China Clarifies Import Tax Policies for Shanghai Free Trade Zone

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Oct. 28 – China’s Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation jointly released the “Circular on Relevant Import Tax Policies for China (Shanghai) Free Trade Zone (caiguanshui [2013] No. 75, hereinafter referred to as the ‘Circular’)” on October 15, which clarifies the import tax policies for the Shanghai Free Trade Zone (Shanghai FTZ). Detailed information can be found below.

According to the Circular, domestic leasing companies registered in the Shanghai FTZ and their subsidiary companies are entitled to a 5 percent import value-added tax (VAT) rate for purchases of overseas aircraft upon approval from relevant administrative departments. Such aircraft shall have an inert weight above 25 tons and be leased to domestic airlines.

Moreover, goods produced and processed by enterprises established in the Shanghai FTZ and sold to the domestic market via the “second-line” (the gate between the Shanghai FTZ and other domestic areas) shall still be subject to import VAT and consumption tax as required. However, at the request of the enterprise, a pilot scheme on tariff policies will be implemented for goods sold to the domestic market based on their corresponding imported materials or actual declaration status.

In addition, the importation of machines, equipment and other goods by manufacturing enterprises and manufacturing service enterprise in the Shanghai FTZ are entitled to tax exemption. Besides, a bonded display trading platform is allowed to be established in the zone.

However, the Circular does not apply to goods imported by consumer service enterprises in the Shanghai FTZ and other goods that are not entitled to tax exemption as provided in laws, administrative regulations and relevant rules.

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