The Shanghai Municipal Commission of Commerce and the Shanghai Municipal Bureau of Finance released updated Measures for Managing the Fund Dedicated to the Development of Regional Headquarters for Multinational Corporations in Shanghai on Feb 1. The measures took effect that day and will be enforced until Jan 31, 2029.

An excerpt from the measures:

Article 1 (Purpose and Regulatory Basis)

To promote the establishment of regional headquarters and research and development centers by multinational corporations in the city, Shanghai introduced the Fund for the Development of Regional Headquarters for Multinational Corporations in Shanghai Municipality (hereinafter referred to as the Fund).

This initiative aligns with the Provisions of Shanghai Municipality on Encouraging Multinational Corporations to Establish Regional Headquarters and the Provisions of Shanghai Municipality on Encouraging the Establishment and Development of Foreign-Funded Research and Development Centers.

Article 2 (Fund Source and Cost-sharing Ratio)

The Fund, allocated by the city’s fiscal budget, is dedicated to promoting the development of regional headquarters and foreign-funded research and development centers for multinational corporations. It draws funding from both municipal and district levels.

For establishment funding, prestige reward, operational reward, and capital increase incentives, the municipal fiscal budget covers 40 percent, while the district fiscal budget covers the remaining 60 percent. Office rent subsidy is entirely covered by the district finance.

Article 3 (Supported Entities and Eligibility Criteria)

The Fund provides support to regional headquarters of multinational corporations, business unit headquarters of multinational corporations, and global research and development centers that meet the relevant conditions.

Applicant enterprises must satisfy the following criteria:

(1) Legally established in this city, operational normally for more than 1 year, and contributing to certain economic and social benefits.

(2) Demonstrating good financial and tax standing, maintaining a sound financial management system, not being blacklisted for dishonest practices by authorities at national, provincial, or municipal levels, and having no record of serious dishonesty on the city's public credit information service platform within the last three years.

(3) Submitting required information and reports for foreign-invested enterprises.

Applying enterprises are not allowed to submit multiple applications for fiscal assistance for the same issue, and they are responsible for the truthfulness, accuracy, and completeness of the application materials.

Article 4 (Support Criteria)

Funding for establishment:

Regional headquarters or business unit headquarters of multinational corporations recognized in this city after Nov 1, 2022, are eligible for one-time establishment funding of 5 million yuan (about $700,000), provided they have a paid-up registered capital of at least $30 million, employ a minimum of 10 individuals, and have authorization from the parent company to manage at least one domestic and foreign enterprise.

Likewise, global research and development centers recognized in this city after Dec 1, 2020, qualify for one-time establishment funding of 5 million yuan, provided they maintain a staff of at least 50 full-time research and development personnel.

The funding are distributed over three years in proportions of 40 percent, 30 percent, and 30 percent.

Enterprises are required to apply for establishment funding within three years of being designated as regional headquarters, business unit headquarters, or global research and development centers of multinational corporations.

Office rent subsidy:

Multinational corporations' regional headquarters or business unit headquarters recognized in this city after Nov 1, 2022, are eligible for a three-year subsidy program when leasing self-used office space (excluding ancillary facilities and supporting rooms). The subsidy amounts to 30 percent of their rental costs, applicable to office spaces not exceeding 1,000 square meters and with a daily rent not exceeding 8 yuan per square meter. To qualify, enterprises must have a paid-up registered capital of at least $2 million, a minimum of 10 employees, and authorization from the parent company to manage at least one domestic or foreign enterprise.

For self-purchased or self-built office space (excluding ancillary facilities and supporting rooms), enterprises are eligible for one-time fund assistance, provided at the same standard as rental assistance.

Global research and development centers recognized in this city after Dec 1, 2020, with a minimum of 50 full-time research and development personnel, are eligible for office rent subsidy under the same standard.

Enterprises must apply for office rent subsidy within three years of being designated as regional headquarters, business unit headquarters, or global research and development centers of multinational corporations. During the subsidy period, self-used office space cannot be leased or subleased, and the designated purpose of the office space cannot be altered. Violation of these rules will result in the repayment of the previously received subsidy.

