(Source: https://pltfrm.com.cn)
In China, foreign companies can qualify for reduced tax rates under certain conditions. These reduced rates are part of China’s strategy to encourage foreign investment in specific industries and regions. As of my last update in April 2023, the rules for qualifying for reduced tax rates generally include the following:
- Industry-Specific Qualifications: Foreign companies operating in certain encouraged industries, such as high-technology, advanced manufacturing, environmental protection, and renewable energy, may be eligible for reduced tax rates. These industries are often outlined in China’s Catalogue of Encouraged Industries for Foreign Investment.
- High and New Technology Enterprises (HNTEs): Foreign companies recognized as HNTEs in China can qualify for
a reduced corporate income tax (CIT) rate of 15%, significantly lower than the standard 25% rate. To be classified as an HNTE, a company typically needs to engage in sectors specified in the High and New Technology Fields Recognized by the State and must meet certain requirements, including a minimum percentage of revenue from high-tech products and services and a certain level of investment in research and development (R&D).
- Special Economic Zones (SEZs) and Free Trade Zones (FTZs): Foreign businesses located in SEZs, FTZs, or certain designated economic areas may enjoy reduced tax rates. The specifics can vary depending on the zone, with some offering tax holidays, reduced rates, or other incentives for a specified period.
- Small and Thin-Profit Enterprises: Smaller enterprises or those with thin profits may qualify for a reduced CIT rate of 20% if they meet specific criteria regarding their taxable income, number of employees, and total assets.
- Western and Central Regions Incentives: To promote economic development in the central and western regions of China, foreign companies investing in these areas may be eligible for reduced tax rates. This incentive aims to balance regional economic disparities.
- Reinvestment Incentives: Foreign companies that reinvest their profits in China, particularly if the investment is made in encouraged sectors or used to establish or expand equity investments, may be eligible for tax rebates or exemptions.
- Environmental Protection, Energy and Water Conservation: Companies investing in environmental protection, energy saving, and water conservation projects may be eligible for preferential tax treatment, including reduced rates or tax holidays.
- Specific Project Incentives: Occasionally, tax incentives are available for specific types of projects, such as infrastructure, technological innovation, or other projects aligned with China’s development goals.
To qualify for these reduced tax rates, companies typically need to meet specific criteria, which can include the nature of the business, location, amount of investment, technological standards, and compliance with relevant laws and regulations. These criteria are often detailed in various government decrees and guidelines.
Given the complexity and variability of tax incentives, foreign companies are advised to seek guidance from local tax professionals or legal advisors to understand the current incentives, assess eligibility, and ensure compliance with all relevant criteria and procedures.
PLTFRM is an international brand consulting agency that works with companies such as Red, Tiktok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries exports in China account for 97% of the total exports in Asia. Contact us and we will help you find the best China e-commerce platform for you. Search pltfrm for a free consultation!
