Summary of Major Nationwide
Preferential Policies for Foreign Investments
The following are major nationwide
applicable preferential policies for foreign investors in
China:
1. Manufacturing businesses
involving foreign investment with a operation tenure of over
10 years enjoy 2 years of corporate income tax exemption from
the first profit-making year and half reduction for the ensuing
3 years.
2. When the foreign party
uses its profit for re-investment to increase the registered
capital or branches out for new businesses for at least 5
years, it can get back 40% of the income tax levied on the
amount added. Total refund is applied to cases of direct investment
for setting up or expanding export businesses or technologically
advanced companies.
3. Port development projects
with at least 15 years of operation are entitled to 5 years
of income tax exemption and half reduction for the next 5
years.
4. Foreign invested operations
in breeding, planting, forestry, animal-husbandry, and agriculture
are free of VAT in sales of self-made farm produce.
5. Simultaneous collection
and return is applied to the general taxpayer who sells self-made
computer software and whose tax exceeds 6% of the amount payable.
Individuals or institutions engaged in technology transfer,
development, and related technical consulting and services
are entitled to the exemption from business tax.
6. Foreign investors are
free to remit abroad their profits, dividends, bonuses and
post-liquidation income.
7. The annual loss incurred
by the foreign invested entity or its China-based manufacturing
or operation sites can be compensated by the profit to be
derived from the following tax year. This process can go on
and on within the limit of 5 years.
8. Exemption of import
tariffs and related VAT on equipment and parts for the enterprises¡¦
own use goes to FIES whose businesses are encouraged by the
State or fall under Category B of the restricted items. This
is also true for those companies which import equipment by
virtue of foreign government loans or loans from international
financial organizations.
9. FIES included in the
Encouraged and Restricted B Category, R&D centers and
export-oriented companies will no longer pay import tax and
duties on equipment which is not otherwise manufactured within
China and which is imported for the company's own use. This
exemption also covers the situation where a product of satisfactory
quality cannot be found in the country.
10. Apart from crude oil
and sugar, export-oriented products by foreign invested entities
are exempt from VAT and consumption tax.
11. The scheme of categorized
management of enterprises in the export processing trade is
being implemented. Enterprises under Category A enjoy ¡§symbolic
execution¡¨ of the shadow margin account system, i.e.,
no need to turn in cash deposit to the bank when it comes
to imports (inclusive of restricted items). This applies also
to those companies under Category B except for the restricted
imports. Category C on the other hand, encompasses enterprises
whose fine for a single regulatory breach within one year
exceeds RMB10,000 or which have a record of two or more transgressions
which account for 0.1 percent of the Customs clearances of
the previous year, a situation which should require on the
corporate side the submission of a cash deposit for their
imports.
12. For companies in the
processing trade pay3ments of the earnest money can be made
in varied forms undertaken by qualified financial bodies authorized
by the General Administration of Customs or any legal person
able to clear off liabilities and provide security to the
Customs. The methods of payment range from cash and cheque
to drafts and remittances.
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