China Amends Import Duty Policy for Major Technical Equipment

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Mar. 21 – On March 7, 2012 China issued a new circular clarifying the government’s updated duty policy for imports of major technical equipment.

The Ministry of Finance, the Ministry of Industry and Information Technology, the General Administration of Customs, and the State Administration of Taxation jointly issued the “Circular on Adjusting Catalog Concerning Import Duties Policy on Major Technical Equipment” clarifying the government’s new policies regarding the importation of technical equipment in addition to outlining the general and special application procedures.

The newly released Circular provides amendments to the “Catalog of Major Technical Equipment and Products under State Support (‘Catalog’)” and the “List of Key Component and Material Commodities Imported for Major Technical Equipment and Products (‘List’),” which will be effective from April 1, 2012. According to these revisions, qualified domestic enterprises will be exempt from customs duties and import value-added tax if they import commodities included in the List to manufacture the equipment or products listed in the Catalog.

General application
Enterprises that wish to enjoy the favorable duty policies for imports listed in the Catalog should submit applications between March 1, 2012 and March 31, 2012 – including the price of the components and raw materials to be imported between April 1, 2012 to December 31, 2012. For application procedures and requirements, please refer to the “Interim Provision for Import Duties Policy on Major Technical Equipment” appended to caiguanshui [2009] No.55.

Provincial industry and information technology departments will review the applications for the first round and send the qualified applications to the Ministry of Industry and Information Technology before April 15, 2012. From April 1, 2012, enterprises that pass the first round of the review process can request China’s Customs to release the imported goods with issued documents from related authorities and a tax guarantee.

From April 1, 2012, the existing regulations governing such imports of technical equipment – namely caiguanshui [2010] No. 17, caiguanshui [2010] No. 50, and caiguaishui [2011] No. 45 – will cease to be in effect. These will be replaced by the relevant documents indicated in the new Circular.

Application procedures for certain equipment in the power industry
According to recent developments in the industry, the “Catalog of Major Technical Equipment and Products under State Support (Amended in 2012)” made adjustments in technical specifications for equipment for wind turbines and its components, DC power transmissions, and AC power transmissions.

If the duty-exempted status for enterprises manufacturing the aforementioned equipment was approved in 2011, the status will be effective until March 31, 2012. Those enterprises hoping to continue the favorable import duty policies from April 1, 2012 to December 31, 2012 should submit the application between March 1, 2012 and March 31, 2012. Please refer to the section above for application procedures.

Implementation reports
All enterprises that enjoyed China’s favorable import duties on major technical equipment in 2011 are required to submit a report on the policy implementation according to the “Interim Provision for Import Duties Policy on Major Technical Equipment (caiguanshui [2009] No.55)” between March 1, 2012 to March 31, 2012. Qualified enterprises are required to fill in the implementation report and related forms.

Non-duty-free Catalog
In addition to the Catalog and List included in the new Circular, the “Catalog of Major Non-duty-free Technical Equipment and Products (Non-duty-free Catalog)” will also be effective from April 1, 2011.

Projects and enterprises approved to enjoy the favorable policies under the “Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment (guofa (1997) No. 37)” after April 1, 2012 will be subject to custom duties for importing equipment listed in the new Non-duty-free Catalog and related technology, components and spare parts along with the equipment.

The applicable projects and enterprises are listed below:

  1. Domestic investment and foreign investment projects encouraged by the government
  2. Foreign government and international financial organization investment loan projects
  3. Processing trade enterprises of non-evaluated equipment imports provided by foreign investors
  4. Prioritized industries for foreign investment in Central China and West China
  5. Self-funded technology reform projects by foreign-invested enterprises and foreign-invested research centers under “Circular of the Customs General Administration on Import Taxation Policy for Further Encouraging Foreign Investment (shushui No. 791)”

Projects and enterprises approved before April 1, 2012 that import equipment listed in the Catalog before September 31, 2012 will follow the existing regulations rather than the updated measures. However, equipment imports from such entities shall be allowed to follow the newly updated custom duty measures from October 1, 2012.

Specific enterprises and projects
Manufacturing enterprises that qualify for duty-exemption in 2011, proprietors of urban rail transit automation projects, and proprietors of nuclear power equipment automation projects that declare imports of components, spare parts and raw materials before April 1, 2012 shall follow the existing regulations rather than the update measures. From April 1, 2012 and onwards, the process shall be guided by the newly updated custom duty measures.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China. The firm specializes in assisting foreign enterprises with their tax obligations. For further advice and specifics relating to these recent measures, please email china@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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