China Processing Plants to Enjoy Tax Exemptions after Converting to FIEs

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Mar. 5 – China has recently clarified that import value-added tax (VAT) and custom duty exemptions can be granted for non-priced equipment imported by outward processing entities (OPEs), when these entities obtain a legal personality as a foreign-invested corporation (FIC) and meet other related criteria.

According to Announcement No.7 issued by the General Administration of Customs (GAC) on February 28, China offers favorable tax treatment to OPEs under the following circumstances:

  • Where an OPE without a legal personality establishes a corporation (an enterprise with legal personality) between July 1, 2011 and December 31, 2012 with all its foreign-provided non-priced equipment as investment, or where the OPE transfers all its non-priced equipment as investment into a corporation (established by the same foreign investor of the said equipment) between July 1, 2009 and December 31, 2012, its non-priced equipment is exempt from backdated payments of customs duty and import VAT. However, this only holds true if it was filed with the customs department in its Processing Trade Manual (PTM) before December 31, 2008, declared as imported equipment before June 30, 2009, and is still under customs supervision. Continue reading…

China Announces Import Tax Treatment to ‘Encouraged’ Foreign-Invested Projects

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Feb. 2 – In Announcement [2012] No. 4 released on January 29, the Chinese General Administration of Customs clarified the favorable import tax treatment to “encouraged” foreign-invested projects (FIPs).

Starting on January 30, FIPs (including capital increases to FIPs) listed in the “encouraged” category in the “Foreign Investment Industrial Guidance Catalog (2011 Version)” (“2011 FDI Catalog”) are exempt from customs duties when investors import equipment (for self use) and technology, accessories as well as spare parts that come along with the equipment based on related agreements. However, these importers are still subject to import value-added tax, which was resumed on such imports in 2009. Continue reading…

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