Regulatory Compliance updates December 2022

China publishes and implements 2022 edition of Catalogue of Encouraged Foreign Investment Industries

The Ministry of Commerce of China promulgated the Catalogue of Industries to Encourage Foreign Investment (2022 Edition), which will come into force on January 1, 2023. The new Catalogue continues the structure of the 2020 edition and consists of two parts: first, the National Catalogue of Industries encouraging foreign Investment (hereinafter referred to as the National Catalogue), which is applicable to the whole country; Second, the Catalogue of Industries with Advantages for foreign Investment in the Central and Western regions (hereinafter referred to as the Catalogue of the Central and Western regions) is applicable to the central and western regions, Northeast China and Hainan Province. Compared with the 2020 edition, the total number of items in the Catalogue of Encouragement is 1,474, with 239 additions and 167 modifications. Among them, there are 519 items in the national catalog, with 39 items added and 85 revised; A total of 955 items were added to the central and western catalogues, with 200 items added and 82 revised.

According to the Ministry of Commerce, there are three major changes in the revision. First, continue to encourage foreign investment in advanced manufacturing. Second, continue to guide foreign investment in the modern service sector. Third, continue to guide foreign investment in advantageous industries in the central and western regions and Northeast China.

The industries and fields of foreign investment in the Catalogue can enjoy three preferential policies: First, the import of self-use equipment within the total investment, except for the products which are not exempt from duty according to the state regulations, will be exempted from duty; The second is to give priority to the supply of land for encouraged industrial projects with intensive land use, and the reserve price can be determined at no less than 70% of the lowest price standard of the national industrial land transfer according to the location, etc. Third, investment in the western region and Hainan Province can be further reduced by 15% corporate income tax.

EU requests two WTO panels against China: trade restrictions on Lithuania and high-tech patents

The EU has requested the establishment of panels at the World Trade Organization for two of its ongoing trade disputes with China. One concerns the legality of the trade restrictions that China has had in place against Lithuanian exports and EU exports containing Lithuanian content since December 2021. The other concerns the legality of China restricting EU holders of high-tech patents from accessing EU courts to effectively protect and enforce their rights.

In both cases, the Chinese measures are highly damaging to European businesses. Furthermore, China's discriminatory measures against Lithuania affect intra-EU trade and intra-EU supply chains and they impact the functioning of the EU internal market, including by forced market adjustments. The removal of these measures is in both the economic and strategic interest of the EU. China's measures reduced trade from Lithuania by 80%.

EU Commission proposes measures to bring VAT into the Digital Age

On 8 December, the European Commission proposed a series of measures to modernise and make the EU's Value-Added Tax (VAT) system work better for businesses and more resilient to fraud by embracing and promoting digitalisation. According to the latest VAT Gap figures Search, Member States lost €93 billion in VAT revenues in 2020. Conservative estimates suggest that one quarter of the missing revenues can be attributed directly to VAT fraud linked to intra-EU trade. These losses are clearly detrimental to overall public finances at a time when Member States are adjusting budgets to deal with the social and economic effects of recent energy price spikes and Russia's war of aggression against Ukraine. In addition, VAT arrangements in the EU can still be burdensome for businesses, especially for SMEs, and other companies who operate or are looking to scale-up cross-border.
Key actions proposed will help Member States collect up to €18 billion more in VAT revenues annually while helping businesses, including SMEs, to grow:

• A move to real-time digital reporting based on e-invoicing for businesses that operate cross-border in the EU
• Updated VAT rules for passenger transport and short-term accommodation platforms
• The introduction of a single VAT registration across the EU

EU preparing new Russia sanctions package

As the Press statement (below) by EU President von der Leyen, EU is stepping up the pressure on Russia, with a ninth package of sanctions.

First, we are proposing to add almost 200 additional individuals and entities to our sanctions list. This includes the Russian armed forces, as well as individual officers and defence industrial companies, members of the State Duma and Federation Council, ministers, governors and political parties, among others. This list covers key figures in Russia's brutal and deliberate missile strikes against civilians, in the kidnapping  of Ukrainian children to Russia, and in the theft of Ukrainian agricultural products.

Second, we propose to introduce sanctions against three additional Russian banks, including a full transaction ban on the Russian Regional Development Bank to further paralyse Putin's cash machines.

Third, we also want to impose new export controls and restrictions, particularly for dual-use goods. This includes key chemicals, nerve agents, electronics and IT components that could be used by the Russian war machine.

Fourth, we will cut Russia's access to all sorts of drones and unmanned aerial vehicles. We propose to ban the direct exports of drone engines to Russia and the export to any third countries, such as Iran, which could supply drones to Russia.
We will also target the Russian propaganda machine by taking four additional channels off the air and all other distribution platforms.

And we propose further economic measures against the Russian energy and mining sector, including a ban on new mining investments in Russia.

This package comes on top of the full EU import ban on Russian seaborne oil that came into force this week. As well as the global oil price cap agreed between the G7.

The international cooperation against Russia's war has never been stronger.

EU – Madagascar agreement proof of origin update

As from 1 January 2023, imports into the EU of products originating in Madagascar shall benefit from the preferential tariff treatment provided for in the interim Economic Partnership Agreement, exclusively upon submission of invoice declarations made out:

• by exporters from Madagascar registered in the EU’s REX system; or
• by any exporter for any consignment whose total value of originating products does not exceed EUR 6 000.

From 1 January 2023, movement certificates EUR.1 issued by Madagascar and invoice declarations made out by approved exporters will no longer be accepted.

European Commission: New transparency rules require service providers to report crypto-asset transactions

On 8 December, the European Commission proposed new tax transparency rules for all service providers facilitating transactions in crypto-assets for customers resident in the European Union. These complement the Markets in Crypto-assets (MiCA) Regulation Search for available translations of the preceding and anti-money laundering rules.

Fair and effective taxation is key to securing revenues for public investment and services, while creating a business environment in which innovation can flourish. However, tax authorities currently lack the necessary information to monitor proceeds obtained by using crypto-assets, which are easily traded across borders. This severely limits their ability to ensure that taxes are effectively paid, which means European citizens lose important tax revenues.

India: Incorporation of new policy condition against HS Code 1006 40 00

As per new policy condition, The India government export of organic non-basmati rice, including organic non-basmati broker rice will be governed as per provisions under notification no. 03/20215-2020 dated 19th April 2017.

Schengen area: Council decides to lift border controls with Croatia

From 1 January 2023, checks on persons at internal land and sea borders between Croatia and the other countries in the Schengen area will be lifted. Checks at internal air borders will be lifted from 26 March 2023, given the need for this to coincide with the dates of IATA summer/winter time schedule.

From 1 January 2023 Croatia will also start to issue Schengen visas and will be able to make full use of the Schengen Information System.

Background
Since its accession to the EU, Croatia has applied parts of the Schengen acquis, including those related to the external border controls, police cooperation and the use of the Schengen Information System.
The remaining parts of the Schengen acquis, which include the lifting of controls at internal borders and related measures, can only become applicable following a unanimous decision by the Council after it has been verified, in accordance with the applicable Schengen evaluation procedures, that they fulfil the necessary conditions. In December 2021, the Council concluded that the necessary conditions were fulfilled by Croatia.

United Kingdom: Deadline for UKCA marking extended by two years

The UK Government has confirmed that it would continue to recognise the CE marking in Great Britain for another two years (until 31 December 2024) giving businesses extra time to prepare for the mandatory introduction of the UK Conformity Assessed (UKCA) marking. Businesses can continue to use the new UKCA marking voluntarily until then, giving them flexibility to choose which marking to apply.