ANNOUNCEMENT 22 Dec 2017

December 22, 2017 - Six Chinese ministries jointly released an updated version of the list of goods which could be imported tax-free for the production of certain types of 'major technical equipment'.

NUMBER OF INTERVENTIONS

5

  • 2 harmful
  • 0 neutral
  • 3 liberalising

SOURCE

PRC Ministry of Commerce, December 22 2017. (财关税〔2017〕39号—关于调整重大技术装备进口税收政策有关目录的通知)
http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201801/t20180105_2793555.html

Inception date: 01 Jan 2018 | Removal date: 31 Dec 2018

Import tariff

On the 22nd of December, 2017, six Chinese ministries* jointly announced an update to the list of goods that can enjoy tax-free (tariffs and VAT) imports, provided that they are used for the production of various kinds of 'major technical equipment'.

33 tariff lines were newly included in the programme.

In addition, 19 items were also removed from a second list, detailing tariff lines which could not benefit from this policy if used in projects that benefit from an existing preferential import policy from 1997 (Guofa 1997/31).

The main criteria for projects accepted under the 1997 policy are as follows:

  • Domestic investment and foreign investment projects encouraged by the government
  • Foreign government and international financial organization investment loan projects
  • Processing trade enterprises of non-evaluated equipment imports provided by foreign investors
  • Prioritized industries for foreign investment in Central China and West China
  • Self-funded technology reform projects by foreign-invested enterprises and foreign-invested research centres under 'Circular of the Customs General Administration on Import Taxation Policy for Further Encouraging Foreign Investment (Shushui 1999/791)'

The catalogue of 'major technical equipment' that can be manufactured with the tax-free imported items includes the following categories of equipment:

  • Power generation
  • UHV transmission
  • Large-scale petrochemical/chemical
  • Large-scale metallurgical
  • Large-scale coal
  • Large ships and marine engineering
  • High-speed rail, mass rail transit
  • Large-scale environmental protection
  • Large-scale construction machinery
  • Major engineering automation and control systems
  • Large-scale CNC
  • Novel textile machinery
  • Novel large-scale, high-powered agricultural
  • Information technology and biomedical
  • Civil aviation-related aircraft and engines thereof

For more specific details, please see the original announcement.

*Ministry of Finance, National Development and Reform Commission, Ministry of Industry and Information Technology, General Administration of Customs, State Administration of Taxation, National Energy Board.

Inception date: 01 Jan 2018 | Removal date: 31 Dec 2018

Tax or social insurance relief

China's 'Major Technical Equipment' policy grants tax-free imports to firms in certain sectors involved in the production of said equipment.

This represents a sector-specific preferential tax policy for those firms. The sectors are as follows:

  • Power generation
  • UHV transmission
  • Large-scale petrochemical/chemical
  • Large-scale metallurgical
  • Large-scale coal
  • Large ships and marine engineering
  • High-speed rail, mass rail transit
  • Large-scale environmental protection
  • Large-scale construction machinery
  • Major engineering automation and control systems
  • Large-scale CNC
  • Novel textile machinery
  • Novel large-scale, high-powered agricultural
  • Information technology and biomedical
  • Civil aviation-related aircraft and engines thereof

The 2017 update to the policy both added and removed products to and from the list of those eligible for the treatment, meaning some firms in the abovementioned sectors saw a positive change in the amount of their tax benefit, representing for such firms a discriminatory preferential tax policy, hence the red GTA rating of this intervention.

Please see the other intervention pertaining to this state act for more information on how this policy functions.

 
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N/A
Inception date: 01 Jan 2018 | Removal date: 31 Dec 2018

Tax or social insurance relief

The Chinese government has, since 2009, instituted a policy pertaining to 'Major Technical Equipment', through which firms in certain industrial sectors who produce this equipment may enjoy tax-free imports on the manufacturing inputs for these goods.

As such, this consitutes a sectorally discriminatory preferential tax policy. The following sectors are covered under the policy:

  • Power generation
  • UHV transmission
  • Large-scale petrochemical/chemical
  • Large-scale metallurgical
  • Large-scale coal
  • Large ships and marine engineering
  • High-speed rail, mass rail transit
  • Large-scale environmental protection
  • Large-scale construction machinery
  • Major engineering automation and control systems
  • Large-scale CNC
  • Novel textile machinery
  • Novel large-scale, high-powered agricultural
  • Information technology and biomedical
  • Civil aviation-related aircraft and engines thereof

In 2017, the updated policy both added and removed sectors from this list. This means that some firms would have lost their eligibility for the treatment, therefore representing a liberalisation in policy and a green GTA rating for said firms.

The level at which these changes were made is very granular, and does not conform to the CPC industrial sector classification system, such as certain kinds of hoses used for industrial hydraulic systems, etc.

Please see the other intervention pertaining to this state act for more information on how this policy functions.

 
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N/A
Inception date: 01 Jan 2018 | Removal date: 31 Dec 2018

Internal taxation of imports

The Chinese government announced in December 2017 a new list of goods which, when imported specifically to produce certain kinds of 'major technical equipment', can be imported tariff- and VAT-free. The new catalogue applies from 2018 and includes 33 more product lines than the previoues iteration.

A second list, which concerns products that are not covered by the policy when used in projects already benefitting from preferential treatment under another import policy from 1997 (Guofa 1997/31), also saw 19 product lines removed.

The main criteria for projects accepted under the 1997 policy are as follows:

  • Domestic investment and foreign investment projects encouraged by the government
  • Foreign government and international financial organization investment loan projects
  • Processing trade enterprises of non-evaluated equipment imports provided by foreign investors
  • Prioritized industries for foreign investment in Central China and West China
  • Self-funded technology reform projects by foreign-invested enterprises and foreign-invested research centres under 'Circular of the Customs General Administration on Import Taxation Policy for Further Encouraging Foreign Investment (Shushui 1999/791)'

The catalogue of 'major technical equipment' that can be manufactured with the tax-free imported items includes the following categories of equipment:

  • Power generation
  • UHV transmission
  • Large-scale petrochemical/chemical
  • Large-scale metallurgical
  • Large-scale coal
  • Large ships and marine engineering
  • High-speed rail, mass rail transit
  • Large-scale environmental protection
  • Large-scale construction machinery
  • Major engineering automation and control systems
  • Large-scale CNC
  • Novel textile machinery
  • Novel large-scale, high-powered agricultural
  • Information technology and biomedical
  • Civil aviation-related aircraft and engines thereof

For more specific details, please see the original announcement.