China Streamlines Business Registration

November 18, 2015

In a move to boost domestic entrepreneurship, China’s government has passed a new regulation stipulating that business licenses, tax registration certificates and enterprise organization code certificates will now all be issued by the State Administration of Industry and Commerce (SAIC). The country’s new business registration system, informally known in Chinese as 三证合一 which translates into “three licenses combined into one”, takes effect on Oct 1 2015.

Previously, applicants seeking to set up businesses or to amend existing business registrations had to apply for or amend an organization code certificate from the Administration of Quality Supervision (ASQIQ); a taxation registration certificate for taxation identification from the State Administration of Taxation (SAT); and an operational certificate from SAIC. Under the new registration system, applicants are required to fill out one form and submit it to one department (i.e., SAIC) when there is a new formation or an amendment to an existing business registration. If approved, they will receive an operation license (i.e., a new or amended business license) with a single identification code.

The new system aims to make business creation easier and promote entrepreneurship and innovation at a crucial time in China’s development. China currently ranks 90th out of 189 economies in terms of ease of doing business according to the World Bank. The same report ranks China 128th for ease of starting a new business. The new system is a boost for entrepreneurs and the credibility of China’s law makers who have pledged to reform the economy’s burdensome regulatory environment. As China shifts to an economic model based on domestic consumption, innovation and new business in the private sector will become an increasingly important source of growth. China’s lawmakers rightfully see business regulatory reforms as key promoter of this growth. In practice, the successful implementation of the new system will depend on SAIC’s capability to cooperate with SAT and ASQIQ to create a modern IT system to collect and record new and existing data. With the three certificates combined into one license, business entities will only need a single identification code. This will simplify the monitoring and supervision of businesses and improve the business social credit system implying an even greater importance for regulatory compliance under the new system.

For existing enterprises who have already been issued a business license, organization code certificate and tax registration certificate, all three certificates will continue to be valid for the duration of the transition period (for Shanghai, the transition period will be from October 1, 2015 to December 31, 2017). After the expiry date of the transition period, these certificates will become invalid and enterprises should apply for and obtain a new business license according to the new system. If an enterprise wishes to change its registration or renew its business license during the transition period, they should simply apply for a single license under the new system and all previous licenses will subsequently become invalid.

If an enterprise attempts to deregister after obtaining the new license, it is required to obtain a tax clearance certificate from SAT and apply for deregistration directly with AIC. Enterprises who deregister during the transition period should go through the current deregistration process accordingly.