After the 2017’s regulation on the requirements and incentives that Shanghai grants to Multinational Corporations (MNCs) that establish Quasi-Headquarters (Quasi-HQ) or Regional Headquarters (RHQs) in the city, which we here at PHC rolled out in one of our previous articles, the Shanghai Municipal People's Government has now issued a new notice that will modify and  further ease the previous rules in an effort to attract an increasing number of foreign companies. The new amendment has already taken effect two days ago, on September 1^st, 2019.

What is a RHQ?

The RHQ of a MNC refers to an organization established by a foreign parent company to perform management and service functions in the form of investment or authorization for other enterprises in the country.

What are the requirements to be recognized as RHQ?

To apply for the identification as RHQ, the following conditions shall be met:

1.       It must be a foreign-invested enterprise with independent legal personality;

2.       The total assets of the parent company must be at least 200 million US dollars;

3.       Under the authorization of the parent company, the RHQ must have decision-making authority, carry on fund management activities, procurement, sales, logistics, settlement, research and development, training, etc.

4.       The registered capital must be at least 2 million US dollars.

Companies that do not qualify to apply for the status of RHQ, can still qualify to be Quasi-HQ entities and thus enjoy most of the benefits reserved for the latter category. To apply for the identification as Quasi-HQ, the total assets of the parent company must not be lower than 100 million US dollars, and the registered capital shall be no less than 1 million US dollars.

What are the main changes with previous regulation?

As can be seen, the new regulations eliminate the requirements for parent companies’ paid-in registered capital and the number of their subsidiaries. Furthermore, the capital requirements for the company and the group have been lowered significantly. New measures will also improve international education and medical services for foreign companies' HQs and make it easier for the senior managers of foreign companies establishing headquarters to hire foreign nationals and domestic staff.

Thanks to the new regulation, a wider number of companies can benefit from this opportunity, and the relative incentives in terms of subsidies, financing support, employees sourcing, trade facilitation that being an RHQ or Quasi-HQ grants.