14 July 2016
Online CBA: Are There Any Incentives for Establishing Service Companies in China?
Q: Are there any incentives for establishing service companies in China?
A: According to the Official Reply of the State Council on Approving the Launch of Pilot Programmes for the Innovation and Development of the Service Trade, pilots for the innovation and development of the services trade have been launched in Tianjin, Shanghai, Hainan, Shenzhen, Hangzhou, Wuhan, Guangzhou, Chengdu, Suzhou, Weihai, and the five New Areas in Harbin, Jiangbei (in Nanjing), Liangjiang (in Chongqing), Guiyang-Anshun, and Xi'an-Xianyang since 22 February 2016. The pilots will go on for two years. Service companies in these areas enjoy the following preferential treatment:
1. Fiscal support from central authorities
The central authorities give financial support to the establishment of information systems on the execution of statistical monitoring in the services trade, make innovations in measures of on-going and ex-post supervision, and effectively prevent tax frauds and acts of cheating subsidies. Pilot areas receive support in establishing public service platforms for services trade and service outsourcing. They also receive support in the form of interest discounts for importing R&D and designs, energy-saving and environmental protection solutions and environmental services badly needed in the country.
2. Tax concessions
The scope of technologically-advanced service companies designated in the pilot areas are expanded from service outsourcing to other high-tech and high value-added services trade. The tax concession policy for technologically-advanced service companies in the field of service outsourcing are expanded from the service outsourcing demonstration cities to other pilot areas. Designated technologically-advanced service companies are eligible for payment of enterprise income tax at a reduced rate of 15%. An employee's education expenses are tax deductible if these do not exceed 8% of his or her total salaries and wages. Amounts in excess of this may be deducted in subsequent tax years.
3. Innovative financial services
Enterprises are given encouragement and support in renminbi settlement in the services trade and related investment, financing and cross-border e-commerce activities to minimise exchange rate risk. Financial institutions are encouraged to actively make financial service innovations that suit the characteristics of the services trade, expand financing supported by export credit insurance policies, energetically develop supply chain financing, overseas merger and acquisition financing, accounts receivable financing, and financing and leasing businesses. Policy-oriented financial institutions are encouraged to further support services trade companies in opening up international markets and carrying out international mergers and acquisitions within their existing scope of business.
4. Guiding fund for services trade innovation and development
The central authorities financially support the establishment of a guiding fund for services trade innovation and development which to provides financing services to those small and medium-sized service companies in the pilot areas with export potential and in line with the country's industrial policy guidelines.
5. Facilitation measures
Service outsourcing bonded supervision is fully implemented on designated technologically-advanced service companies operating in the pilot areas.
(The HKTDC provides one-on-one China Business Advisory Service free of charge to assist companies in resolving problems encountered when doing business in China. For enquiries and appointments, please call (852) 1830 668 or register online.)