1. VAT discount

The preferential policy of value-added tax for foreign-funded enterprises means that foreign-funded enterprises enjoy the same tax exemption as domestic enterprises, but also enjoy special preferential policies, that is, from 1 September 19991day, domestic equipment purchased by foreign-funded enterprises within the total investment can be fully refunded.

2. Income tax for foreign-invested enterprises and foreign enterprises

Foreign-invested enterprises and preferential income tax for foreign enterprises are the most widely applicable taxes for foreign-funded enterprises. It can be divided into four benefits: ◆ For foreign-invested enterprises established in special economic zones and engaged in production and operation, and production-oriented foreign-invested enterprises established in economic and technological development zones, corporate income tax is levied at a reduced rate of 15%.

◆ Production-oriented foreign-invested enterprises with an operating period of more than 10 years shall be exempted from enterprise income tax in the first 1 year and the second year from the profit-making year, and the enterprise income tax shall be halved in the third to fifth years.

In order to encourage foreign investment, many provinces in China have reduced or exempted local income tax.

◆ Encourage reinvestment and implement preferential tax refund policies. According to the provisions of the tax law, if a foreign investor of a foreign-invested enterprise directly reinvests the profits obtained from the enterprise to increase its registered capital, or establishes other foreign-invested enterprises as capital investment for a period of not less than five years, the foreign investor may apply for returning the reinvested part and pay 40% income tax after approval by the tax authorities.

3. Urban construction tax and surcharge for education According to the laws of China, for foreign-invested enterprises and foreign enterprises, urban maintenance and construction tax and surcharge for education are not levied for the time being.

4. Property tax and vehicle and vessel tax According to regulations, production-oriented foreign-invested enterprises and foreign enterprises are exempted from property tax and vehicle and vessel license tax.

What is a foreign-funded enterprise?

Only when the proportion of foreign investors' contribution to the registered capital of a foreign-invested enterprise established after the merger reaches more than 25% can the enterprise enjoy the treatment of foreign-invested enterprises;