Sinordica Business Development

Sinordica
Business Development

Investing in China

The trading and investing conditions of today are excellent. The infrastructure is good, the legal system has matured, the cost advantages are obvious and the political and financial risks are much lower compared to how it was for just a few years ago. If in recent years only big foreign cooperations had the advantages of making investments in China, today there are excellent opportunities for medium and small-sized foreign enterprises to enter the chinese market. Nevertheless there is still a substantial need for knowing the culture and the language and even more having the right connections with the authorities for getting the most out of your business.

Factors to consider

The actual basic and tax cost-level depends on:
• the location of the operations
• the area of your business
• the juridical form of your enterprise
• what investments have been made and are to be made
• other

Not to forget is that the local authorities have, on case-to-case basis, a great influence over the actual level of all of us described cost items.

Business Tax

The enterprise income tax varies between 0 och 30% on earnings. Different regions and business areas can be stimulated through additional tax relieves for a period of time. On many occasions foreign-funded start-ups are excempt from enterprise income tax during the first years of operations. A realistic tax rate on your earnings would be slightly under 10% of your earnings. In addition, there are some considerable tax relieves if you commit your investments and reinvestments for a longer period of time.

VAT

VAT applicable to foreign-funded enterprises are:
• 17% on sales or import of goods and on services including processing, repairs and replacement of parts;
• 13% on sales or import of gain, edible vegetable oil, gas, natural gas, coal products for household use, books, newspapers and periodicals;
• 6% on units and individuals verified by the competent taxation authorities as "small payers of VAT"
• 0% on goods for export unless otherwise stipulated by the State Council.

Basic cost

There are same basic costs that apply for most foreign-funded enterprises:
• Charges for land use applicable to foreign funded enterprises
• Charges for central urban districts land use
• Charges for water applicable to industrial and commercial undertakings
• Charges for gas applicable to industrial and commercial undertakings
• Charges for electricity

Individual tax income

Personal Income Tax (applicable to wages and salaries):

The monthly taxable income listed in this table refers to the balance of monthly income after deduction of Y4000 allowed for expenses or after deduction of additional expenses in accordance with the Individual Income Tax Law of The People's Republic of China. In addition, there are deductions and exemption-possibilities on case-to-case basis.

The rate shall be 20% on incomes from services, royalties, interest, dividends, extra dividends, lease of property and transfer of property, as well as from other incomes.

Miscellanious

• Foreign-invested projects are in most occasions exempt from:
• customs tariffs on the import of equipment for own use
• import-related VAT as well as some other taxes.

• Consumption tax
There are 11 items subject to collection of consumption tax (punktskatt), with a range of 25 rates ranging from 3%-45%.

• Vehicle and Vessel License Tax
Payers of the this tax are users of vehicles and vessels. The tax rates are computed by tonnage as in the case of cargo-carrying vehicles, and by the number of seats as in the case of passenger-carrying vehicles. There are different tax rates for:
- cargo-carrying vehicles
- passenger-carrying vehicles, the tax rate varies according to the number of seats
- motorcycles
- non-power driven vehicles

• Local income tax for enterprises
Generally this tax is 3% of the profit before taxes and al´pplies only if the operations are situaded in urban areas, the different economic zones are exempted.

• Housing property tax
For housing property owned by foreign-funded enterprises and personnel of foreign nationality, the housing property tax shall be collected at an annual rate of 1.2% of the original value of the housing property. Reductions can be granted.

• Increment Tax on Land Value
Four-grade progressive rates are practiced in collection of the increment tax on land value.

Investment procedures

• Documents Required for Setting up of Enterprises with Overseas Investment
• Limit of Authority for Examination and Approval (in us$)
• Regulation Governing the Setting up of Branches of Enterprises with foreign/Overseas
• Investment and the Procedures for Approval
• Procedures for the Establishment of Resident Representative Offices by Foreign Enterprises
• Procedures for Inviting Foreigners to China
• Z-Type VISA

Regulations for Encouragement of Foreign Investment

• Regulations on Labor Management
• Regulations of Foreign Exchange Control
• Regulations Regarding Financial Administration
• Regulations on Real Estate Investment
• Provisions Concerning Administration of Import & Export
• Export-oriented Enterprise and Advance Technology Enterprise
• Regulations for Further Encouragement of fore-ign Investment in Tianjin
• Provisions of the State Council on the Encour-agement of Foreign Investment
• Rules and Regulations Concerning Industry and Commerce Administration
• Regulation on Reinvestment by Foreign-funded Enterprises
• Industrial Guidance Catalogue for Foreign Investment

Forms of Investment

• Equity Joint Venture
• Contractual or Cooperative Joint Venture
• Wholly Owned Foreign Enterprise
• Overseas Funded Joint Stock Limited Liability Company
• Overseas Funded Investment Company
• Overseas Funded Financial Institutions
• Build - Operate - Transfer (BOT)
• Transfer of Management Right
• Mergers and Acquisitions
• Project Fund-raising
• Orientations of Investment