Chinese General Secretary Xi Jinping's conference keynote at the Boao Forum for Asia Annual: "All countries should follow the trend of the times, adhere to openness and win-win, be bold in change and innovation, and make continuous progress towards the goal of building a community of human destiny; China will adhere to reform and opening up without wavering, continue to launch new major initiatives to expand and open up, and work together with other countries in Asia and the world to create a better future for Asia and the world."

Shanghai as the pioneer of opening to the outside world, actively responding to the requirements of the general secretary, to further expand the opening to the outside world, improve the quality and level of the utilization of foreign capital, speed up the multinational regional headquarters and other functional agencies gathered in Shanghai, expand function and enhance development levels, and introduce a series of preferential policies to encourage multinational companies to set up regional headquarters and headquarters-type organizations in Shanghai.

Based on the above-mentioned government preferential policies and practical experience, this article is intended to provide useful reference for multinational companies intending to set up regional headquarters/headquarters in Shanghai.

We hope you will bear with us if there are any omissions or shortcomings in this article.

I. Definitions

A regional headquarters of a multinational corporation is the sole head office of a parent company registered abroad and established in Shanghai to perform management and service functions for enterprises in more than one country in the form of investment or authorization. (hereinafter referred to as "regional headquarters")

A headquarter-type institution of a multinational corporation refers to a foreign enterprise (or branch) that does not meet the criteria of a headquarter but actually undertakes several functions of management decision-making, capital management, procurement, sales, logistics, settlement, research and development, training and other support services in more than one country region of the parent company abroad. (hereinafter referred to as "headquarter-type institution")

II. Major Government Normative Documents

III. Approval Department and Approval Time

The Shanghai Municipal Commission of Commerce is responsible for the identification of regional headquarters and headquarters-type organizations, and coordinates with market supervision, finance, taxation, foreign affairs, science and technology, human resources and social security, public security entry and exit, foreign exchange management, People's Bank of China, customs and other departments in their respective areas of responsibility to carry out management services for regional headquarters of multinational companies.

The Shanghai Municipal Commission of Commerce shall complete the examination within 8 working days from the date of receipt of all application materials and make a decision on whether to recognize or not to recognize the application. If the decision is granted, a certificate of recognition shall be issued.

It is important to note that, in our practical experience, the Shanghai Municipal Commission of Commerce will review the application documents upon receipt and conduct site visits, if the application documents submitted by the applicant do not meet the requirements, the documents will need to be corrected in accordance with the requirements of the Shanghai Municipal Commission of Commerce.

Therefore, the 8 working days mentioned above refers to 8 working days after the Shanghai Municipal Commission of Commerce has received all the eligible application materials.

IV. Conditions of Application for Recognition

According to Document 31, the conditions for the recognition of a headquarters or headquarters-type establishment are as follows:

1.  Conditions for the Recognition of Headquarters

(1).Foreign-invested enterprises with independent legal personality.

(2).Total assets of the parent company ≥ US$200 million.

(3). Authorized by the parent company to undertake the headquarter functions of management decision making, capital management, procurement, sales, logistics, settlement, research and development, training, etc. within a region of more than one country.

(4). Registered capital of ≥ US$2 million.

(5).Those who basically meet the aforementioned conditions and have made outstanding contributions to the economic development of the region in which they are located may be considered for recognition on a discretionary basis.

2. Conditions for the Recognition of a Headquarters-type Institution.

(1).Foreign-invested enterprises or branches with independent legal personality.

(2).Total assets of the parent company ≥ US$100 million.

(3). Authorized by the parent company to undertake the head office functions of management decision making, capital management, procurement, sales, logistics, settlement, research and development, training, etc. in more than one country region.

(4). Registered capital ≥ US$1 million or, in the case of a branch, working capital allocated by the head office ≥ US$1 million.

