China: Tax incentives expanded, foreign investments | KPMG | GLOBAL

China: Tax incentives expanded, foreign investments in advanced technology services

China: Tax incentives expanded, foreign investments

A series of measures intended to boost foreign direct investments in China were outlined at an executive meeting of the State Council earlier this year, and one of the measures concerns extended, on a nationwide basis, a “pilot city program” of corporate income tax incentives for “advanced technology services enterprises” (ATSEs).

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The ATSE incentives have been available for enterprises registered in 31 pilot cities, mostly in cities located in the developed east of China, but with some central and western-region cities also included. The existing ATSE incentives are temporary, and currently are effective until the end of 2018 (although it was generally expected that the incentives would be extended). 

Qualifying ATSEs engaging in service outsourcing businesses are offered preferential corporate income tax treatment, including:

  • A reduced rate of corporate income tax of 15% (the standard rate is 25%)
  • An ability to deduct employee education expenses, up to a limit of 8% of total employee expenses (otherwise limited to 2.5%)

With the nationwide availability of the incentives being offered, there may be advantages for foreign investors with respect to these ATSE incentives.

 

Read an October 2017 report prepared by the KPMG member firm in China

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