On the 15th of July 2021, the “Guideline on Supporting High-level Reform and Opening-up of the Pudong New Area and Building a Pioneer Area for Socialist Modernization” (“the Guideline”) was issued by China’s Central Committee and State Council. The Guideline sets out development planning for Pudong New Area in Shanghai and specifies the following preferential policies.

Preferential Corporate Income Tax (CIT) Rate

The Guideline specifies a reduced CIT tax rate for qualified companies engaged in production and research in key fields such as integrated circuits, artificial intelligence, biomedicine, and civil aviation in specified areas of Pudong District.

The CIT of these companies will be levied at a reduced rate of 15% for five years from the date of establishment.

Import Taxes Exemption

Import taxes (import VAT and import consumption tax, where applicable) may be exempted for drugs used in clinical research.

In addition, the Guideline aims to foster the R&D of technologies, supporting qualified R&D institutions by exempting the import taxes for self-use equipment and offers a tax refund for self-use equipment sourced in China.

Incentives to Promote Bonded Business in Pudong

The policies of Yangshan Special Comprehensive Bonded Area may be extended to Pudong’s customs supervision areas.

Shortlisted companies outside the customs supervision areas are also encouraged to carry out high value-added, high-tech, and environment-friendly bonded repairing business for offshore markets.

Preferential CIT Policy for Venture Capital Companies

A specific area in Pudong would be assigned for preferential CIT policies targeting venture capital companies. During the policy period, eligible venture capital companies can be exempted from CIT based on the proportion of shares held by individual shareholders at the end of the year.

Our Observations

Selected companies and industries can greatly benefit from the policies proposed in Pudong New Area. We will keep a close eye on the regulatory developments and their application, in order to fully understand how to take advantage of the policies. If you would like to know more about the most recent tax and financial policy developments in China, please contact us at info@phcadvisory.com.