China Law Online: It’s All Wrong

One of the things we often stress on here is that our posts should NOT be used as a substitute for real world advice. Like ever. This holds true (oftentimes in triplicate) about every other site out there that writes about Chinese law as well.

I am saying this again today because there are apparently a bunch of people out there who believe things about China personal income taxes because someone on WeChat is saying that we said this particular thing about China income taxes, even though we never did and even though it is apparently flat out wrong.

It all started when someone wrote to ask whether his living and business situation would mean that the Chinese government would deem him to be doing business in China. I responded as I usually do to such inquiries by saying that there is no way we are going to answer a question like that:

Much of what you say below is not at clear to me and there is much more I would need to know to even venture a guess as to whether what you are proposing is legal or not, and even then, we would probably want to confirm it with the local authorities. In any event, we cannot give out specific and direct advice to anyone not our client because our malpractice carrier forbids it — just imagine if on the sketchiest of facts (which are not even clear to me) I were to tell you that everything is okay and then you get jailed because it isn’t? See Doing Business in China Without a WFOE: Will the Defendant Please Rise.

This person then wrote back to say that he was confused about “the new tax legislation that would be coming into effect in 2019 for foreigners.” My response to that was to say “what legislation.” He responded by saying that xyz tax laws would be changing for foreigners. I then pointed out that this was a completely different question than his initial question and that what he was saying would be new in 2019, we had written about in 2014 (and it wasn’t even new then!).

Then I got another email, this one from someone who said that he had read a couple people on WeChat who were claiming that our blog had said that foreigners need to submit some strange form to the Chinese government by 2019, when in fact we absolutely never said such a thing nor are we aware of such a thing nor is something like that even something we would write about even if it were to be the case.

I then told these two people the following:

The internet on China laws is unbelievably bad. I think I need to write another article on why you should never take what you read on the internet as legal advice.

Speaking personally, I recently spent about a year living in Spain (helping out our Barcelona office) and I read everything I could on Spain visas before I went but I knew that I still didn’t know enough to do it on my own. So I hired a really good and really expensive Spain immigration lawyer and in about three hours she totally set me straight and I walked out of her office knowing exactly what to do and I did it and it worked. 90 percent of what I had read about Spain visas on the internet was true but ten percent that was either dead ass wrong or had changed recently changed or just did not apply to our specific situation. Had I gone with just what I had learned on the internet, I likely would have been booted out of Spain in 90 days. Despite all that I had learned by going through all of this, when it came time for another American lawyer in my firm to take my place in Spain, he too went to this same Spain immigration lawyer and he reported back to me the same result. She saved him huge amounts of time and huge amounts of problems.

And China is ten times worse than Spain on this, for the following reasons:

1. China’s laws are incredibly local. See e.g., China Employment Law: Local and Not So Simple, China “Laws” Are Local And Don’t You Forget It, and China. Where Everything Is Local. Until It’s Not. More so than Spain.

2. China’s written laws say one thing and local government enforcement (or even Beijing enforcement) will do another. Sometimes there are laws that are not enforced and this benefits foreigners, but more often there are laws that are written for China to look good to foreign governments that are completely ignored to the detriment of foreigners. This is far far less common in Spain. This is why our China lawyers will first research the written laws and then go to the appropriate Chinese government authorities and just flat out ask whether our interpretation of those laws jibes with theirs. Fortunately, Chinese government officials are very good at responding honestly to such queries.

3. China’s laws are in Chinese. Unless your Chinese is amazing and you have China legal experience, you almost certainly do not understand them. Sorry, but this is true. And to top it off, most translations you see on the Internet range from terrible to just okay. In English Translations Of Chinese Laws. Don’t Call Us, I wrote about the risks of using our blog posts or English language translations of Chinese laws:

Pretty much every week someone asks one of our China lawyers for an English translation of a Chinese law or cites one of our blog posts as an explanation for a decision they made or are contemplating.

Reading Spanish is far easier than reading Chinese if your first language is English, for obvious reasons — the alphabet, the cognates, the sentence structure, among other things. And in Spain the laws do not change as often as in China. Not nearly.

Years ago, a company called us about forming a WFOE in China. They asked about the minimum capital requirements and then mentioned that they had read on our blog that assets could count towards that. I said that was correct. They then said good, because they had shipped over $5,000,000 (yes, 5 million dollars) of equipment and they would need that to count as their minimum capital for their WFOE. I immediately went into near-panic mode, demanding to know whether they had secured Chinese government approval to have that equipment count towards their minimum capital before they sent it to China. They had not and I had to tell them that getting it approved in advance was a requirement. To which about all they could say was “that’s ridiculous, that’s putting form over substance,” to which about all I could say, was “that’s right but that’s how it is in China on this.” They had relied on one of our blog posts saying that physical assets can count towards a WFOE’s minimum capital requirements but they had not bothered to determine the rules required to make that a reality.

So please, please, please do not make any business or legal decisions based on what you read on the Internet. Go ahead and use it to give you a basic education and some sense of the issues, but not for more. Our own disclaimer basically says this:

The China Law Blog is for educational purposes and to give a general information and a general understanding of Chinese law. It is not intended to provide specific legal advice. By using this blog you understand there is no attorney client relationship between you and our law firm. You should not use the China Law Blog as a substitute for competent legal advice from a licensed attorney.

Why does anyone ever think otherwise?

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.