The Ministry of Finance (MOF), State Taxation Administration (STA), and the National Development and Reform Commission (NDRC) have revised their “Catalogue to encourage industries to engage the foreign investment and the Catalogue for Guiding Industry Restructuring in Hainan province”, which came into effect on March 1st, 2024.  In general, the policy's main goal is to develop tourism, modern services, and high-tech industries to increase foreign direct investment (FDI) in Hainan province and Jiangsu province.  

The purpose of the guideline is to classify tax and fees according to different activities incurred within business firms mainly in Venture capital investment, Research and experimental development, technology transfers, development of key industries, and the entire industry chain. The newly published catalog indicates that firms are registered in Hainan, a business that is in Hainan and businesses in the encouraged business are eligible for a reduced corporate income tax rate of 15 percent from January 2020 to December 31, 2024.

In addition, on March 12, 2024, MOF in collaboration with MOST, STA, and GACC released the guideline on Major tax and fee incentives to support technological innovation in China. The guideline classifies tax and fee incentives according to the activities in each different stage of technological innovation. Under different categories, the guidelines provide detailed information mainly on relevant tax and fee incentives content, eligible entities, application methods, required documentation, reporting deadlines, and legal basis.

The Jiangsu Provincial Department of Commerce and the Jiangsu Department of Finance jointly published the Guiding on Promoting the Establishment of Regional Headquarters and Functional Institutions by Multinational Corporations in Jiangsu Province (2024 Edition). The policies focus on the promotion of investment and economic growth development which establishes a favorable business environment for multinational corporations in the province.

According to the policies, those regional HQs and institutions registered in Jiangsu province and certified with criteria will be eligible for the policies and will receive support that essentially focuses on financial supervision, Tax facilitation services, and Access to preferential policies related to land use taxation and financing issues. The published documents will be in effect from April 1st, 2024, until December 31st, 2026.  

China Ministry of Finance (MOF) and State Tax Administration (STA) have published guidelines on the main preferential tax and fee policies available to the manufacturing industry within the country. The guidelines provide significant assistance to manufacturing companies' accounting taxation. The policy provides an advantage for China's domestic SME businesses, mainly in VAT refund, CIT reduction, and Research development pre-tax deduction. The effect of regarding policy is indefinite according to the law.

China provides Value-added tax policies exclusively for manufacturing companies including VAT refunds, exemptions, and deductions for certain products and services. The VAT refund policy allows a company in the manufacturing industry that is certified with the policy to refund the VAT in China to the accumulated deferred tax amount every month and the remaining deferred tax amount in the fiscal year.

In addition, for SME tax payers who are required to prepay VAT according to existing regulations, and whose monthly sales in the prepayment location do not exceed RMB 100,000, no tax payment is required for the current period. If the monthly sales exceed RMB 100,000, the prepayment VAT items subject to a 3 percent prepayment rate shall be prepaid at a reduced rate of 1 percent.

The Chinese government also allows the reduction of CIT in China reduction which reduces a 15 percent CIT rate including High-technology companies along with enterprises settled within development zones and less developed zones. To qualify with the policy the company must have “substantial operation” within an area which means a company should receive at least 60 percent of their main income within the area. The policy will be in effect from April January 1st, 2021, to December 31st, 2030.

In conclusion, the tax brief in March 2024 provides important support regarding taxation to promote business development within Hainan and Jiangsu provinces to increase the country FDI and provides a significant tax incentive benefit toward manufacturing companies and high technological companies such as VAT exemption, VAT deduction and essential reduction for CIT in China into establish efficiency toward research and development of the business within the country.

At PHC Advisory, we can offer you full support on matters regarding doing business in China or any other issues your business may face. If you would like to know more about policies relevant to your business in China, please contact us at info@phcadvisory.com.  

PHC Advisory is a company of DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance. 

The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way. 

If you want to know more about doing business in China, please have a look at our previous articles:

· China's latest Fiscal policy updates