Preferential Policy
2009.04.30

State Preferential Policy

1Foreign investment projects fall within the encouragement category of Catalogue for the Guidance of Foreign Investment Industries which involve transfer of technology, the equipment imported for self-use as well as the technologies, components, and parts attached to such equipment as provided under the contract within its aggregate investment shall be exempted from customs duties and value-added taxes in the linkage of imports with the exception of commodities listed in the Catalogue of Imported Commodities not Entitled for Tariff Exemption for Projects with Foreign Investment

Value-added tax (VAT) of domestically made equipment within the tax exemption catalogue shall be refunded in full amount if foreign-funded enterprises that fall into the encouraged category purchase those equipment in China with a total amount within the tax refund investment total controlled by taxation administrations

2Productive foreign-funded enterprises scheduled to operate for a period of 10 years or more may be exempted from enterprise income tax in the first and second profit-making year and allowed a 50 per cent reduction in income tax in the third to fifth year and are entitled to exemption of local income tax during the tax reduction and exemption period.
   Losses incurred by a foreign enterprise in its production and operation institutions and places in a tax year may be carried over to the next year and made up with a matching amount drawn from that year’s income. Should the income in the subsequent tax year be insufficient to make up for the said losses, the balance my be made up with further deductions against income year by year over a period not exceeding five years.


3Foshan city enjoys taxation preferential policies for coastal economic open zones and, productive foreign-funded enterprises may pay enterprise income tax at a reduced rat of 24 per cent.

Productive foreign-funded enterprises engaging in the following projects, upon approval by State Administration of Taxation, may pay enterprise income tax at a reduced rated of 15 per cent.

   i  Technology- and knowledge-intensive projects; 
   ii Projects with an investment of over USD$300 million and requiring a longer investment recovery cycles
   iii
projects of energy, transportation, and port construction.

4 Foreign investors of foreign-funded enterprises who reinvest their shares of profits into their enterprises to increase the registered capital or to establish other enterprises as the capital for a period of operation of no less than five years, upon approval by the tax authorities of the applications filed by the enterprises, shall be refunded 40 per cent of enterprise income tax already paid on the reinvested portion.
 
5
After the expiration of the period for the reduction or exemption of enterprise income tax in accordance with the provisions of the state, “product-for-export” foreign-funded enterprises, with the value of export products in that year amounts to 70 per cent or more of the value of their products for that year, may pay enterprise income tax at a rate reduced by one half of the current tax rate(enterprise income tax will be levied at a rate of 10 per cent if the reduced rate is lower than 10 per cent.) and is entitled to exemption of local income tax.
  Beside the above special preferences, foreign investors of product-for-export enterprises who reinvest directly their shares of profits from their enterprises within Chinese territory in order to establish or expand product-for-export enterprises for a period of operation of no less than five years, upon approval by the tax authorities of the applications filed by the enterprises, shall be refunded the total amount of enterprise income tax already paid on the reinvested portion.

6 "Technologically advanced enterprises", if, after the expiration of the period of reduction or exemption of enterprise income tax in accordance with the provisions of the state, still retain the title, may extend for three years the payment of enterprise income tax at a rate reduced by one half of the current tax rate (enterprise income tax will be levied at a rate of 10 per cent if the reduced rate is lower than 10 per cent.) and is entitled to exemption of local income tax.

Beside the above special preferences on tax, foreign investors of technologically advanced enterprises who reinvest directly their shares of profits from their enterprises within Chinese territory in order to establish or expand technologically advanced enterprises for a period of operation of no less than five years, upon approval by the tax authorities of the applications filed by the enterprises, shall be refunded the total amount of enterprise income tax already paid on the reinvested portion.

7Foreign-funded enterprises with a 10 per cent or more increase in technology development expenses over the previous year, upon approval by the tax authorities, are allowed to further deduct 50 per cent of the actual amount of technology development expenses from the taxable income of the year.

8) Foreign-funded research and development centers are allowed to import and sell a small quantity of high and new technology products produced by their parent companies for market testing of their research and development products.

  i The imported products from their parent companies should be products for marketing test for the products of the research and development project being conducted by the centre currently.
   ii The quantity of imported good shall be consistent with the objective of marketing test.
9Importation by foreign-funded research and development centers within its aggregate investment, of self-use equipment and the technologies, components and parts attached to such equipment that can not be produced in China or their performance fail to meet the demands, may be exempted from customs duties and value-added taxes in the linkage of imports with the exception of commodities listed in the Catalogue of Imported Commodities not Entitled for Tariff Exemption for Projects with Foreign Investment(attachment 5, Shushui nctionallnt, opment center, witd parts attached to such equipment that can not be produced or functionall (attachment 5, No.1062[1997] of the General Administration of Customs).

Local Preferential Policies

iProportionally reduce the land price. High and new technology projects or productive investment projects with a registered capital of USD$5 million to USD$10 million is entitled to a reduction of 20 per cent to 60 per cent upon the current land price.
ii
Properly lower the industrial water expenses. Productive enterprises shall be exempt from urban public utilities surcharge for water for industrial use.
iiiAll districts can formulate on their own more preferential policies and measures on land price and other aspects in accordance with the local situation, as well as the quality, scale and level of the investment project.
iiiiGovernments at all levels and management committees of all industrial park zones may set up special incentive funds. Agents and people from all walks of life who have done remarkable achievement in attracting foreign investment shall be rewarded by local government or industrial park zone where the project lies with an amount of 0.5 per cent of the actual investment amount of the project.

Preferential Policies of High and New Technology Industrial Development Zone

iHigh and new technology enterprises in the development zone, since the tax year they get the qualification, may pay enterprise income tax at a reduced rate of 15 per cent.
iiNewly established high and new technology enterprises in the development zone, upon approval by the tax authorities of the applications filed by the enterprises, may be exempted from income tax for two years since the year they go into production.  
iii
High technology products, samples for dissembling and testing imported by high and new technology enterprises in the development zone shall be released free of duty by the Customs against the approval documents of the verifying department in the zone. These samples and sampling machines shall not be transferred for other usage or for sale.
iiiiHigh and new technology enterprises in the development zone, which introduce scientific and technical personnel with intermediate or above technical title (including MA degree from abroad) from home or abroad, shall be exempted from city maintenance fee.

 
iiiii
Scientific and technical personnel and business personnel in the high and new technology enterprises in the development zone who need to go abroad or to and fro Hong Kong and Macao due to business needs, may enjoy preference in application for passport and Exit-Entry Permit for Traveling to and from Hong Kong and Macau with a multiple-journey endorsement