Preferential tax treatment for some imported goods will be adjusted as of October 1, 2002, according to a circular jointly promulgated by the Ministry of Finance, Ministry of Foreign Trade and Economic Cooperation, General Administration of Customs, State Economic and Trade Commission, State Development Planning Commission and State Administration of Taxation.
The policy adjustments focus on three main aspects:
First, imported production equipment associated with technical innovation, fundamental infrastructure (including government listed projects) and foreign-funded investment (including those requiring loans from foreign governments or international financial organizations), approved prior to April 1, 1996, will be exempt from customs tax and value-added tax (VAT), at the import stage. There will still be some commodities that will incur tax at the request of the government. In the past, any imported equipment, including raw materials, enjoyed customs tax and VAT exemptions.
Second, recently approved foreign funded projects and companies that export all of their products will be levied with customs tax and VAT, at the import stage, on imported materials. If the government confirms the legitimacy of their exports, tax paid will be reimbursed at a rate of 20 percent per annum over a five-year period until all tax has been returned. If an organization is deemed to have breached government regulations, tax paid will not be reimbursed and any returned tax will be re-levied.
To maintain consistent policy, the circular points out that projects already approved can continue to enjoy tax exemptions on imported resources. After five years of operation, government departments will investigate these organization’s exports. If the said projects will no longer require imports, their previous exports will not be subject to investigation. But the government departments concerned will conduct spot-checks on their exports in the remaining years if the period of the projects from date of operation to October 1, 2002 is less than five years. If the production exports are thought to be deficient, violators will be prosecuted to full extent of the law.
Finally, applications for tax exemptions or reductions will no longer be accepted. In addition to 20 categories of imported commodities required to incur tax, customs tax and VAT, at the import stage, will now also be levied on raw materials imported for the purpose of production and cars imported for special celebrations.
(china.org.cn by Tang Fuchun, September 20, 2002)
