China Council for the Promotion of International Trade (ccpit) 2009 Preface



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Tax Policies

  1. Enterprise Income Tax


The Enterprise Income Tax Law of the People's Republic of China has been adopted at the 5th Session of the 10th National People's Congress of the People's Republic of China on March 16, 2007. It is hereby promulgated and shall go into effect as of January 1, 2008.

Small and medium sized enterprises are accounting for 90% of Chinese light industry enterprises. Many of them enjoy small low-profit enterprises tax preferences. According to the Law and its implementation regulation, those enterprises meeting the necessary requirements will be eligible for a reduced enterprise income tax rate of 20%. Small low-profit enterprises refer to those involved in business which is not restricted or prohibited by the government and meet the following requirements: industrial enterprises with an annual amount of taxable income less than 300,000 yuan, number of employees less than 100 and total assets less than 30 million yuan; other enterprises with an annual amount of taxable income less than 300,000 yuan, number of employees less than 80 and total assets less than 10 million yuan.


      1. Corporate Value-added Tax


Chinese government decided to implement value-added tax (VAT) reform from January 1st 2009. According to the relevant provisions of The Provisional Regulations of the People’s Republic of China on Value-Added Tax and PRC Value-added Tax Tentative Regulations Implementing Rules, general VAT taxpayer can deduct the income tax amount through purchased or self-made fixed assets from substituted money on VAT by means of VAT special invoices, customs import VAT payment book, transportation cost billing documents (Hereafter referred as value-added tax deduction certificates).

VAT is a new commodity and service tax with added value as tax base and commodity and service as subjects to taxation. It is known as a modern form of multi-link indirect taxes. In accordance with income tax amount deduction method, VAT can be divided into two types: firstly, only deduct the tax of purchased raw materials but not the tax contained in outsourcing of fixed assets; secondly, tax included in all outsourcing projects such as raw materials and fixed assets are allowed to deduct. The first type is usually referred to as "production-type VAT", while the second "consumption-type VAT". China is now implementing production-type VAT. VAT reform is to transfer production-type to consumption-type VAT.

China's current basic VAT rate is 17%, of production-type, which equals 23% of consumption-type. The tax burden is considered high internationally. In terms of improving the international competitiveness of enterprises, promoting their technological progress and realizing business goals of industrial upgrading, basic VAT rate shall remain the same or reduce appropriately after reform. Generally speaking, overall VAT reform increases the enterprise's profits and will lay a good foundation for their future development.

      1. Export Rebate Rate


Chinese government frequently increases export rebate rate on some products in the second half of 2008 and 2009 to stimuli economic growth and promote export. Each adjustment on export rebates involves in light industry products. The rebate rate is adjusted as follows:

On July 30 2008, the Ministry of Finance and State Tax Administration issued Notice on Adjusting Export Rebate Rate for Certain Products of Textile and Apparel etc. (No.111 [2008] of the Ministry of Finance and State Tax Administration) which stipulates to increase VAT export rebate rate for some textile and apparel from 11% to 13%, for some bamboo products to 11% and cancel the export rebate rate of red pine seed, some agricultural chemical, some organic arsine products, taxol and its products, colophony, silver, zero zinc, some coating products, some battery products and carbon element.

October 21st 2008, the Ministry of Finance and the State Administration of Taxation issued a Notice Concerning Increasing the Export Tax Rebate Rates for Certain Commodities (No.138 [2008] of the Ministry of Finance and State Tax Administration) which stipulates that effective from 1 November 2008. Export rebate rates for certain textile products, toys are increased to 14%, ceramic articles for daily use and ceramic art increased to 11%, certain plastic articles increased to 9%; various types of furniture increased to 11% or 13%. Those for various commodities including AIDS medicine, freeze-dried powder of recombinant human insulin, collagen, toughened safety glass, capacitor tantalum wire, marine anchor chain, sewing machine, fan, carbide-tipped tool for digit control machine, some books and notebooks are increased to 9%, 11% and 13%.

On November 17th 2008, Notice Concerning Increasing Export Tax Rebate Rates for Various Labor-intensive Products and Other Commodities (Ministry of Finance and the State Administration of Taxation No.144/2008) was approved by the State Council and issued by the Ministry of Finance and the State Administration of Taxation. It stipulates for December 1st on, export rebate rates for some rubber products and wood articles are increased from 5% to 9%; those for some molds and glassware are increased from 5% to 11%; for aquatic products are increased 5% to 13%; for suitcases, shoes, hats, umbrellas, furniture, bedding, lamps and watches among others will be increased from 11% to 13%; for various chemical products, stones and non-ferrous metal processing materials are increased from 5% and 9% to 11% and 13% respectively; for mechanical & electrical products are increased from 9% 11%, from 11% to 13%, from 13% to 14%.

On December 29th 2008, the Ministry of Finance and the State Administration of Taxation issued a Notice Concerning Increasing the Export Tax Rebate Rates for Certain Mechanical & Electrical Products (No.177 [2008] of the Ministry of Finance and State Tax Administration) which stipulates that effective from January 1st 2009, export rebate rates for air inertial navigation instrument, gyroscope, ion-ray detector, nuclear reactor, industrial robot among others are increased from 13% and 14% to 17%; for motorcycle, sewing machines, electric conductor among others are increased from 11% and 13% to 14%.

On April 1st 2009, the Ministry of Finance stipulated that export rebate rates for commodities such as CRT color TV, some TV spare, optical cables, UPS, backing copper clad laminate for refining copper printed circuit board are increased to 17%; export rebate rates for textile and apparel are increased to 16%; export rebate rates for heavy chemicals like six sodium fluoaluminate, perfuming and laundry stuff like perfume, plastics like PVC, some rubber and rubber products, leather products like fur apparel, paper products like envelope, ceramics for daily use, glassware like kinescope bulb, steel material like refined welded steel pipe, non-ferrous metal like single crystal silicon, single crystal silicon rod with diameter larger than 30cm and aluminum extruded sections, rock drilling tool and metal furniture are increased to 13%; export rebate rates for various commodities including methanol, some plastics and products, wood products like wood picture frame, glassware lick rearview mirror are increased to 11%; export rebate rates for heavy chemicals like sodium carbonate, architectural ceramics, sanitary ceramics, hardware like locks, copper belt material, some enamelware, some steel products, and imitation jewelry are increased to 9%; export rebate rates for calcium hypochlorite, and hypochlorite, zinc sulfate of other calcium are increased to 5%.

On June 1st 2009, the Ministry of Finance stipulates that export rebate rates for transmitting apparatus for TV and sewing machines among others are increased to 17%; export rebate rates for deep processed agricultural products like can and juice, mechanical and electrical products like electric wheel pump and semi-trailer, instruments and meters like optical elements, medicines like INS, suitcase, shoes and hats, umbrella, hair products, toys and furniture are increased to 15%; export rebate rates for some plastics, ceramics, glassware, some aquatic products and turning tools are increased to 13%; export rebate rates for steel materials like alloy steel anisotropic medium, steel products like steel structure, scissors are increased to 9%; export rebate rates for corn starch and alcohol are increased to 5%.



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