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Preferential Import Tax Policies Explained

Business Beijing, in cooperation with the Beijing Municipal Development and Reform Commission, is beginning this Q&A column to serve foreign investors.

If you have any questions about investing in Beijing please write us via e-mail at: invest@btmbeijing.com or fax at +86 10 6715 2381, we will find someone authoritative to provide you with the best and latest information available. Please remember: only e-mails and faxes are acceptable.

Q: My company is domestically funded, but a foreign-owned enterprise would like to buy 30 percent of my company’s stock and invest more. Could we enjoy Preferential Equipment Import Tax Policies?

A: The domestic limited liability company and stock limited company transferring into a foreign invested stock limited corporation with no less than 25 percent stock and more investment, whose invested items accord with the Encouraged Matters in Catalogue for the Guidance of Foreign Investment Industries, or the industrial entries of Catalogue of Priority Industries for Foreign Investment in the Central-Western Region, the imported equipment for self use included in the added investment could enjoy preferential import tax policies applied to foreign investment projects. However, the equipment for self-use in the original project (excluding the added investment) could not enjoy these preferential policies

Q: Our company is a joint venture and an “encouraged” project. We would like to apply for a technical transformation using our own funds. Could we enjoy relevant preferential tax policies when importing necessary equipment?

A: Foreign-invested enterprises with a foreign side investing less than 25 percent of the whole company, may not enjoy preferential import tax policies applied to foreign investment projects. As a result, these enterprises are not included in the relevant preferential tax policies range regulated in the Circular of the Customs General Administration on Import Taxation Policy for Further Encouraging Foreign Investment (Shu Shui [1999] No. 791). As a result, they could import equipment for self-use with their own funds, duty free.

Q: Our company is wholly invested by a foreign-owned enterprise. Which policy should we work with: the one governing domestic enterprises or foreign enterprises? Could we enjoy Preferential Equipment Import Tax Policies?

A: With respect to enterprises established by foreign-invested enterprises outside the Central-Western Region by reinvestment and enterprises established by foreign-invested enterprise in the Central-Western Region by reinvestment in which foreign investment accounts for less than 25 percent (including those which directly or indirectly have foreign capital), the projects they invest in shall be done in accordance with foreign investment industrial policies, in particular, with respect to projects falling within the “encouraged” category of the Catalogue of Industries for Guiding Foreign Investment or the “industry list” of the Catalogue of Priority Industries for Foreign Investment in the Central-Western Region. The self-use equipment imported within their aggregate investment shall be exempted from customs duties and value-added taxes in the linkage of imports except those listed in the Catalogue for Foreign Investment Projects of Import Commodities Not Exempted from Tax.

Q: Our company is a foreign one, devoted to electrical apparatus manufacturing, research and development. We would like to establish a joint venture. Does it qualify on listings as “encouraged”? Could we enjoy Preferential Equipment Import Tax Policies? How about our accessories?

A: In accordance with Catalogue for the Guidance of Foreign Investment Industries (Amended in 2007), the establishment of auto electrical apparatus manufactures, research and development belongs to the Catalogue of Encouraged Foreign Investment Industries. In accordance with the provisions on foreign investment, where a Chinese-foreign equity joint venture, a Chinese-foreign contractual joint enterprise or a solely foreign-invested enterprise (hereinafter referred to as foreign-invested enterprises) is legally established within the territory of China and has acquired the Certificate of Approval for Foreign-invested Enterprises of the People's Republic of China, the Business License for Foreign-invested Enterprises and other legal documents, if any project it invests in falls within the encouraged category of the Catalogue of Industries for Guiding Foreign Investment or the industry list of the Catalogue of Priority Industries for Foreign Investment in the Central-Western Region, the self-use equipment as well as the technologies, components and spare parts attached to such equipment (hereinafter referred to as self-use equipment) imported by it within its aggregate investment shall be exempted from customs duties and value-added taxes in the linkage of imports except commodities listed in the Catalogue for Foreign Investment Projects of Import Commodities Not Exempted from Tax.