According to our practical experience, the Shanghai Municipal Commission of Commerce usually chooses to conduct site visits and face-to-face interviews with the employees of the applicant company, based on a full understanding of the applicant company, to make a comprehensive determination of whether the applicant company meets the conditions for recognition as stated in Document 31.

Therefore, if a multinational company intends to apply, it should make adequate preparations in advance, and can hire a professional law firm to assist in the internal determination of whether the conditions for recognition are met. If the specific conditions are uncertain, it can entrust professionals to the Shanghai Municipal Commission of Commerce for preliminary consultation, maintain active communication with the Shanghai Municipal Commission of Commerce when applying, and cooperate with the inspection and interview work carried out by the Shanghai Municipal Commission of Commerce.

V. Financial Support

According to Document. 190, the Shanghai Municipal Government, in order to encourage multinational companies to set up regional headquarters in Shanghai, has set up a special fund to encourage the development of inter-company regional headquarters in Shanghai. If a multinational company is assessed by the Shanghai Municipal Commission of Commerce as a headquarters/headquarter-type organization upon application, the multinational company enjoys various financial subsidies, mainly as follows.

1. Subsidy for Setting Up

(1) A start-up grant of RMB 5 million will be given to those who set up a regional headquarters in the form of an investment company with a paid-up registered capital of over USD 30 million and 10 or more employees. The start-up grant will be granted in the proportion of 40%, 30% and 30% over three years.

(2) Foreign-funded global R&D centers with more than 50 R&D staff and foreign-funded R&D centers with independent legal personality are eligible for the start-up grant with reference to the same criteria.

2. Rental Subsidy

(1) For regional headquarters of multinational corporations registered in the city or relocated to the city after July 7, 2008, with a paid-up registered capital of more than US$2 million and leasing office space for their own use, a subsidy of 30% of the rent shall be provided for three years at a rate of not more than 1,000 square meters of office space and not more than RMB8 per square meter per day; for the purchase of office space for their own use, a one-off financial subsidy shall be provided at a rate of a one-off financial subsidy will be given for the total amount of three years at the same standard as the rental subsidy.

(2) For foreign-funded global R&D centers with more than 100 R&D staff and foreign-funded R&D centers with independent legal personality, which are recognized after 10 October 2017, the rental subsidy will be granted at the same rate.

3. Annual Turnover Achievement Bonus

If a multinational company is recognized as an Asia-Pacific headquarters and its annual turnover reaches the following targets, it will receive a corresponding cash incentive.

(1) For the portion of annual turnover reaching RMB 500 million and less than RMB 1 billion, a one-off incentive of RMB 5 million will be granted.

(2) For the portion of annual turnover reaching RMB 1 billion and less than RMB 1.5 billion, a one-off incentive of RMB 3 million will be awarded.

(3) For the portion of the annual turnover reaching and exceeding RMB 1.5 billion, a one-off award of RMB 2 million.

The above awards are divided into three years, respectively in accordance with the proportion of 40%, 30% and 30%.

4. High-level Funding for Headquarters

A newly established headquarters of a multinational company in Asia, Asia Pacific or a larger region in the city after January 1, 2012 or an established regional headquarters of a multinational company upgraded to an Asia, Asia Pacific or a larger region headquarters after January 1, 2012, with a paid-up registered capital of more than USD 2 million and not less than 50 employees, and the head person appointed by the parent company and the main A one-time high level subsidy grant of RMB 3 million is available to those who are based in Shanghai.

VI. Policy Support

After a multinational company has applied to be assessed by the Shanghai Municipal Commission of Commerce as a headquarter/headquarter-type organization, the multinational company enjoys the following policy support.

1.Cross-border Fund Operation and Management Facilities

(1). It can carry out centralized operation and management of cross-border funds (hereinafter referred to as "cross-border funds pooling business"), centralize the management of domestic and foreign funds of member enterprises of the Company, and carry out fund pooling, transfer, settlement, hedging, investment, financing and other businesses in accordance with the Group's business model.

