China?
BIZCHINA / Preferential Taxation Policies
What preferential taxation policies foreign-funded enterprise enjoy in
China?
Updated: 2006-04-17 09:36
A: (1) Income Tax
Income tax rate: The current rate of income tax imposed upon foreign
investment enterprises is 33%, though it is set at the lower rate of 15%
in special economic zones, national hi-tech industrial zones and national
grade economic and technical development zones. In coastal regions and
provincial capitals the rate is 24%.
Tax-reducing policy: Foreign investment enterprises may enjoy the benefit
of business income tax not being collected during the first two years
after the beneficial year; a half income tax may then be imposed for the
succeeding 3 years.
Foreign investment enterprises in the central and western regions are
also encouraged by the State via 5 years' of tax reductions, with the
possibility of a further 3 years' half income tax thereafter.
In the case of advanced technology enterprises, they are exempted from
income tax for two years and are then subject to a half income tax for
the following six. Export enterprises enjoy the benefits of two years'
exemption and three years at half rate.
(2) Turnover Tax
From 1st January 1994, China started to implement unified Value Added
Tax, consumption tax and business tax in foreign invested enterprises
whilst simultaneously abolishing industrial and commercial consolidated
tax. Foreign enterprises and foreign invested enterprises are exempted
from business tax in technological transfer. If the foreign invested
enterprise purchases equipment made domestically within the volume of
total investment, there is a benefit of a refund of value added tax on
domestically-made equipment.
(3) Import Tax
Tariff Rate: The Chinese government has lowered import tariff rates
several times; the current rate is 12% and China's WTO concession will
render the tariff to lower further according to the agreed time line.
Tariff Exemption Policy for Equipment Import: The importation of
equipment for foreign or domestic-invested projects which are both
encouraged and supported by the State shall be granted tariff and import-
stage value-added tariff exemption. Provided that the foreign-invested
product is subject to the Category of Encouragement, all equipment
imported for its use within the aggregated investment shall be exempted
from tariff and import-stage value-added tax (unless the project comes
under the heading of those not entitled to Tariff Exemption). The aims of
this policy are to expand the use of foreign investment and to encourage
the influx of foreign technology whilst maintaining a healthy and
developing domestic economy.
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