The rate of enterprise income tax shall be 25% and came into force as of January 1, 2008. According to the provisions by the State Council, the enterprises that enjoyed lower income tax rates pursuant to the previous tax laws and administrative regulations may gradually transit to the tax rate of 25% within five years. During the interim, the enterprises with income tax rate of 15% shall enjoy 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012. The enterprises with the old preferential income tax rate of 24% shall be levied at the rate of 25% in and after 2008. Where such enterprises enjoy regular tax exemption and reduction, the treatment shall continue until expiry. However for those that failed to be entitled to this treatment by reason of not making profits, the preferential treatment shall be calculated from the year 2008. The enterprises that can enjoy this interim policy must be registered in the industry and commerce administration prior to March 16, 2007.
◆ Preferential Policies on Circulation Tax
1. Tax Incentives for Encouraging Technological Innovation
For the sale of the software products developed and produced by the enterprise itself or the imported software through localization by itself, drawback policy of value-added tax shall be practiced for the portion of the actual VAT exceeding 3% after the legal tax rate of 17% have been levied. The general VAT payer may enjoy the preferential VAT policy, if the sales of the embedded software and the sales of the computer hardware, machine and equipment, etc, can be calculated separately when its self-developed software is sold together with the computer network, computer hardware, machine and equipment, etc.
The animation enterprise belonging to the general VAT payer shall enjoy the drawback policy of VAT for the portion of its actual VAT exceeding 3% after 17% tax rate has been levied, when it sells its self-developed and produced animation software.
2. All-Round VAT Transformation
From January 1, 2009, every general VAT payer may reduce its taxation against its VAT special invoices, transportation invoices, customs import VAT payment certificate and other legal documents, when it has newly purchased the fixed assets (not including real estate) bearing input VAT.
3. Preferential Taxation for Disabled Employment
From July 1, 2007, monthly VAT drawback policy shall be practiced for the goods VAT payable produced by the enterprise, which has employed the disable accounting for 25% or more of the total number of the workers and staff members a month on average and numbering 10 or more.
4. Preferential Taxation for Comprehensive Utilization of Resources
The particular products of building material produced by the enterprise for comprehensive utilization of resources, where no less than 30% of waste residue is mixed in the production raw material, shall be exempt from VAT. The waste residue refers to mining and dressing wastes, smelting slag, chemical residue and others.
VAT drawback policy shall be practiced for cement (incl. cement clinker) using rotary kiln process or through grinding with purchased cement clinker, with no less than 30% of waste residue in the raw material for production.
The VAT realized by the eligible tax-rebate payer in selling renewable resources in 2010 shall be returned to the tax payer by a proportion of 50%.
5. Preferential Taxation for Supporting Agricultural Development
The agricultural producers are exempt from VAT for selling their self-produced primary farm products, including the farmer specialty cooperative association for selling the farm products produced by its members.
Agricultural film and other agricultural means of production, such as seeds, saplings, fertilizer, pesticide and agricultural machinery, sold either in batch or in retail, are exempt from VAT.
The import and domestic production of a single bulk of feed, mixed feed, formulated feed, compound premixed feed, concentrated feed products and the meals of cake kind, except for soybean meal and rapeseed cake, are exempt from VAT.
The enterprises are exempt from VAT for selling phosphate fertilizer, nitrogen fertilizer and the compound fertilizer using tax-free fertilizer as main raw material.
The enterprises are exempt from VAT for producing and selling either in batch or in retail organic fertilizer, organic-inorganic compound fertilizer and bio-organic fertilizer.
◆ Preferential Policies for Enterprise Income Tax
1. The enterprise income tax for the income generated from the projects of agriculture, forestry, animal husbandry may be exempted or reduced.
2. Income generated from investment and operations by the enterprises engaging in the public infrastructures supported by the State on focus, such as port terminals, airports, railways, highways, city public transportation, electric power and water conservancy, shall be exempt from enterprise income tax from the first to the third years and reduced by 50% from the fourth to the sixth years, stating from the taxable year when first income is obtained from the operations.
3. Income generated from eligible projects of environment protection and energy and water conservation, including public sewage treatment, public waste treatment, comprehensive development and utilization of methane, technical renovation for energy-saving and emission reduction and seawater desalination, shall be exempt from enterprise income tax from the first to the third years and reduced by 50% from the fourth to the sixth years, stating from the taxable year when first income is obtained from the operations.
4. A fixed amount shall be off from business tax, urban maintenance and construction tax, educational surcharge and enterprise income tax for the year when business and trade enterprises and service-type enterprises have employed laid-off workers who have <>, signed labor contract with them for a period of no less than a year and paid various social insurances according to law, in accordance with the actual number of persons employed. In Anhui, the fixed amount is 4,800 yuan per person a year.
5. The income generated from the products produced by the enterprises for comprehensive use of resources shall be reduced to 90% as their total income for income tax calculation and collection.
6. The capital investment by the enterprises on procurement of special equipment used for environmental protection, energy and water conservation and safe production may be subject to a tax offset by a certain proportion. The offset limit is at 10% of the investment on special equipment procurement.
7. The enterprise income tax rate for eligible small enterprises with meager profits may be reduced to a rate of 20%.
8. The enterprise income tax for the key high-tech enterprises supported in need by the State may be reduced to a rate of 15%.
9. Preferential policies regulated by the State for China Middle and Western Regions shall be enjoyed.
10. The income from eligible technology transfer less than 5 million yuan a year shall be exempt from enterprise income tax, and the enterprise income tax shall be reduced by 50% for the part over 5 million yuan.
11. The research and development fees of the enterprise for developing new technology, new products and new processes may be calculated as plus 50% for taxable deduction.
12. The wages paid by the enterprises for employment of the disabled may be calculated as plus 100% for taxable deduction on the basis of the real paid-wages.
13. Further preferential policies shall be provided for the major investment projects in line with Maanshan industrial development policy through the means of “one matter one treatment”.