1．Preferential tax policies applicable for foreign-invested
enterprises at Huadu District:
a.The productive enterprises with foreign investment that have an
operation period exceeding 10 years shall, from the year they begin
to make profit, be exempt from income tax for the first two years
and allowed a 50 percent reduction for the following three years.
Within these five years, they may be exempted from Local Income Tax.
b.The productive enterprises with foreign investment shall be levied
Enterprise Income Tax at a reduced tax rate of 24% and 3% for the
Local Income Tax following the period of tax exemption and reduction
as provided for above. If their actual operation period is less than
10 years, they should make up the Income Tax that has already been
exempted or reduced. Enterprises with foreign investment engaged in
agriculture, forestry and animal husbandry may, upon approval by the
State Bureau of Taxation, be allowed a 15 to 30 percent reduction
on the income tax for a period of another 10 years following the expiration
of the period of tax exemption and reduction as provided for above.
c.In addition to the two-year tax exemption and three-year tax reduction
treatment, foreign-invested enterprises producing for export shall
be allowed a reduced income tax rate of 50 percent as long as their
annual export accounts for 70 percent or more of their sales volume.
D.Preference of Enterprise Income Tax for those foreign-invested enterprises
with advanced technology: If they are still approved as advanced technology
enterprises after the period of tax exemption and reduction expires,
the advanced enterprises may pay the tax at 50% for another 3 years
according to the Tax Law.
e.Preferences of the Value Added Tax and the Consumption Tax:
(1)The value-added tax rate shall be zero for the taxpayers exporting
goods, except as otherwise provided for by the State Council. If the
exported goods are taxable consumer goods, the Consumption Tax is
free unless otherwise stipulated by the state.
(2)Enterprises with export rights to export commodities or act as
an agent in the export, unless otherwise stipulated by the state,
may apply for drawback or exemption from the Value Added Tax and the
Consumption Tax after export and making financial settlement as sales.
f.Preferential regulation on making up losses: Losses incurred in
a tax year within the foreign-invested enterprises and production
sites or business operations set up in China by foreign enterprises
may be made up by the income of the following tax year. Should the
income of the following tax year be insufficient to make up for the
said losses, the balance may be made up by its income of the further
subsequent year, and so on, over a period not exceeding five years.
g.Reinvestment and tax refunding. Any foreign investor of foreign-invested
enterprise who reinvests his share of profit obtained from the enterprise
directly into that enterprise by increasing its capital, or uses the
profit as capital investment to establish other foreign-invested enterprise
with operating period of no less than five years shall, upon approval
by the tax authorities, be refunded 40 percent of the income tax already
paid on the reinvested amount. In case the reinvestment has been withdrawn
before the expiration of five full years, the amount of refunded tax
shall be paid back. Foreign investors who reinvest the profits distributed
by the enterprise to establish or expand export-oriented enterprise
or technologically advanced enterprise for a period of no less than
five years shall receive a full refund of enterprise income tax already
paid on the amount of reinvestment in accordance with the stipulations
of the State Council.
h.Tax exemption for imported equipment: Equipment imported for foreign-invested
projects that are encouraged and supported by the State and purchased
within their total amount of investment shall, besides all the commodities
in Catalogue of Imported Commodities not Entitled for Tariff Exemption
for Projects with Foreign Investment, enjoy tariff and import-stage
value-added tax exemption. Imported technologies and spares including
in the import contract of the above mentioned projects should be free
of tariff and the import-stage value added tax as well. So long as
a 100% directly exported foreign-invested project is subject to the
category of permit in accordance with the Guiding Catalogue of Industries
for Foreign Investment and approved after/on October 1, 2002 for its
feasibility study, all equipment imported for its own use shall be
levied tariff and the import-stage value added tax according to the
rules and law. If it is true that the above enterprise 100% directly
exports, it would be annually refunded 20% of tax already paid on
importing equipment, which will be fully refunded within 5 years.
i.Regulations on tax drawback for exported goods:
(1)In accordance with related regulations in papers No. Cai Shui [2002]
007 issued by the Finance and Tax Authorities, as of January 1, 2002,
all foreign invested enterprises may execute measures on "tax
exemption, offset and drawback" for exporting goods produced
on their own by themselves or by agency
(2)The exported goods of the foreign invested enterprises that are
deemed as small-scale taxpayer are exempted from added value tax and
consumption tax. (Small-scale taxpayer means the annual sales amount
is under the standard of common taxpayer.)
(3)The re-exported goods processing with imported material are exempted
from added value and consumption tax.
(4)If foreign capital enterprises purchase home equipment under the
scope of drawback, they shall be entitled to drawback the paid VAT
according to the Proposed Regulations on Tax Drawback Administration
Regarding Foreign Capital Enterprises' Purchase of Home Equipment
(SAT [1999] 171).
j.In accordance with related provisions in papers No. Cai Shui [2000]
49 issued by the Finance and Tax Authorities, equipment made in China
and purchased for foreign-invested projects within their total amount
of investment in conformity with Encouraged Category and Restricted
Category B of "Industrial Guiding Catalogue for Foreign Investment"
listed in the circular of adjusting equipment import tax policy by
the state council, besides all the commodities in Catalogue of Imported
Commodities not Entitled for Tariff Exemption for Projects with Foreign
Investment regulated by the papers No. Guo Fa [1997] 37,are entitled
to be offset 40% of the equipment value with the increased Enterprise
Income Tax over previous year.
2. Preferential tax policies applicable for domestic enterprises at
Huadu District:
The government supports and encourages the development of the tertiary
industry with a reduced enterprise income tax or exemption from enterprise
income tax in certain period in accordance with the industrial policies.
(The tertiary industry also includes service enterprises transformed
from those owned by the whole people.) Hereinafter are the detailed
preferences:
a.Newly established enterprises with independent accounting engaged
in consulting service (on technology, law, accounting, auditing, taxes),
information and technical service shall be exempted from the Enterprise
Income Tax from the date of starting business for the first two years.
b.Newly established enterprises with independent accounting engaged
in transportation, post and telecommunications shall be exempted from
the Enterprise Income Tax from the date of starting business for the
first year and reduced by the half for the second year.
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