to open. This application process could take a few days and often require a complete list of every employee that will begin working along with employees’ health situation and travel history.
- Companies need to provide contingency and operation resumption plans. The plans should include details about the company’s leadership, accountability system, inspection mechanism, daily management modes and make clear the responsibilities of different departments and individuals.
- Companies should adopt effective measures to prevent the spread of the coronavirus and ensure that safety precautions are in place after resuming operations. Employees must wear masks at work and not sit too close to each other. There should also be hygiene procedures at work.
- Employees who have traveled can be subjected to quarantine requirements. The quarantine typically lasts 14 days and while most regulations specify that this requirement only applies to those who have traveled to provinces with a high-number of cases, some district governments and neigborhood committees regulations insist that the quarantine applies to anyone who have traveled in the last 14 days.
China’s Ministry of Commerce Vows More Support for Foreign Companies
China’s Ministry of Commerce (MOFCOM) released a new set of measures on February 10 urging local authorities to “spare no effort” to provide superior services for foreign-invested enterprises (FIEs), such as helping FIEs resume regular production and operations, and to keep attractingforeign investment.
Shanghai Government Releases Measures to Support Business During Pneumonia Epidemic Situation and in Support of Prevention and Control of New Coronavirus Infection
The Shanghai Municipal People's Government unveiled 28 measures (上海市人民政府关于印发上海市全力防控疫情支持服务企业平稳健康发展若干政策措施的通知 [沪府规3号]) while Shanghai Municipal Bureau of Finance and the State Taxation Administration released other measures (上海市财政局、国家税务总局上海市税务局关于坚决贯彻落实支持防控新型冠状病毒感染的肺炎疫情有关税收政策的通知 [沪财税7号]), on February 7 and 9 respectively, to stabilize businesses in the novel coronavirus epidemic. The measures will take immediate effect and won’t expire until three months after the outbreak is officially declared over.
They include increasing fiscal support, preferential tax treatment and credit for for key enterprises involved in epidemic prevention, loan guarantees, exemption of registration fees for certain drugs and medical devices, measures to support the aviation industry and other financial support, reducing and exempting corporate housing rents, exempting the fixed tax burden of individual industrial and commercial households, and appropriately reducing the medical insurance premium rate for employees
The government estimates the measures will reduce costs for companies by RMB 30 billion, according to the News. Foreign-funded companies will enjoy the same treatment as local businesses. Local districts are responsible for the implemenation with their respective execution plans.
Basically, the 28 measures are divided into 6 categories:
1) In Category 1, financial, tax and other policies are aimed at encouraging companies to join in efforts to combat the epidemic.
2) In Category 2, measures are designed to reduce rental, tax or fee burden on businesses. For example, corporate donation will enjoy pre-tax deduction.
3) In Category 3, the government highlights financial support to companies heavily impacted by the virus.
4) Category 4 is closely related to stabilizing employment as authorities strive to delay payment of social insurance premiums and lower the medical insurance premium rate, while encouraging companies to adopt flexible working arrangement.
5) In Category 5, the city government shows its determination to unveil more policies in support of developing online business ecosystems and online medical services, while
6) Category 6 is about the upgrading of the general business environment.
The below is a summary with bullet points for each of the 28 measures. The English version is an unofficial translation. If there is any discrepancy, the Chinese version shall prevail.
Category 1: Policy 1-8
Incentives to encourage corporates to participate in the fight against the virus
1. Tax deduction and exemption
For example, if a manufacturer needs to buy facilities for manufacture of epidemic prevention supplies, such a purchase will be entitled to one-time pre-tax deduction.
VAT is exempted for the income obtained by taxpayers in providing public transportation services in the epidemic, living services, and providing residents with necessary living materials and express delivery services.
And also, if a company is mandated by the government to produce supplies needed in emergency response, it will be offered full-amount subsidies if the cost is higher than the actual market price.
Losses Carry-over. The longest carry-over period of losses incurred by enterprises in difficult industries affected by the epidemic in 2020 is extended from 5 to 8 years. Enterprises in difficult industries, including transportation, catering, accommodation, and tourism. The income from the main business of enterprises in difficult industries in 2020 must account for more than 50% of the total income (excluding non-taxable income and investment income).
Tax-deductible Donations. Enterprises and individuals donate cash and articles used to respond to the pneumonia epidemic of new coronavirus infection through non-profit social organizations or people's governments at or above the county level and their departments, and allow full deduction when calculating taxable income .
2. Lowing lending rates
Local commercial banks are urged to leverage central bank policy to offer loans with preferential rates to companies that make, transport or sell medical supplies and daily necessities in the fight against the epidemic, including small and micro firms. Together with additional fiscal subsidies, the loan rate shall be lower than 1.6%.
Local financial institutions are encouraged to issue bonds to raise funds for epidemic control.
3. Tapping capital market financing
High-tech startups that play a role in epidemic control will be granted priority review status to be listed on the Nasdaq-like science and technology innovation (STAR) market in Shanghai.
The government will encourage PE/VC funds to invest in companies that produce medical supplies and vaccines.