Prestige reward:

Regional headquarters or business unit headquarters for the Asia region, Asia-Pacific region, or a larger region of multinational corporations recognized in this city qualify for a one-time prestige reward of 3 million yuan. To be eligible, they must possess a paid-up registered capital of at least $2 million, employ a minimum of 50 individuals, and have their heads and key senior management personnel, pertaining to headquarters functions, residing in Shanghai on a long-term basis as appointed by the parent company.

Operational reward:

Recognized regional headquarters of multinational corporations are eligible for operational reward if they have a registered capital of at least $2 million and achieved an annual turnover of 500 million yuan or more. Those with turnovers of 500 million yuan to 1 billion yuan (exclusive) will be provided a one-time incentive of 5 million yuan. Those with turnovers of 1 billion to 1.5 billion yuan (exclusive) will be granted an extra one-time reward of 3 million yuan. Those with an annual turnover exceeding 1.5 billion yuan will receive an additional one-time reward of 2 million yuan.

Recognized business unit headquarters of multinational corporations qualify for operational reward if they have a paid-up registered capital of at least $2 million and achieved an annual turnover of 1 billion yuan or more. Those with turnovers of 1 billion to 1.5 billion yuan (exclusive) will be provided a one-time reward of 5 million yuan. Those with turnovers of 1.5 billion to 2 billion yuan (exclusive) will be granted an extra one-time reward of 3 million yuan. Those with an annual turnover exceeding 2 billion yuan will receive an additional one-time reward of 2 million yuan.

The reward is distributed over three years in proportions of 40 percent, 30 percent, and 30 percent.

Enterprises are required to apply in the subsequent year after reaching the operational turnover targets to be eligible for reward.

Capital increase reward:

Regional headquarters or business unit headquarters of multinational corporations qualify for a one-time capital increase reward of 2 million yuan. To be eligible, they must achieve an annual actual foreign investment of at least $30 million through a capital increase, focusing on projects aligning with the city's industrial development orientation (excluding real estate, finance, and projects similar to finance). This incentive can only be enjoyed once during the implementation of the measures.

The capital increase amount should be calculated based on the actual sum included in the national foreign investment statistics by the Ministry of Commerce in the natural year. Applying enterprises must furnish a written commitment not to reduce capital, withdraw capital, or convert to domestic capital within three years.

Enterprises are required to apply in the subsequent year after the arrival of the capital increase amount. Simultaneous applications for both capital increase reward and establishment funding are not allowed during the same year.

Article 5 (Management Responsibilities)

The commerce and finance departments at both municipal and district levels collaboratively undertake the management of the Fund according to their respective functions.

The Shanghai Municipal Commission of Commerce is responsible for identifying the recipients and establishing the criteria for the Fund. It oversees the organization and review processes for the Fund and manages performance, supervision, and inspections to ensure its implementation.

In a supportive role to the Shanghai Municipal Commission of Commerce, the Shanghai Municipal Bureau of Finance handles the allocation of fiscal funds, oversees performance, and manages supervision and administration.

At the district level, the commerce and finance departments are responsible for organizing applications, conducting preliminary reviews, disbursing funds, overseeing management and supervision, and evaluating performance.

Article 6 (Application and Review Process)

(1) The Shanghai Municipal Commission of Commerce issues an annual Fund application notice, specifying the application requirements.

(2) Enterprises meeting the relevant conditions may apply to the commerce authority in their district and submit the required application materials, as specified in the notice.

(3) The commerce and finance departments at the district level jointly conduct preliminary reviews of the application materials. Approved applications from the preliminary review are then reported to the Shanghai Municipal Commission of Commerce.

(4) The Shanghai Municipal Commission of Commerce delegates the review of application materials to a third-party organization. If necessary, on-site verification may be conducted. Subsequently, in conjunction with the Shanghai Municipal Bureau of Finance, a re-evaluation is conducted based on the results of the third-party review, leading to the determination of the outcomes. If necessary, consultations with other relevant departments would be conducted.

(5) The Shanghai Municipal Commission of Commerce, working in coordination with the Shanghai Municipal Bureau of Finance, communicates the final results to the commerce and finance departments at the district level.

Article 9 (Management of the Transition Period)

Projects that have been approved before the implementation of these measures and are still in the fund disbursement period will continue to be executed based on the original review results until the full disbursement of funds.

Source: sww.sh.gov.cn