(2). Support regional headquarters and headquarters-type institutions of multinational corporations to carry out cross-border payments in all currencies, both domestic and foreign, under the cross-border fund pooling business. Regional headquarters and headquarter-type institutions of multinational corporations may conduct cross-border capital pooling operations through multi-currency (including RMB) domestic capital master accounts. Regional headquarters and headquarter-type institutions of multinational companies are encouraged to use RMB for cross-border settlement, and all cross-border transactions that can be settled in foreign currency according to the law can be settled in RMB.

(3). Regional headquarters and headquarters-type institutions of multinational corporations may, according to their needs, directly file with the Shanghai Branch of the State Administration of Foreign Exchange to carry out cross-border fund pooling business. After filing, they shall centralize the management of foreign debts and/or overseas lending of member enterprises in accordance with the macro-prudential principles and follow commercial practices to borrow and repay foreign debts or carry out overseas lending business on their own, and all members need not apply for the registration of foreign debts (or overseas lending) by currency and by creditor (or debtor) on a case-by-case basis All members are not required to register their foreign debts (or foreign loans) by currency or creditor.

(4). Removal of restrictions on the number of cooperative banks and domestic fund master accounts for cross-border fund pooling business. There is no restriction on the number of cooperating banks for regional headquarters and headquarters-type institutions of multinational corporations as host enterprises, no requirement to allocate foreign debt and offshore lending concentration quota among cooperating banks before filing, and no restriction on the number of domestic fund master accounts to be opened.

2. Trade and Logistics Facilitation

(1). To pilot the implementation of "one license with multiple locations" for chain enterprises in regional headquarters and headquarters-type institutions of multinational corporations, and to enhance the convenience of opening chain shops in regional headquarters and headquarters-type institutions with prominent trade functions.

(2). Take the lead in including regional headquarters and headquarters-type institutions of multinational companies with good credit in the scope of self-printing enterprises of export certificates of origin, and continuously improve the level of origin visa facilitation.

(3). Support regional headquarters of multinational companies, headquarters-type institutions and foreign-funded R&D centers to carry out pilot tariff guarantee insurance.

(4). Support eligible regional headquarters and headquarters-type institutions of multinational companies to carry out cross-regional outward processing or deep processing carry-over on their own.

(5). Explore the implementation of the group's general guarantee, improve the customs supervision system such as "one book" and sharing of credit measures, so as to attract more multinational companies to set up their regional headquarters and headquarters-type institutions.

(6). Promote the implementation of "one-stop" customs registration, customs clearance, tax exemptions and bonding for regional headquarters of multinational companies, headquarter-type institutions and foreign-funded R&D centers.

3. R&D Support

(1). Implement risk assessment and classification management for import and export materials for testing by regional headquarters of multinational companies, headquarters-type institutions and foreign-funded R&D centres, and promote the facilitation of import and export of materials for R&D testing.

(2). Adjusting the number of persons required to apply for start-up grants and rent subsidies for foreign-funded R&D centres to 50.

4. Facilitation of the Introduction of Talents and the Entry and Exit of Foreign Employees.

(1). Facilitation by the human resources and social services departments and the science and technology departments for the introduction of foreign talents from headquarters/headquarter-based institutions to work in the city and to apply for relevant documents.

(2). The introduction of domestic talents may apply for household registration in the city if they meet the relevant conditions.

(3). The district where they are based will facilitate the admission of their children to school, medical care, and application for talent flats, etc.

(4). Foreign nationals who need to stay in the city for a long period of time may apply for a residence permit for foreigners valid for three to five years.

(5). Senior executives, such as legal representatives, may be recommended for a Permanent Residence Permit for Foreigners on a priority basis.

(6). The Customs Department provides a green channel for legal representatives and senior executives related to headquarters functions to apply for health certificates.

VII. Application Process for Financial Assistance and Preferential Policies