China’s ICT (information and communication technology) environment is very different in the way it is regulated and managed compared to other countries, such as Germany. The most common challenge for multinationals wishing to provide online or services in Mainland China is obtaining an internet content provider (ICP) license. We will give you a brief overview of ICP license regulations in Mainland China and the necessary regulatory steps to consider.
What is an ICP license?
An ICP license, not to be confused with the ICP filing, is a state-issued permit that allows you to provide certain services through a website on a Chinese server. The ICP license is very different to the commonly used ICP filing. Even if both licenses have a similar name, they differ greatly in their application. The ICP license only needs to be acquired if your company offers direct revenue generating services on a Chinese server. Whereas the ICP filing almost always has to be applied for as soon as a company offers a website on a Chinese server. For this reason, the extent of the service offered through the website is crucial for applying for the correct license.
As you can see in the picture below, Ecovis Beijing had to register for an ICP filing in order to host a website in Mainland China. Though, there was no need to obtain the ICP license due to the service scope.
Which services require the registration of an ICP license?
China established a system of licensing permits for the telecommunication and internet sector. By law, you are obliged to obtain the ICP license if your services or products generate revenue through a website or app within the Chinese mainland area. For the convenience of supervision, the Chinese government classified the telecommunication related business activities into two broad categories: Basic telecommunication services (BTS) and Value-added telecommunication services (VATS). In the “Classification Catalog of Telecommunication Services” (Chinese: 电信业务分类目录) BTS refer to the business of providing public network infrastructure, public data transmission and basic voice communication services. Whereas, VATS refer to the use of public network infrastructure to provide telecommunications and information services. Details of the services requiring an ICP license are regulated in the section “B25 Information Services”.
What are the B25 Information Services?
The B25 information services are a subsection of the value-added telecommunication services in the “Classification Catalog of Telecommunication Services”. Information services provide data collection, development, processing and construction of information platforms via the Internet. For each category there are different technical methods to provide and organize the services, such as data release, transmission and many more. These services are classified into five main groups: information release platforms and transmission services; information retrieval and inquiry services; information community platform services; instant information interaction services as well as information protection and processing services. We have summarized the groups combined with examples below. We also give some examples of foreign companies. However they are only provided for you to better understand the services because they might not hold ICP licenses in China.
1. Streaming services
Information publishing and streaming services refer to platforms that provides users the ability to publish texts, pictures, audio, videos, application software, and other information. Whether an individual or a business entity, theses platforms may transmit and distribute texts, pictures, audio, videos, application software and other information to the user’s designated terminal or e-mail, according to the user’s needs.
Examples include QQ Music, the Chinese counterpart to Spotify or platforms such as iQiyi, the counterpart to YouTube in China.
2. Search engines
Information retrieval and inquiry services refer to online search engines that display texts, pictures, audio, and videos. The information is provided for users by way of data collection, retrieval, organization, storage, classified indexing, sorting and sequencing via the Internet.
Some examples in the Chinese market are search engines such as Baidu, Sougou, and Bing. Their main service is based on data organization and storage as well as sorting and sequencing of online information. The most famous search engine worldwide is Google.
3. Information community platform services
Information community platform services refer to online social media sites that enable the synchronous or asynchronous information interaction of online text, picture, audio and video exchanges of registered or cluster users.
These network activity platforms have socialized characteristics. Information exchange is the main purpose here, whether in the format of online text messages, pictures or audio and video. Weibo and Baidu Tieba are the famous platforms in China while abroad Instagram and Facebook are the main players.
4. Short Messaging Services (SMS)
Information communication or interaction services refer to platforms in which users can send and receive information including text, documents, pictures, audio, and videos. These services are provided for users by operating the client software, browsers and intelligent terminal via the Internet. This group includes instant messaging, interactive voice-response services (IVR) as well as end-to-end bilateral real-time voice services (including video voice services). In today’s world, these are the applications people use on a daily basis to communicate and share information with others. Several applications offer a mixture of many different service areas, such as QQ and Skype. The most widely used application in Germany is WhatsApp, while in China WeChat is the must-have.
5. Information protection and processing services
Information protection and processing services refer to online services that provide users with virus scanning, deletion, and the protection and processing of terminal information contents. These services include spam interception and blocking for users by client software on a computer or intelligent terminal via the Internet. Common examples are Tencent PC Manager, Kaspersky and McAfee.
Important things to consider:
Each service category has different requirements when it comes to the registration process of an ICP license. Therefore it is crucial to undertake a thorough examination of your business before applying for the ICP license. Generally speaking, there are two levels of institutions handling the application and examination for ICP licenses in China: The Ministry of Industry and Information Technology (MIIT) and the Provincial Telecommunication Administration Authority.
Attention: Foreign-invested businesses’ application of ICP license in China always require the approval of the Ministry of Industry and Information Technology (MIIT). An examination of the company’s business model is crucial in order to successfully apply for the ICP license.
Special regulations for foreigners
Foreign-invested telecommunication enterprises engaged in one or more of the B25 Information Services need to take into account, in particular, the capital participation. The shareholding of foreign investor(s) shall not exceed 50% ultimately. Beyond that, foreign-invested telecommunication enterprises are legally obliged to obtain following licenses besides business license in order to provide their services in China:
- The Examination Decision Report on Foreign Investment in Telecommunications
- The Telecommunication Business Operating License
Special regulations in Closer Economic Partnership Arrangements (CEPA)
Both Hong Kong and Macao have separate CEPA with Mainland China. CEPA is a free-trade agreement, it regulates the proportion of capital contributed by the partner regions. Companies incorporated in Hong Kong or Macao are allowed to establish a WOFE (Wholly Owned Foreign Enterprise) to provide information or application software services (B25) in Mainland China. Whereas, foreign companies outside the CEPA are not allowed to exceed a total shareholding of 50%.
However, investments from Hong Kong and Macao still need to apply for an Examination Decision Report on Foreign Investment in Telecommunications and The Telecommunication Business Operating License.
Special regulations in Shanghai Pilot Free Trade Zone (SHFTZ)
The SHFTZ is a trade zone designed to explore new paths and open-up through an all-round reform. It includes similar regulations to the CEPA. For example, foreign investors enjoy the same shareholding ratio rule as for investments from Hong Kong and Macao. Meaning, that foreign-invested companies located in SHFTZ have the same right of shareholding ratio up to 100% to provide App Store services.
This article is only focusing on a few of the most important regulations regarding the ICP license in mainland China. Therefore, we highly recommend upfront consultancy in case you want to register the ICP license on your own.
Ashley Tian is certified Chinese lawyer with a double bachelor degree in in law and psychology (Human Resource focus) and a master degree in Constitution and Administrative Law. She gained international experience during a work related stay in the United States and worked in a law firm and foreign-invested enterprise prior to joining ECOVIS Beijing. Ashley focuses her practice on company law, contract law, labor law, cyber security law, foreign exchange control, international trade as well as foreign direct investment. She is fluent in English and Mandarin.
Ecovis Beijing is the trusted tax and legal advisor to several embassies and official institutions in China. It specializes in mid-sized international companies and is focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up for our Newsletter, give us a call +86 10-65616609 or contact us directly via firstname.lastname@example.org.