What tax benefits can foreign-invested enterprises have?

Foreign Investment Preferential Policy

At the end of June, the National Development and Reform Commission and the Ministry of Commerce issued a new negative list of 2018 foreign investment, which was implemented at the end of July, and the negative list significantly eased market access. The number of negative list entries in the national version has been reduced from 63 to 48, and the number of negative list entries in the free trade zone has been reduced from 95 to 45. China's accelerated opening up is also attracting foreign investment.

So what tax benefits can foreign-invested enterprises have?

In the early years, there were separate tax incentives for foreign-invested corporate income tax, such as the ¡°two exemptions and three reductions¡± tax incentives for productive foreign-invested enterprises. Tax incentives for energy, transportation, infrastructure construction projects, tax incentives for service industries and financial industry, and reinvestment tax rebates. Foreign-invested corporate income tax preferential policies for different industries.

Up to now, the State Taxation [1995] No. 151 and State Taxation [1995] 121, have been abolished. The foreign-invested enterprise income tax law has expired, and there are almost no tax incentives for foreign-invested enterprises. The new corporate income tax law is applicable to both domestic and foreign-funded enterprises. That is to say, the preferential tax policies enjoyed by foreign-invested enterprises are in line with the national industrial development policy and the tax incentives that are common to the regions. Specifically, there are the following aspects:

1. Exemption and reduction:

(1)Income from agricultural, forestry, animal husbandry, and fishery projects (including exemption and reduction)

(2)Income from investment in public infrastructure projects supported by key countries (3 free of 3 minus half)

(3)Income from environmentally-friendly, energy-saving and water-saving projects that meet the requirements (3 free 3 halving)

(4)The part of the eligible resident enterprises whose technology transfer income does not exceed 5 million yuan shall be exempted from enterprise income tax; if the part exceeds 5 million yuan, the enterprise income tax shall be halved.

2. Tax rate discount:

(1) For small and low profit enterprises, from January 1, 2018 to December 31, 2020, the maximum annual taxable income will be raised from 500,000 yuan to 1 million yuan. For said enterprise whose annual taxable income is less than 1 million yuan (including 1 million yuan), its taxable income should be 50% of its income, and the enterprise income tax shall be paid at a rate of 20%. Document: Finance and Taxation [2018] No. 77.

(2) High-tech enterprises, high-tech enterprises that the state needs to support, are subject to a corporate income tax rate of 15%.

Foreign Investment Preferential Policy

3. Extra tax deductions:

(1) For the research and development expenses incurred by the enterprise for the development of new technologies, new products and new processes, if the intangible assets are not included in the current profits and losses, they shall be deducted according to the 50% of the research and development expenses on the basis of actual deduction according to the regulations. For technology-based SMEs, deducting 75% of research and development expenses. If an intangible asset is formed, it will be amortized at 150% of the cost of the intangible asset.

(2) The wages paid by the disabled persons shall be deducted from the 100% of the wages paid to the disabled employees on the basis of the actual deduction of the wages paid by the enterprise to the disabled employees.

4. Investment credit:

If a venture capital investment enterprise invests in an unlisted small and medium-sized high-tech enterprise for more than two years by means of equity investment, it may deduct the ¡°starting investment enterprise¡± in accordance with its ¡°70% of the investment amount¡± in the ¡°year when the equity is held for 2 years¡±. The amount of taxable income"; if the amount is not deductible in the current year, it can be deducted in the subsequent tax year.

5. Accelerated depreciation:

(1) Fixed assets that can be used to shorten the depreciation period or adopt an accelerated depreciation method:

¢ÙFrequently updated fixed assets due to technology development

¢ÚFixed assets in strong vibration and high corrosion.

(2) If the method of shortening the depreciation period is adopted, the minimum depreciation period shall not be less than 60% of the legal depreciation period.

(3) If the accelerated depreciation method is adopted, the double balance declining method or the sum of years method may be adopted.

(4) Instruments and equipment purchased by all companies after January 1, 2014 and dedicated to research and development activities:

¢ÙIf the unit value does not exceed 1 million yuan, it can be deducted at the time of calculating the taxable income.

¢ÚIf the unit value exceeds 1 million yuan, the depreciation period shall be shortened by 60% of the legal depreciation period, or the double declining method or the sum of years method shall be adopted to accelerate the depreciation.

(5) After January 1, 2014, the fixed assets held by all enterprises, whose unit value does not exceed 5,000 yuan, can be deducted at the time of calculating the taxable income.

Foreign Investment Preferential Policy

6. Reduced income:

The enterprise takes the resources stipulated in the Catalogue of Comprehensive Income Tax on Comprehensive Utilization of Resources as the main raw material, and the income from the production of products that are not restricted and prohibited by the state and meets the relevant national and industry standards, is reduced to 90% of the total income.

7. Credits for tax credits:

¡°Acquisition and actual use of enterprises¡±, ¡°Environmental Protection Special Equipment for Environmental Protection Special Equipment¡±, ¡°Environmental Income Tax Concessions for Energy-saving and Water-saving Equipment¡± and ¡°Provisions for Enterprise Income Tax Concessions for Special Equipment for Safety Production¡± For special equipment such as environmental protection, energy conservation, water conservation, and safe production, the ¡°10% of the investment amount¡± of the special equipment can be offset from the ¡°taxable amount¡± of the enterprise in the current year; Tax credits for the tax year.