China has issued new policies to relax control on market access of foreign capital and encourage foreign investors to enter the Chinese market, while at the same time introducing fairer competition in the market and equal treatment of foreign and domestic enterprises. The Chinese government levies low tax on enterprises with foreign investment, and preferential tax policies are offered to the sectors and regions where investment is encouraged by the state.
I. Income Tax
The income tax on enterprises with foreign investment is levied at the rate of 33 percent. The income tax on enterprises with foreign investment located in special economic zones, state new- and hi-tech industrial zones, or economic and technological development zones is levied at the rate of 15 percent. The income tax on production enterprises with foreign investment located in coastal economic open zones, special economic zones, or in the old urban district of cities where economic and technological development zones are located is levied at the rate of 24 percent. And the income tax on enterprises with foreign investment that are engaged in projects such as energy, communications, port and dock is levied at the reduced rate of 15 percent.
II. Circulation-stage Tax
Since January 1st, 1994, the Chinese government has levied unified value-added tax, consumption tax and business tax on enterprises with foreign investment and domestic enterprises. Technology transfer and technological development by foreign enterprises and enterprises with foreign investment are exempted from value-added tax, as a measure to expand domestic demand and to encourage technological renovation in foreign-invested enterprises. For foreign-invested enterprises engaged in projects in the encouraged or restricted-B categories, the value-added tax on China-made equipment purchased by the enterprises within their total amount of investment shall be fully refunded if the equipment is listed under the catalogue offered with income tariff exemption.
III. Import-stage Value-added Tax
a. Tariff rate: Since 1992 the Chinese government has reduced nine times the tariff rate for imported commodities. The present average tariff rate is 12 percent.
b. Tax exemption for imported equipment: Equipment imported for foreign-invested or domestic-invested projects that are encouraged and supported by the state shall enjoy tariff and import-stage value-added tax exemption. (Source: http://www.china.org.cn)
For more information about accounting and tax filing, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143422, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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