CHINA Law and Practice Contributed by: Nancy Zhang, Xiaoying Tian, Qian Gu and Liangqian Ying, JunHe LLP
administrative review decision is, as provided by law, a final decision. 4.6 Agreements With Local or Governmental Authorities A developer or investor may enter into an invest - ment or joint development agreement with the competent subdivision of the local government, specifying, among other things, local regulatory requirements upon construction, progress and the investment intensity, and the fiscal preferen - tial treatment offered by the local government. The specific contents of such agreement vary from project to project and are subject to local policies and negotiations. 4.7 Enforcement of Restrictions on Development and Designated Use The regulatory authorities may enforce restric - tions on the development and designated use of a piece of land in various ways. • If any entity occupies land without due approval or with approval obtained by decep - tion, such entity shall be ordered to return the land, and any building and other struc - tures newly constructed on the land may be ordered to be confiscated or dismantled. In addition, a fine may be imposed concurrently, and the relevant persons responsible for the illegitimate occupation may also be subject to criminal liability. • In the event of any illegitimate land transfer, the income gained by the transferor from such transfer shall be confiscated, and the newly constructed buildings on the land may be ordered to be confiscated or dismantled. • If construction work is carried out without a permit or the approval of the competent authorities (including failure to obtain per - mission or failure to carry out construction in compliance with the construction works
planning permit), the project owner or devel - oper may be ordered to correct the violation and dismantle the building or structures, they may be liable to pay a fine and the illegitimate properties may also 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 compa - nies 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 company or a limited company by shares is limited to its respective subscribed capital contribution to the company. Limited lia - bility companies are the most common choice for acquiring real estate assets among both domestic and offshore investors. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Both limited liability companies and limited com - panies by shares are formed and governed by their articles of association ( 章程 ), which also govern their shareholders, directors, supervisors and officers, in addition to the companies them - selves. These provide for, among other things, capital contributions, shareholding percentage, governance rights, distribution rights, dissolu - tion and liquidation matters. Both limited liability companies and limited com - panies by shares that hold real estate are subject to property tax and urban land use tax, as men - tioned in 8.3 Municipal Taxes , and have access to tax benefits as mentioned in 8.5 Tax Benefits. There is no substantial difference in terms of tax costs, as mentioned in 2.10 Taxes Applicable to a Transaction , incurred as a result of purchase
288 CHAMBERS.COM
Powered by FlippingBook