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A synopsis of the tax system in the PRC (part 2)

Background
When a sourcing project gets to a certain size, it often makes sense to set up a permanent presence on-the-ground in China to help manage the supply chain.  This series of blog posts covers some of the key areas of consideration when it comes to setting up in China.

 

Tax incentive policies

The EIT regime adopts the “predominantly industry-oriented, limited geography-based” tax incentive policy. Key emphasis is placed on “industry-oriented” incentives aiming at directing investments into those industry sectors and projects encouraged and supported by the State.

 

The new tax incentive policies mainly includes that the EIT may be reduced or exempted on income derived from the following projects:

 

1. Projects/industries EIT incentive*3 Valid period

For example: Agriculture, forestry, animal-husbandry and fishery projects- exemption or 50% reduction on all years as long as it is engaged in these projects.

2. Specified basic infrastructure projects*1 3+3years tax holiday Starting from the 1st income-generating year.

Example: Environment protection projects and energy/water conservative projects*2 3+3years tax holiday Staring form the 1st income-generating year.

3. Qualified new/high tech enterprises established in Shenzhen, Zhuhai, Shantou, Xiamen, Hainan and Pudong New Area of Shanghai newly established after 1 January 2008 2+3years tax holiday *4 Staring form the 1st income-generating year.

4. Software production enterprises 2+3years tax holiday Staring form the 1st profit-making year.

For Example:

Integrated circuits (“IC”) production enterprises with a total investment exceeding RMB8 billion, or which produce IC with a line-width of less than 0.25um provided that its operation period exceeds 15 years 5+5 years tax holiday Staring form the 1st profit-making year IC production enterprises which produce IC with a line-width of less than 0.8um 2+3years tax holiday Staring form the 1st profit-making year.

 

Notes:

1. Including harbour, wharf, airport, railway, highway, EITY public transportation, electric power, water resources utilization projects, etc.

2. Including public sewage treatment, public refuse treatment, comprehensive development and utilization of methane, technologies alteration for energy-saving and emission reduction, seawater desalination projects, etc.

 

Written for CSIC by Sophie Mao
China based lawyer at www.AsiaBridgeLaw.com



Mike Bellamy

Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). Author of “The Essential Reference Guide to China Sourcing” and founder of PassageMaker Sourcing Solutions. Mike is co-founder of CSA, the China Sourcing Academy.


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