The Chinese Ministry of Finance, General Administration of Customs and State Administration of Taxation recently issued a notice promulgating policies that will extend tax incentives for enterprises doing business in western regions of China. Enterprises located in western regions that engage in encouraged industries will be subject to a reduced enterprise income tax rate of 15 percent (a 10 percent reduction from the regular rate) until December 31, 2020. In addition, equipment imported for these projects may be exempted from tariffs.
An enterprise engaging in an encouraged industry refers to:
- Enterprises whose core business is any of the industrial projects listed in the soon to be published Catalogue of Encouraged Industries in Western Regions; and
- Enterprises whose revenue from the core business accounts for more than 70 percent of their total revenue.
For purposes of this notice, western regions include the Chongqing Municipality, Sichuan Province, Guizhou Province, Yunnan Province, Tibet Autonomous Region, Shaanxi Province, Gansu Province, Ningxia Hui Autonomous Region, Qinghai Province, Xinjiang Uygur Autonomous Region, Xinjiang Production and Construction Corps (XPCC), Inner Mongolia Autonomous Region and Guangxi Zhuang Autonomous Region. The notice also extends these tax incentives to certain areas in the Hunan, Hubei and Jilin Provinces.
China is one of the world’s largest and fastest growing marketplaces. U.S. investors taking steps to establish a presence in China or those contemplating expanding their existing operations in China who wish to receive tax or other investment incentives are advised to seek guidance from counsel regarding these opportunities.