Taxation and Tax Return in Chengdu

Chengdu Taxation and Tax ReturnService
Hotline: 86-755-82143422 Email: anitayao@citilinkia.com

For foreign invested manufacturing enterprises with an operation period of over 10 year, staring from when profits are achieved, income taxes will be exempted for the first to second year, and levied on a half rate from the 3rd to the 5th years.

The income tax on production enterprises with foreign investment shall be levied at a reduced rate of 24%. And the income tax on the production foreign-invested enterprises (FIEs) that adopt advanced technology and located in Chengdu Economic & Technological Development Zone or Chengdu Hi-tech Zone (including Chengdu Cross-Strait Scientific Industry Development Park) shall be allowed a reduced income tax rate of 15%.

Production projects with foreign investment in middle and west China, encouraged by the state industrial policies shall pay income tax at the reduced rate of 15% for three years on expiry of the current favorable tax period.

For foreign invested enterprises at west China (including Chengdu) and under the encouraged category of Guiding Directory for Foreign Invested Industries or belonging to the Directory for Advantageous Foreign Invested Industries at Mid-west China, provided the encouraged industries are the key business of the companies accounting for over 70% of the total income, income taxes will be levied on 15% during 2001 and 2010.

The FIEs which are engaged in technology or knowledge-intensive projects, or which make an investment over USD 30 million and have a long payoff period, which are engaged in production for energy and transportation projects, shall pay business tax at a reduced rate of 15% upon approval by the competent tax authority.

Following the expiration of the tax preferential period, the business income tax for foreign funded export enterprises shall be reduced by half of the state decided rate if their export for the current year exceeds 70% of the total production value. For export enterprises that pay business income tax at a rate of 15% of the state decided tax rate, the tax rate shall be reduced to 10% if they meet the abovementioned conditions.

The income tax on the financial agencies such as foreign funded banks, joint venture banks and etc., which are located in Chengdu, shall be levied at a reduced rate of 15%upon approval by tax authority foreign investors or operation capital from the head bank to the branch exceeds USD 10 million and with an operation period of exceeding 10 years. The business income tax shall be exempted for the first year and be reduced by half in the 2nd and 3rd year staring from the year the begin to make profit.

For foreign invested enterprise to utilize pretax profit to increase its registered capital or use after-tax profit to establish new enterprises, with an operation period over five years, 40%of the income taxes paid for the re-investment will be refunded by ratification of tax administration. If the new enterprise is engaged in high and new technology, export-oriented, infrastructure projects such as highway, energy, irrigation, or public facility or the development of agriculture, forestry, stockbreeding and fishery with at least 5 years' operation period, the paid business income tax for the re-invested value shall be fully refunded to the investors.

The foreign companies, enterprises and other economic agencies that have no branch in Chengdu but obtain income from Chengdu's bonus stock, interest, rent franchise fights and others, shall be allowed a 10% reduction rate on the income tax.

For foreign invested enterprises with R&D expenses increasing 10% over the previous year (inclusive), 50% of the actual R&D expenses may deduct the tax that year.

For foreign invested advance-technology enterprises which are recognized as advanced technological enterprises, after the expiry of their exempt or reduced tax period, half-tax rate period may be prolonged for additional three years as described by tax regulation. The income tax rate below 10% will be levied at 10% for the enterprises conforming to the half-tax reduction conditions.

For Chinese-invested enterprises located inside CDHT and recognized as a high-tech enterprise, the income tax will be reduced to 15 percent. A newly established Chinese-invested high-tech enterprise shall be exempted from income tax during the first 2 years from the year when it shows the first sales income. For Chinese-invested enterprises located inside CDHT and encouraged by the State, the income tax shall be reduced to 15 percent prior to 2010.

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