A new policy on subsidies for multinational corporations in Shanghai came into effect on February 1, and will run through January 31, 2029.

Earlier this month, Shanghai released a work plan to enhance its business environment, with 150 initiatives aimed at attracting foreign investments and enterprises.

The newly announced subsidy policy is part of the drive to encourage more MNCs to set up regional headquarters and research and development centers in Shanghai, boost foreign-invested businesses and improve the quality of foreign investments.

MNCs that intend to establish or have already had regional headquarters and R&D centers in Shanghai can receive considerable funds, with financial support provided by both the district government (60 percent) and the city government (40 percent). Additionally, the district government will provide rental subsidies for qualified MNCs.

Application requirements

1. Companies established in Shanghai must have operated legally and continuously for over one year, and have sufficient economic and social benefits.

2. The companies must have commendable financial and tax credits and sound financial management structure. They must not be listed by any level of government as dishonest debtors, and there should be no history of defaults on the city's public credit information platform within the past 3 years.

3. Companies must submit foreign-invested enterprise information reports as required.

Applicants are prohibited from repeatedly applying for financial assistance for the same matter. Be responsible for the authenticity, accuracy and completeness of the application materials.

Subsidy standards

Business establishment subsidies

1. To qualify for a 5-million-yuan (about US$695,000) subsidy, the companies must meet the following criteria:

• Have a paid-up registered capital of no less than US$30 million;
• No less than 10 employees;
• Recognized as MNC regional headquarters or divisional headquarters in Shanghai after November 1, 2022;
• Authorized by the parent enterprise to manage at least one domestic or foreign enterprise.

2. To qualify for a 5-million-yuan subsidy, the R&D centers must meet the following criteria:

• No less than 50 full-time research and development personnel;
• Recognized as global research and development center in Shanghai after December 1, 2020;

3. The establishment subsidy will be provided over 3 years based on the ratio of 4:3:3.

4. Note that is that all the MNCs should submit the application materials within three years of being recognized as a MNC regional headquarters or global research and development center.

Rental subsidies

1. Requirements to get a three-year subsidy based on 30 percent of the rent:

• Paid-up registered capital should be no less than US$2 million;
• No less than 10 employees;
• Recognized as the MNC regional headquarters or divisional headquarters in Shanghai after November 1, 2022;
• Authorized by the parent enterprise to manage at least one domestic or foreign enterprise;
• No more than 1,000-square-meter office space (excluding ancillary facilities and supporting rooms), with a maximum daily rent of 8 yuan per square meter;
• For the purchase or construction of self-used office space (excluding ancillary facilities and supporting rooms), a one-off funding subsidy will be provided based on the total three-year amount of the rental subsidy.

2. For global R&D centers recognized in Shanghai after December 1, 2020, with no fewer than 50 full-time R&D personnel, a rental subsidy can be enjoyed according to the same standards.

3. Enterprises should submit rental subsidy applications within three years of being recognized as regional headquarters, divisional headquarters, or global R&D centers.

4. During the subsidy period, self-used office space shall not be leased or sublet, and the purpose of the office space shall not be altered. Violations of the above provisions shall require the return of the received subsidy.

High-level rewards

Criteria of a 3-million-yuan reward:

• Paid-up registered capital of no less than US$2 million;
• No less than 50 employees;
• Designated as the regional headquarters or divisional headquarters for the Asia-Pacific region or a larger geographic area in Shanghai;
• Directors or key senior management personnel appointed by the parent enterprise are based in Shanghai.

Operational rewards

1. MNCs with regional headquarters in Shanghai, with a paid-up registered capital of no less than US$2 million, and an annual revenue of 500 million yuan or more:

• For the portion of annual revenue reaching 500 million yuan but less than 1 billion yuan, a one-off reward of 5 million yuan will be given;
• For the portion of annual revenue reaching 1 billion yuan but less than 1.5 billion yuan, a one-off reward of 3 million yuan will be given;
• For the portion of annual revenue reaching or exceeding 1.5 billion yuan, a one-off reward of 2 million yuan will be given.

2. MNCs with divisional headquarters in Shanghai, with a paid-up registered capital of no less than US$2 million and an annual revenue of 1 billion yuan or more:

• For the portion of annual revenue reaching 1 billion yuan but less than 1.5 billion yuan, a one-off reward of 5 million yuan will be granted;
• For the portion of annual revenue reaching 1.5 billion yuan but less than 2 billion yuan, a one-off reward of 3 million yuan will be granted;
• For the portion of annual revenue reaching or exceeding 2 billion yuan, a one-off reward of 2 million yuan will be granted.

3. The reward will be provided over three years based on the ratio of 4:3:3. Companies are required to submit an application in the year following the achievement of the operational reward criteria.

Capital-increase rewards

1. A one-off reward of 2 million yuan will be given:

• MNCs regional headquarters or divisional headquarters investing in foreign-funded projects that align with Shanghai's industrial development orientation (excluding real estate, finance, and projects similar to financial industry);
• The annual increment of actual foreign investment amount should not be less than US$30 million;
• The capital increase reward corresponds to the amount of increased capital, which should be calculated based on the actual foreign investment amount included in the annual statistics of the Ministry of Commerce. The applicant unit must commit in writing not to reduce, withdraw or convert domestic capital within three years;
• The amount of capital increase corresponding to the capital increase incentive shall be calculated based on the amount included in the actual foreign investment statistics of the Ministry of Commerce;
• The applicant shall make a written commitment not to reduce, withdraw, or switch to domestic investment within three years.

2. Only one capital increase reward can be enjoyed during the implementation period.

3. The amount of capital increase corresponding to the capital increase incentive shall be calculated based on the amount included in the actual foreign investment statistics of the Ministry of Commerce. The applicant shall make a written commitment not to reduce, withdraw, or switch to domestic investment within three years.

4. Enterprises should hand in the application material after the year of the amount of capital increase. Applications for both capital increase reward and establishment subsidies are not allowed within the same year.

Application and review process

1. The Shanghai Commission of Commence will publish the notification of headquarters capital application and clarify the application requirements.

2. All qualified MNCs can apply and provide the required application materials.

3. The commission will entrust a third-party institution to process the materials. The commission will then re-examine the materials based on the results of the third-party institution and Shanghai's bureau of finance to make the final decision.

4. The commission, in collaboration with the bureau of finance, will inform the commerce authorities and finance departments of enterprises regarding the audit outcome.