NPCSC Extends Term of Incumbent Hong Kong Legislature, Authorizes Hong Kong & Macau Lawyers to Practice in Mainland & Approves Two Tax Laws

The 13th NPC Standing Committee (NPCSC) concluded its twenty-first session on Tuesday, August 11. It adopted five bills, most notably a decision allowing the incumbent Hong Kong Legislative Council (LegCo) to continue serving for at least another year after its original term expires next month. We will focus on this decision below and briefly summarize the other bills.

Hong Kong LegCo Decision

The LegCo decision came after Hong Kong’s Chief Executive postponed this year’s LegCo’s elections to next fall. The elections were originally scheduled for September 6, but as Hong Kong has recently seen a surge in COVID-19 cases, the Chief Executive exercised her emergency powers to delay the elections, citing safety concerns. Under the Hong Kong Basic Law and local Hong Kong law, the current (6th) LegCo’s four-year term will expire on September 30. Because the Chief Executive cannot extend the LegCo’s term herself, she sought the central government’s assistance.

The operative provision of today’s NPCSC decision is quite succinct. It reads in full:

The [6th LegCo] is to continue performing its duties after September 30, 2020, for no less than one year, and until the term of the [7th LegCo] begins. After the [7th LegCo] is lawfully constituted, its term is still four year.

2020年9月30日后,香港特别行政区第六届立法会继续履行职责,不少于一年,直至香港特别行政区第七届立法会任期开始为止。香港特别行政区第七届立法会依法产生后,任期仍为四年。

On its face, the decision allows all incumbent LegCo members to stay in office during the extended term, including the four legislators who have been disqualified from running in the next election. According to an explanatory document, the decision also allows for the potential delay of the LegCo elections beyond one year, if the Hong Kong government deems it necessary in light of the “development of the epidemic.”

The decision’s preamble asserts that the NPCSC adopted it to “safeguard the constitutional order and rule of law” in Hong Kong and to “ensure the normal governance by the Hong Kong government and the normal functioning of the society.” But the decision cites no specific provision in the P.R.C. Constitution or the Hong Kong Basic Law that grants the NPCSC the power to extend the LegCo’s four-year term. The explanation glosses over this question as well. The central government may have again resorted to ominous concept of its “comprehensive jurisdiction” [全面管制权] over Hong Kong.

Hong Kong/Macau Legal Practice Pilot

The NPCSC also authorized a pilot program that will allow eligible practicing lawyers licensed in Hong Kong or Macau to practice mainland law in nine cities in the neighboring Guangdong Province—which, together with the two special administrative regions (SARs), are known as the “Greater Bay Area” [粤港澳大湾区]. This new pilot reform is part of a high-profile plan to boost cooperation and development within the Area.

Under current Ministry of Justice rules, lawyers from the two SARs can be hired by mainland law firms only as “legal consultants” to handle non-mainland legal matters. Those who want to practice mainland law must pass the mainland’s Unified Legal Profession Qualifying Examination; even if they do, they still cannot practice litigation. The new pilot will loosen these restrictions. Subject to the eligibility requirements the State Council will prescribe, Hong Kong and Macau lawyers may practice mainland law “within a certain scope” if they pass a special bar exam.

The pilot will run for three years.

State Honors

In the third decision adopted on Tuesday, the NPCSC decided to confer state honors on four individuals to commend their “outstanding contributions” to the fight against COVID-19. Dr. Zhong Nanshan, the most respected infectious disease expert in China and the first person to publicly confirm human-to-human transmission of COVID-19, was awarded the Medal of the Republic [共和国勋章]. Three other medical professionals, including Dr. Zhang Dingyu, President of Wuhan’s Jinyintan Hospital (a designated hospital for COVID-19 patients) are given the state honorary title of “People’s Hero” [人民英雄]. For an explanation of China’s state honor system, please see this post.

Tax Laws

The NPCSC also approved two tax laws on Tuesday.

Under the Urban Maintenance and Construction Tax Law [城市维护建设税法], taxpayers of the consumption tax and the value-added tax (with certain exceptions) are also required to pay the urban maintenance and construction tax (UMC tax) (arts. 1, 3). The UMC tax rate has three brackets, depending on where the taxpayer resides: 7% (urban districts), 5% (counties or townships), or 1% (elsewhere) (art. 4, para. 1). The amount paid by a UMC taxpayer equals the applicable tax rate times the amount of consumption tax and value-added tax it pays (id. para. 2).

Under the Deed Tax Law [契税法], the transferee in a transfer of rights in or title to real property (e.g., sales) must pay the deed tax (arts. 1–2). The deed tax rate ranges from 3% to 5%, to be decided by each provincial-level legislature, upon the recommendation of the corresponding provincial-level government (art. 3). The Law grants tax exemptions to certain transferees, including governmental or semi-governmental bodies, non-profits, and foreign and international organizations (art. 6).

Under both laws, the State Council may allow for tax reductions or exemptions under certain circumstances. Both laws will take effect on September 1, 2021.

Co-written with Changhao Wei


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