CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian and Liangqian Ying, JunHe LLP
5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Both limited liability companies and limited companies by shares are formed and governed by their articles of association ( 章程 ), which also govern their sharehold - ers, directors, supervisors and officers, in addition to the companies themselves. These provide for, among other things, capital contributions, shareholding per - centage, governance rights, distribution rights, dis - solution and liquidation matters. Both limited liability companies and limited companies by shares that hold real estate are subject to prop - erty tax and urban land use tax, as mentioned in 8.3 Municipal Taxes , and have access to tax benefits as mentioned in 8.5 Tax Benefits . There is no substan - tial difference in terms of tax costs, as mentioned in 2.10 Taxes Applicable to a Transaction , incurred as a result of purchase of real estate to limited liability companies and limited companies by shares. 5.3 REITs China officially launched a pilot scheme on public REITs in the infrastructure field in 2020, which was further broadened on a pilot basis, to include depart - ment stores, shopping malls, and marketplace for agricultural products. Foreign investors can initiate these vehicles subject to satisfaction of “commercial presence” requirement and other qualification require - ments, such as sound creditworthiness, robust internal control system, consistent business operations, and material legal compliance in past three years. Using a REIT can improve cash flow and asset-liability ratio, and increase asset turnover ratio of an enterprise. Recently, Shanghai and Shenzhen Stock Exchanges are, at the same time, exploring the introduction of private REITs to supplement public REITs and the first private REIT product is under way. 5.4 Minimum Capital Requirement The minimum capital for companies engaging in real estate development may not be less than CNY1 mil - lion.
If the developer further objects to the administrative review decision, it may file an administrative lawsuit with the court, unless the administrative review deci - sion is, as provided by law, a final decision. The regulatory authorities may enforce restrictions on the development and designated use of a piece of land in various ways. • If any entity occupies land without due approval or on the basis of approval obtained by deception, it shall be ordered to return the land, and any build- ing and other structures newly constructed on the land may be ordered to be confiscated or demol - ished. In addition, a fine may be imposed, and the relevant persons responsible for the unlawful occu - pation may also be subject to criminal liability. • In the event of any illegitimate land transfer, the income gained by the transferor from the transfer shall be confiscated, and the newly constructed buildings on the land may be ordered to be confis - cated or demolished. • If construction work is carried out without a per - mit or the approval of the competent authorities (including failure to obtain permission or failure to carry out construction in compliance with the construction works planning permit), the project owner or developer may be ordered to correct the violation and to demolish the building or struc - tures. They may also be liable to pay a fine and any unlawful properties may be confiscated. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Under the Company Law, the types of companies include limited liability companies ( 有限责任公司 ) and limited companies by shares ( 股份有限公司 ). The liability of each shareholder of either a limited liability com - pany or a limited company by shares is limited to its respective subscribed capital contribution to the com - pany. Limited liability companies are the most com - mon choice for acquiring real estate assets among both domestic and offshore investors.
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