China law on the Internet is 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. This blog’s disclaimer states this, albeit more formally:
The purpose of the Websites is to provide general information only. The Websites are intended for communication purposes, not for solicitation to provide legal services. The information on the Websites does not constitute or contain formal legal advice or solicitation of legal services.
I am saying this again today because a fairly large number of people believe things about China personal income taxes because someone on WeChat is saying 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 me to ask whether his business situation would cause the Chinese government to deem him to be doing business in China. I responded by saying there was no way we could answer that question:
Much of what you say below is not at all clear to me and I would need to know considerably more even to 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 Chinese government authorities and maybe bring in a high-level China accountant as well. In any event, we cannot give out specific and direct advice to anyone not our client. Just imagine if on the sketchiest of facts I were to tell you that everything you are doing is okay and then you get jailed because it actually is not. See e.g., Doing Business in China Without a WFOE: Will the Defendant Please Rise.
This person then wrote me back to say he was confused about “tax legislation for foreigners.” My response was to ask “what legislation?” He then sent me something and I pointed out that this was a completely different question than his initial question and that what he had sent me did not strike me as being at all relevant to any of his issues.
Then I got another email, this one from someone who said that people on WeChat were claiming this blog had said that foreigners need to submit some strange form to the Chinese government, when we absolutely never said such a thing nor are we even aware of such a thing.
I then told these two people the following:
The internet on China laws is unbelievably bad.
A few years back, I spent nearly a year living in Spain (working and getting to know our our Spain lawyers) and I read everything I could on Spain visas before I went but I knew I still didn’t know enough to do it on my own. So I worked with a really good Spain immigration lawyer and in about three hours she totally set me straight by letting me know exactly what I needed to do and I did it and it worked. Ninety percent of what I had read about Spain visas on the internet was true but ten percent was either flat out wrong or had changed recently or just did not apply to my 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 this, when another American lawyer in my firm went to Spain, he too went to this same Spain immigration lawyer and he reported back that she had saved him huge amounts of time and huge amounts of problems.
And China is ten times worse than Spain on this (and pretty much everything else), 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. 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 why our China lawyers will first research the written laws and then go to the appropriate Chinese government authorities to confirm that our interpretation of the laws matches the on-the-ground reality. Fortunately, Chinese government officials are very good at responding honestly to such queries.
Just today, I consulted with a company that wanted to know if Chinese courts actually follow China’s IP laws. My response was that they do about 95% of the time but if the Chinese government thinks your IP is really important (the other 5% of the time, the laws go out the window). One of the ways in which our China IP lawyers earn their keep is by knowing what constitutes the 5%.
3. China’s laws are in Chinese. Unless your Chinese is amazing and you have China legal experience, there is pretty much no way you can understand them. Most translations you see on the Internet range from terrible to just okay. Way back in 2013, 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.
China’s laws are too precise/too vague/too changing/too real world/too local/too dependent on regulations to use English language translations of one or two laws for making final decisions. An English language translation can give you a good “feel” for a situation or serve as a starting point for how to proceed, but the risk of that translation being very wrong or just enough wrong to make a big (or even just a little difference) is too great to rely on without more.
And every year or so a company comes to us as a new client seeking our help in getting them out of some sort of trouble they find themselves in with the Chinese government for having accidentally violated some law due to a mediocre translation or one that simply did not include all applicable laws and regulations on the subject. In figuring out how to legally proceed in China, even a good translation is not nearly enough because decisions on how to proceed might require interpretations of local regulations or even knowledge of local quirks. Many times one of our China-based lawyers (or even one of our China lawyers in the US) will get on the phone and call a government official (or two) to get their views on how the relevant government body interprets/enforces particular laws/regulations and/or treats particular situations. Chinese government officials are virtually always willing to talk and they are often surprisingly helpful, even if they do not always provide the expected or desired answer.
So what do I tell those who ask me for English language translations of Chinese laws? I send them the following form email:
I am sorry but because our China lawyers do not work from translations of Chinese laws (we find them too risky and unreliable) I do not know where you can find translations of the particular laws you seek nor am I aware of the best site or sites for such translations generally. I wish you the best of luck in your search.
Years ago, a company called us about forming a WFOE in China. They asked about the minimum capital requirements and then mentioned they had read on our blog that physical assets could count towards that. I said that was correct. They then said good, because they had shipped over 5 million dollars of equipment and they would need that to count as their minimum capital for their WFOE. I immediately asked 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. Their response to my disquieting news was “that’s ridiculous, that’s putting form over substance.” My response to their response was “that’s right but that’s how China is on this and on so many other things.” 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 specific rules required to make that a reality.
Your takeaway from this post should be that you will never make any business or legal decisions based on what you read on the Internet. Go ahead and use the Internet to give you a basic education and some sense of the issues (like I did with my Spain visa), but never use it for more than that. Not for China and not for anywhere. from a licensed attorney.
Why does anyone ever think otherwise?
