Tax
Policies
China
adopts low-tax policy toward foreign invested enterprises and at the
same time grant preferential tax to the industries and regions,
which are encouraged by the nation to receive investments. At
present, taxes applicable to the foreign-invested enterprises as
well as foreign individual (including compatriots in Hong Kong,
Macao and Taiwan) includes: enterprise income tax, personal income
tax, turn over linkage tax (including value added tax, consumption
tax and business tax), tariff, land value added tax, resource tax
and city real estate tax etc.
1.
Income Tax:
1).
Income Tax Rate:
We
adopted preferential income tax policies toward foreign invested
enterprises. The income tax rate is 15% in Economic Zones, Hi-tech
Industrial Zones, Economic and Technological Development Zones; the
enterprise income tax rate is 24% in the coastal opening areas and
provincial capital cities.
2).
Tax reduction and exemption policies:
The
foreign invested enterprises can enjoy the treatment of income tax
exemption in the first 2 years after making profits and income tax
reduction by half in the following 3 years. The foreign invested
hi-tech enterprises will enjoy the treatment of income tax exemption
in the first 2 years after making profits and income tax reduction
by half in the following 6 years; in addition to the above mentioned
preferential income tax policies of 2 years’ exemption and 3
years’ reduction, the export-oriented enterprises will enjoy the
income tax reduction by half so long as the volume of its annual
exports accounts for more than 70% of the general sales of the
enterprises; if the foreign-invested enterprises purchases
domestically made equipment within the volume of the total
investment, which are entitled to the Category of Tariff Exemption,
they will enjoy the tax credit according to some regulations.
2.
Turn-over Tax
1)
Ever since January
1st, the year of 1994, the nation implemented
unified value added tax, consumption tax, business tax in
foreign invested enterprises while abolishing the industrial and
commercial consolidated tax, which were promulgated in the 1950s.
2)
Foreign enterprises
and foreign invested enterprises will be exempted from business tax
in technological transfer.
3)
If the foreign
invested enterprises purchases domestically made equipment within
the volume of total investment, which are entitled to the Category
of Tariff Exemption, they will enjoy a refund of value added tax of
domestically made equipment.
3.
Tax at Import Stage:
1)
Tariff rate: Since
the year of 1991, the Chinese government has reduced its import
tariff for 8 times. The 1996 round of tariff cuts covered 4,994
tariff lines, bringing down the average tariff rate from 35.9% to
23% with the scale of reduction reaching 35.9%. On October 1 of the
year of 1997, we further moved the average tariff level down ward
from 23% to 17% based upon the comparatively large-scale lowering of
overall tariff level. This new initiative represents a 26% reduction
scale and involves over 4,800 tariff numbers with reduction coverage
of 73%.
2)
To carry out tariff
exemption policy for the importation of equipment: the importation
of equipment for the foreign or domestic-invested projects
encouraged and supported by the state shall be granted tariff and
import-stage value added tariff exemption. So long as a
foreign-invested project is subject to the Category of Encouragement
and Category of Restriction (B) of the Category,
all the equipment imported for self-use within its aggregated
investment, except for those listed in the Catalogue of Imports for
Foreign-invested Projects not Entitled to Tariff Exemption, shall be
exempted from tariff and import-stage value added tax. Its aims and
significance are in further expanding the utilization of foreign
investment, encouraging flow of foreign advanced technology and
equipment, promoting the industry structural adjustment and
technological advancement as well as maintaining a continuous, rapid
and healthy development of the national economy.
(Source
ChinaFDI.org.cn. For more details regarding FDI related information
on China click
here)
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