Technology import contracts are contracts that involve the import of technology ("Technology Import Contract" or "Contract") and include standard intellectual property rights license contracts, technical service contracts, technical consultancy agreements and cooperative contracts for development, production and/or research. Agreements involving cross-border research and development that lead to the import of technology are also generally regarded as Technology Import Contracts. 1. Import Control on Technology The PRC Ministry of Commerce ("MOC") publishes list of prohibited and restricted imported technologies and updates it on a regular basis. Technology that does not fall within the list is deemed to be freely imported technology. Freely imported technology can be imported directly without prior approval though the importer must register the relevant Contract with the local branch of the MOC ("COFTEC") in accordance with requirements of the Registration Method of Freely Imported Technology Contracts ("Revised Method"), which was published on 1 February 2009. The Revised Method provides much clearer requirement than previous legislation in terms of the registration of Contracts with the relevant authorities. China has also strengthened tax filing requirements of Contracts through a series of procedural regulations which became effective from the beginning of this year. 2. Registration with COFTEC The law requires a Contract to be registered with COFTEC within 60 days after it takes effect. However, this 60 period deadline does not apply if the Contract involves the payment of a fee that is calculated by way of a formula and the elements of such formula are to be determined in the future (e.g. sales turnover). Where this is the case, the Contract must be registered with COFTEC within 60 days of the determination of all the elements of the formula. The Contract's registration with COFTEC must be amended each time the elements of the formula are re-determined. To register a Contract and any amendments to its initial registration, the importer must present the Contract and the documents evidencing the elements of the formula (such as an audited financial report) and any changes to such elements to COFTEC. As a Contract normally takes effect once it has been signed by all parties, non-registration with COFTEC will not impair a Contract's effectiveness. China regulates the payment of foreign exchange out of China, registration is required before a bank can facilitate any payment arising from a Contract. Therefore, the parties have a very good incentive in ensuring that their Contracts are registered with COFTEC. 3. Registration with Tax Bureau China strengthened its tax filing requirements in a series of procedural regulations in 2011.From the beginning of 2009, the registration requirement applies to all types of Technology Import Contracts. The new registration requirements can be summarized as follows: 1) For an intellectual property rights license contract: the Chinese licensee must register its withholding tax obligation with the relevant Chinese tax bureau within 30 days after the Contract has been signed by all parties. The Chinese licensee must present the requisite documents including the Contract to the tax bureau. Only after registration can the Chinese licensee withhold and pay taxes on behalf of the foreign licensor; 2) For a technical service contract: a foreign-service provider must register with the relevant Chinese tax bureau within 30 days after the Contract has been signed by all parties. After registration, the foreign-service provider can make quarterly tax filings and payments in China. Within 15 days after the completion of the services under the Contract, the foreign-service provider must deregister with the same tax bureau. Similarly, a Chinese company that receives technical services from the foreign-service provider must file the Contract with the relevant tax bureau within 30 days of the parties signing the Contract. The Chinese company must also complete and file a certain form with this tax bureau indicating each payment within 30 days after receipt of each invoice from the foreign-service provider. Tax registration enables the payment of taxes. Such registration is also essential if fees of more than USD 30,000 are to be paid under a Contract, as it is impossible for the foreign party to receive any such payment without a tax certificate.