Thread,
Ran across another explanation of China Tax Law tonight. It's more complete and in simpler terms than the other one I posted, but still Greek, or should I say Chinese, to me without a thorough study. Hopefully someone more experienced can interpret. I've edited soem of it for brevity.
As near as I can determine, Jetcrown is in a Special Enterprise Zone (SEZ). Also, the corporate changes that resulted in Deswell being a Virgin Island Holding company seem to correspond with the dates changes were made in the tax laws.
Ron
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Foreign-founded enterprise may enjoy the following preferential policies on:
1.Enterprise income tax
The rate of enterprise income tax shall be 15%, No local surtax shall be
levied.
Enterprise engaged in such productive trades as industry, transport,
agriculture, forestry, livestock farming with an operation period of 10 years
or more shall be exempted from income tax for 2 years commencing from
the first profit-making year and allowed a 50% reduction from the third to
the fifth year inclusive. After the expiration of the above-mentioned period,
an enterprise, whose value of export products amounts to 70% or more of
the total value of product manufactured in that year may, upon approval of
the tax authorities, be subjected to income tax at the reduced rate of 10% of
that year, while a high-tech enterprise may enjoy a further extension of
3-year-period of half-reduction. An enterprise of the above both may prefer
to have either of the two.
Foreign investors who reinvested their share of profit in China for a period of
no less than 5 years may, upon approval of the tax authorities, obtain a
refund of 40% of the income tax paid on the reinvested amount, and those
who reinvest the share to establish or expand export enterprises or
technologically advanced enterprises for a period of no less than 5 years
may get a total refund of the income tax paid on the reinvested amount.
2.Consumer tax, Valued-added tax
I.Consumer tax or value-added tax shall be exempted on export
products made by foreign-funded enterprises, except those specially
listed by the State.
II.Goods made and sold in the SEZ shall temporarily be exempted from
value-added tax on the industrial link according to the policy of "Local
producing and local selling", but consuming tax on consuming
products shall be levied according to relevant constitutions and
regulations.
III.For export products made by those foreign-funded enterprises
registered with the Industry and Commerce after January,1,1994 and
those approved to set up before December 31,1993 but Developed
new products different from the original ones, the consumer tax and
the value-added tax shall be refunded or exempted.
IV.For those foreign-funded enterprises approved to set up before
December 31,1993 and engaged in the 6 categories, i.e. electricity,
high-and-new-tech, wholesale of goods, textiles, printing and dyeing
and processing, the over-paid tax caused by the adjustment of
taxation shall, upon applications from these enterprise and approved
by the taxation authorities, be refunded within the approved tenure of
operation but no more than 5 years.
For those foreign-funded enterprises located in BAOAN and
LONGGANG districts involving overpay of consumer tax and
valued-added tax shall be refunded within prescription term according
to relevant regulations. The overpayment in 1994 shall be 100%
refunded while that in and after 1995 shall be refunded at a
progressive decrease rate of 20% each year.
V.Goods imported by foreign investment enterprises in the way of
processing with imported materials will be exempted from
value-added taxes on the import link and consumer taxes. The
imported goods for processing will be exempted from consuming
taxes and value added taxes on processing, entrusting to process and
industry dues.
If the contract of processing with imported materials by a foreign
trade enterprises is subcontract to a foreign investment enterprises to
process or the contract of processing with imported materials by a
foreign investment enterprise is subcontract to another foreign
investment enterprise or a domestic enterprise with the presentation of
the certificate of "processing with imported material", added-value
and consumer taxes on subcontract of industrial processing will be
exempted with the presentation of the tax exemption certificate of
"Processing with imported materials".
3.Use of land
For procuring right to the use land by virtue of transference as stipulated in
the contract or agreement, a land use fee shall be paid, the rate for which
varies according to such factors as purposes of use, location of site, ratio of
the land to the construction space and the agreed tenure of use. An investor
may acquire the right through bidding or auction.
A half reduction in the payment for land use fee is available to the site where
a new project construction is going on beginning from the date on which the
"Contract for the Use of Land" takes effect until the date on which the
construction is completed as specified in the Contract. If the construction
fails to be fulfilled on schedule for exceptional reasons, the reduction period
may be extended, upon approval of the responsible authorities, for no more
than one year.
Upon approval by SHENZHEN Municipal Committee for Science and
Technology, projects with uptodate technology may be allowed a 50% ***
reduction of land use fee for 5 years. Those involving particularly high
technologies may apply for a total exemption from land use fee.
4.Profit remittance
After-tax profits made by foreign investors or funds distributed to them after
the clearance of debts of their enterprise at the expiration or discontinuance
of the enterprise's term may be remitted abroad. No remittance income tax
shall be levied on the net profits. Foreign employees may remit abroad their
incomes from salary or wage or other proper sources after payment of
individual income tax in accordance with the law.
