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On the last day of its 18th session, held October 22-27, the Standing Committee of the 10th National People's Congress (NPC) adopted amendments to the Corporate Law, allowing one-person limited companies, Securities Law, allowing new regulations on financial sector management, and Personal Income Tax Law, raising its minimum payment threshold.
According to the newly-amended corporate law, one person is allowed to apply to open a limited company with a minimum capital of 100,000 yuan (US$12,345).
It also prescribes that the owner of the single-person company should pay the investment capital in one go, they cannot open a second single-person company and annual end of year audits must be submitted to an accounting firm.
An owner who fails to prove that their assets are independent from those of the company should take responsibility for the company's losses, the amendment said.
The proposal was opposed by a number of lawmakers during discussions, fearing that the owner of a one-person limited company might take advantage of the company's assets for their own use.
A study co-conducted by several legislative and government bodies found that companies with features of one-person limited companies already existed in China. These either had their assets mostly owned by one of the shareholders, or owned by one actual shareholder and a number of others who only hold stocks nominally.
Amended securities law gives larger room for development of stock market
The newly-amended Securities Law has more room for the future development of the country's stock market, said former chairman of China Securities Regulatory Commission Zhou Zhengqing.
The new law has over 100 amendments, making it look like a completely new law.
One of the most important amendments is that it allows the State Council to stipulate new regulations regarding the management and operation of different financial sectors including banks, securities companies, trust companies and insurance firms, according to Zhou.
It leaves room for future reforms in this field, with the possibility of allowing different financial firms to enter into others' areas.
Meanwhile, the new amendments also give the State Council the final say on whether securities dealers are allowed to provide loans to investors and state-owned companies or state-held firms are allowed to trade shares on the stock market.
The newly-amended law includes articles on the setting up of a state fund for the protection of investors. Accordingly, the China Securities Investors Protection Foundation Limited was established on September 29.
Moreover, the amended law has required securities dealers to place clients' accounts separate from their own accounts.
Personal income tax cutoff point raised to 1,600 yuan
The minimum payment threshold for monthly personal income tax was increased from 800 to 1,600 yuan, effective from January 1.
The amount is 100 yuan (US$12) higher than the proposed 1,500 yuan cutoff point in the draft, which officials said was an indication that lawmakers have considered opinions aired at a previous public hearing.
"We learned from this hearing that people hoped the cutoff point should be even higher," said Lou Jiwei, vice-minister of finance.
"But in that case, fiscal revenue would decrease too much and our capability to support the growth of the western regions would be impaired," he said.
According to Lou, more than 50 percent of central finance goes to transfer payments to less developed western regions.
He said that raising the cutoff point from 800 to 1,500 yuan will result in more than 23 billion yuan (US$2.84 billion) being lost in revenue each year. Raising it to 1,600 yuan would incur an additional annual loss of over 5 billion yuan (US$617 million).
"After the adjustment of the cutoff point, the number of taxpayers will drop by more than half. It will live up to our legislative principle to care for the interests of low and medium-income groups," said Lou.
The current standard of 800 yuan was instituted in 1993, when only around one percent of the employed people earned more than that. In 2002, that proportion had jumped to around 52 percent.
(Xinhua News Agency October 28, 2005)
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