What preferential taxation policies
foreign-funded enterprise enjoy in China?
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.