5.Import tariff
Starting from April 1, 1996, China's custom duties on imports will be
reduced to 23% as a whole. Tariff and import link duties will imposed on all
imported equipment and raw materials at legal rates.
All the imported equipment and raw materials in the total investment of a
newly-approved foreign-funded enterprises shall be subject to tariff and
import link tax at official rates. One duly approved heretofore may continue
to enjoy preferential reduction or remission of tariff and import link tax within
the stipulated period of grace. To be specific, the imported equipment and
raw materials of a project with a total investment of over 30 million US
dollars ( including 30 million but not including investment added after the
issuance of this notice ) shall still be taxed according to the old stipulations
until 31 December 1997, while those of a project with a total investment of
below 30 million US dollars shall still be taxed according to the old
stipulations until 31 December 1996. In case the importation cannot be
completed within the stipulated period of grace, an application for extension
of the period shall be submitted through the MOFTEC to the State Council
for approval.
Tariff and import link duties will be imposed at legal rates on all goods and
materials imported by specific areas, including special economic zones,
economic technological development zones, new-or-high-tech industrial
zones and other zones.
6.Incentives to Enterprises Doing Processing and Assembling with
Imported Materials and Compensation Trade:
Policies in encouraging the development of business of processing and
assembling with imported materials and compensation trade shall be in
keeping with the city's overall industrial policies. Projects of capital and
technology intensive and with integrated production process shall be
encouraged, while those of high consumption of resources such as energy
and water shall be restricted, and those causing environmental pollution be
prohibited.
A reduction of 30% in the price of industrial land shall, under approval of the
city's land planning and administration authorities, be granted to those
projects to be launched in remote and mountainous districts.
Newly established enterprises engaged in processing and assembling with
imported materials and compensation trade with an operation period of 10
years or more shall be exempted from income tax for 2 years or
commencing from the third to the fifth year inclusive. For enterprises who
terminate their operation before completing the planned period of at lease 10
years, the exempted and reduced portion of the income tax shall be
recollected.
According to relevant regulations made by the State and GUANGDONG
province, the finished products made by the enterprises doing processing
and assembling with imported parts and materials, which are badly needed in
domestic markets and allowed to import by the state can be sold
domestically under check and approval by the Municipal Economic
Development Bureau together with some other competent organs, and after
completion of import procedures and payment of the due tax.
These enterprises can also, under approval by relevant authorities, use raw
materials and parts locally for processing and assembling for export.
The city's fiscal organ shall no longer collect the additional charge from the
enterprises belonging to districts, towns and villages which accounts 3% of
the processing fee, while the collection of this charge from the enterprises
belonging to the city will remain unchanged. The commission charged by the
relevant service departments to those enterprises belonging to the city shall
be reduced from 5% to 30%.
The government organs involved in the administration of business of
processing and assembling with imported parts and materials and
compensation trade should further raise their working efficiency in
administration and services to those enterprises.
Applications of these projects shall be handled by the competent authorities
of the city and district levels following the already set procedures . An official
reply should be given within 5 working days except those applications need
to submit to the Chinese Ministry of Foreign Trade and Economic
Cooperation for approval, Applications of these enterprises for acquiring the
business licenses and registering for taxation shall be handled by the
Administrative Authorities of Industry and Commerce and the taxation
authorities respectively and completed within 5 working days; reasons
should be given to applicants if their applications were refused.
7.National Treatments to Foreign Enterprises and Foreign Residents
in Shenzhen
To speed up the pace of reform and opening and to improve investment
environment, pursuant to the state's relevant rules and regulations, Shenzhen
will gradually grant national treatment to foreign enterprises and foreigners in
Shenzhen from Jan 1,1997. Details are as follows:
I.Duly open the domestic market to products made by foreign-invested enterprises
A.Newly-established foreign-invested enterprises which manufacture
products non-restricted by state's quota or license will have the right
to decide the ratio between inward and outward sales, which will be
appraised and ratified by the city's Foreign Capital Office and the
city's Industrial and Commercial Bureau when applying for
registration; while inward sales proportion of those which manufacture
products subject to the state's restriction will be decided according to
the state's relevant rules and regulations, and the city's concerned
department must assist enterprises to complete the declaration work.
B.The state implements bank guaranty funds policy on processing trade,
which requires the foreign invested enterprises manufacturing products
non-restricted by the state must indicate their inward sales proportion
in the processing trade contracts, which will be ratified by the city's
authority responsible for management of processing trade, and which
will be the basis for customs duties. Enterprises manufacturing state
restricted products must apply for import and export license or other
approving documents according to state's rules and regulations.
C.Foreign-invested enterprises approved as "Advanced Technological
Enterprises" by the city's administration can sell 100% of their
products at home market.
D.The projects of the city's "vegetable basket" and the agricultural
development projects of high output, high quality, high-efficiency
invested by foreign-investors and 100% of their products are sold at
domestic market.
EDITED OUT THE REST - Simply stated it says no Foreign entity will be overcharged for any services. |
