CHINA FOREIGN INVESTMENTS
CITY INFORMATION - SHENZHEN
Incentives to which foreign investors in Shenzhen are exclusively entitled
In addition to a set of nationally applicable preferences, foreign investors in Shenzhen enjoy a package of exclusive incentives:
1. While corporate income tax stands at 15%, a three percentage of local income tax is also exempted.
2. Export companies at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for income tax provided the export volume accounts for 70% of the total industrial output. Local enterprises using state-of-the-art technology at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3-year extension.
3. Foreign invested operations engaged in high-tech industries are free of income tax for 2 years and enjoy half reduction for the ensuing 8 years. Having successfully absorbed the related technologies and started production, the high-tech projects are given3 years of income tax exemption on the profit hitherto made regardless of previous tax incentives.
4. The VAT of high-tech businesses (projects) with foreign investment is computed against last year's figure and 50% of the local portion of the newly added VAT shall be returned to the enterprise by the municipal financial department.
5. Newly-established foreign invested enterprises with an export orientation need only pay half of the land use fee for industrial purposes. The same is true of certified projects involving update technology for a span of 5 years. As for the land used by high-tech businesses (projects) no fee is collected from the transfer of land-use rights.
6. The manufacturing and operation sites newly built or purchased by high-tech enterprises are free of property tax for 5 years. Other projects enjoy a 3-year exemption from property tax.
7. Technological achievements counted as contribution by companies with limited liability can take up as large a proportion as 35% of its registered capital pending certification of high-tech status by the Municipal Bureau of Science and Technology.
8. Overseas-based Chinese students and professionals intent on starting technology-intensive entities in Shenzhen may transcend the residence inadequacies of the shareholder. Payment of registered capital can take the form of installments in two years in cases where it fails to be an once-off placement.
9. Encouraging domestic and overseas venture investment bodies to make their presence in Shenzhen. Given local registration and a minimum investment ratio of 70 percent in the hi-tech sector, such investment entities are entitled to all the tax holidays and other incentives enjoyed by the hi-tech firms. A 3 percent to 5 percent of the year's total profit can be withdrawn as risk compensation fee to make up for the loss incurred during the previous year and the current year. The remaining amount of the risk compensation fee is settled on an annual basis provided the sum does not exceed 10 percent of the net assets of the company.
10. H-tech companies run by foreign investors (including those from HK, Macao and Taiwan) can be registered as domestic-funded ones if their capital contribution is below 25 percent of the registered capital.
11. Foreign investment in the local service sector exceeding US$ 5 million with a business tenure of at least 10 years is entitled to income tax exemption for the first profit-making year and half reduction for the second and third years.
12. Foreign banks or sino-foreign equity joint venture banks in Shenzhen are exempt from business tax for 5 years commencing on the date of opening.
13. Goods made and sold locally are free of VAT in the production process.
14. Goods imported by foreign invested enterprises engaged in export processing businesses are exempt from import-related VAT and consumption tax.
15. Processing businesses undertaken by enterprises or commercial entities with import-export license and certified qualifications for processing and assembly operation are free of consumption tax as well as VAT levied on the industrial fees.
16. Industrial fees derived from processing businesses by commercial entities for all types of processing enterprises are free of VAT and consumption tax.
17. Bonded processing enterprises with export priority are, upon approval by the Customs office, permitted to set up bonded factories for processing trade. Imported facilities for the processing, assembly and production of export goods for foreign investors are allowed deferral in going through formalities for import taxation. Imported materials used for processing finished products for export enjoy exemption from tariffs and VAT.
18. The foreign business community in Shenzhen have long had access to national treatment. In the production of goods not restricted by State quota or permits, foreign invested entities are free to determine readjust the market share of domestic and overseas sales according to actual needs. They have the same standards in paying the utility bill with their domestic-funded counterparts. Foreign staffs working and living in Shenzhen enjoy equal service and are charged at the same rate with local citizens when it comes to renting or purchasing houses, seeking medical consultation or visiting scenic attractions.
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