4. Stepping up insurance support
Policyholders who are hurt by the epidemic should be offered compensation as early as possible.
Insurers are encouraged to offer insurance for free to medical staff who participate in emergency response in Hubei, and to expand insurance coverage to include the novel coronavirus.
5. Improving capacity and imports of emergency supplies
If a company is mandated by the government to upgrade its technology facilities needed to produce emergency supplies, financial subsidies equivalent to 50-80% of the related investment will be offered.
For imported medical supplies beyond actual use in the emergency response, the government is expected to buy them as the city’s supply reserves.
6. Tariff exemption
The imports of supplies for epidemic control will be exempted from tariffs and other related VAT or consumption tax.
7. Green channel at Customs
The government has set up a green channel for imported supplies used in epidemic control to ensure 7*24 Customs clearance.
8. Funds to aid product innovation
The city will set up new or leverage existing industry and innovation funds to support development and manufacture of new products to fight against the coronavirus.
Category 2: Policy 9-13
Reducing rental, tax, fee burden on enterprises
9. Rental waiver or reduction
State property owners are required to waive rentals at least in February and March for small- and medium-sized enterprises.
Commercial property owners are encouraged to waive or reduce rentals for tenants, and they can accordingly apply to get deductions in their own property tax or land use tax.
10. Delaying tax declaration
For reasons related to the impact of the epidemic, tax payers can apply to delay tax declaration for up to 3 months.
11. Preferential tax policies for corporates and individuals
For donation in terms of supplies and cash by corporates, it can enjoy pre-tax deduction, with no need to pay VAT, consumption tax or additional tax.
For subsidies offered to medical staff or protective supplies offered to employees, no personal income will be levied.
12. Tax waiver for sole traders
During the entire period of the epidemic, sole traders are exempted from paying income tax.
13. Lower guarantee deposit for travel agencies
Starting February 5, travel agencies with good credibility will have 80% of their service quality guarantee deposit returned.
Category 3: Policy 14-16
Financial support to companies heavily impacted by the virus
14. Lower interest rates for heavily-hit businesses
For industries or SMEs that are heavily impacted by the epidemic, local banks are required to offer loans with interest rates at least 25 basis points lower than the benchmark.
15. Working capital support
Banks should offer refinancing or extend maturity periods for loans used as working capital in a variety of industries that are heavily hit by the epidemic, including tourism, accommodation and catering, wholesale and retail, transportation, logistics and warehousing, culture and entertainment, convention and exhibition.
16. Financing guarantee support
The government will offer more loan guarantee to SMEs and micro companies that produce emergency response supplies or are impacted by the epidemic to help them secure loans.
Category 4: Policy 17-22
More efforts to stabilize employment
17. Return of unemployment insurance premiums
For companies that do not lay off workers in 2020, the government will return half of the unemployment insurance premiums they paid in the previous year.
18. Delaying social insurance collection
The city will delay the starting month of the annual collection period of social insurance premiums from April to July, or by 3 months, due to the novel coronavirus outbreak.
19. Extending social insurance payment period
Companies and self-employed individuals are allowed to delay payment of their social insurance premiums until as late as 3 months after the epidemic is officially declared over. No overdue fines will not be incurred.
20. Subsidies for online training
For enterprises that arrange online training for employees under the impact of the epidemic, subsidies equivalent to up to 95% of the actual training expenditure can be offered back.
21. Lower medical insurance premium rate
In 2020, the medical insurance premiums payment rate for employees is lowered by 0.5 percentage points.
22. Flexible working policies
Enterprises are encouraged to adopt flexible working policies, such as salary adjustment, job rotation, flexible working hours, and other measures to stabilize job positions.
Category 5: Policy 23-25
Measures to help resumption of work
23. Supporting companies to resume operation
The government will urge and help enterprises to put in place epidemic prevention measures before resuming work. Further efforts will be made to ensure supply of masks, thermometers, and disinfectants.
24. Helping enterprises secure labor force
The government will help companies to leverage WeChat, and other interactive online channels to hold online recruitment activities to secure sufficient labor force.
25. Cultivating new technologies and business ecosystems
The city will step up efforts to develop a series of new business ecosystems, such as online shopping, online education, remote office, online services, digital entertainment, digital life, and intelligent delivery.
Key support will be offered to high-growth startups specializing in online healthcare, original innovative drugs, medical supplies, and medical devices.
Category 6: Policy 26-28
Fostering a business-friendly environment
26. Improving online services to corporates
The city will further leverage its integrated online service platform to facilitate imports of supplies to aid the battle against the epidemic.
27. Ensuring the epidemic not to wrongly hurt corporate credibility
For companies that may incur payment default or other activities that may hurt their credibility due to the epidemic, such issues should not be recorded as misbehavior in the public credit rating system.
For enterprises unable to fulfill international trade contracts due to the epidemic, the Council for the Promotion of International Trade Shanghai is expected to issue a factual proof of force majeure upon request.
28. Improving legal service support
The city will establish an emergency public legal service mechanism, and help enterprises deal with disputes over contracts and labor relations that arise from the epidemic.