China Regulatory Brief: Adjustments to Tobacco Tax and Private Investment into Water and Gas Supply

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New VAT policy to be piloted in the customs special supervision zone  

The State Administration of Taxation (SAT), Ministry of Finance (MOF), and General Administration of Customs (GAC) issued an announcement on October 14, 2016 regarding a pilot program in which enterprises operating in customs special supervision zones are granted ordinary VAT taxpayer qualification. The pilot program will be implemented in comprehensive bonded zones in Kunshan, Suzhou, Chongqing, Shenzhen, and Zhengzhou, as well as the export processing zones of Shanghai and Zhengzhou, starting November 1, 2016. Enterprises that meet registration requirements may submit their application to local tax and customs bureaus. For domestic sales of goods (including those sold to other pilot enterprises), a pilot enterprise may issue special VAT invoices and declare for payment of VAT and consumer tax as required.

Opinions regarding amendments to tobacco leaf tax solicited

On October 17, 2016, the State Administration of Taxation issued a draft law on tobacco leaf taxation for opinions. Basic provision is preserved, but adjustments are made to the amount of subsidy offered, now at 10 percent of purchase price, and according to the amount of subsidies granted by taxpayers in different regions. In addition, the draft also revises provision for tax payment time restriction, reducing the period from 30 days to 15 after the tax payment obligation is generated, and where the taxation period is of one month.

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Preferential import tax policies for integrated circuit manufacturing enterprises

An announcement of implementation of preferential import tax policies for integrated circuit (IC) manufacturing enterprises was jointly made on October 19, 2016 by the State Development & Reform Commission (SDRC), the Ministry of Industry & Information Technology (MIIT), the Ministry of Finance (MOF), and General Administration of Customs. The Announcement furnishes a list of the IC manufacturing enterprises entitled to preferential import tax policies, namely those whose manufactured line width is less than 0.25μm, or with investment exceeding RMB 8 million and line width less than 0.5μm, and will be retrospectively entitled to the terms of the new policy starting from June 1, 2015 and November 20, 2015, respectively.

Private investment into urban water supply and fuel gas encouraged

Opinions have been issued encouraging and guiding private investment into urban water supply, fuel gas, heat supply, sewerage, and waste treatment industries by increasing channels for private investment. The opinions detail that private capital may enter these industries by means of direct investment in the form of wholly foreign-owned enterprises (WFOE), joint ventures (JVs), and the PPP model featuring public-private cooperation as well as participation in state-owned enterprise (SOE) reform and restructuring, equity subscriptions, and industry investment funds. In addition, private enterprises are encouraged to overcome regional and industrial restrictions by assets mergers and enterprise reorganization. In terms of financial services, increased credit support will be extended to private investors, who are encouraged to operate new types of loan businesses, and relevant enterprises will be supported in issuing debt financing instruments of non-financial enterprises. The Opinions were jointly issued by the Ministry of Housing and Urban-Rural Development, the State Development and Reform Commission (SDRC), the Ministry of Finance (MOF), and the Ministry of State-Owned Land & Resources and People’s Bank of China (PBOC).


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