In China, Foreigner investment policy and tax rate may different in each city, even Foreigner company can get different Vat & Tax in the different area at the same city. We use the the Qingdao Development Area as the example to explain the Vat & Tax. If your company need to find the suitbale area for the business start, please contact us.

VAT:

• Foreign invested enterprises will be exempt from VAT if they would conduct processing of materials provided by foreign clients.
• Those engaged in agriculture, forestry and animal husbandry, and those who market and sell their own products, will be exempt from VAT;
  

FOREIGN INVESTED ENTERPRISE INCOME TAX:

• A. For those foreign invested productive enterprises in the Area, the business income tax is reduced to a rate of 15%.
• B. For foreign invested productive enterprises with the exception of those involved in the development of petroleum, natural gas, rare and precious metals which are subject to the stipulation of the Sate Council, as long as the term of the business is more than 10 years, their income will be exempt from business income tax for two successive years starting from the first year in profit, and liable for 50% of the normal rate for the following three years.
• C. Those foreign invested enterprises undertaking agriculture, forestry, and animal husbandry, can apply for tax reduction after the preferential policy of "two-year's exemption and three-year's half" expires, and on obtaining the approval from competent tax authorities under the State Council's competent department, they can enjoy an reduction of income taxes from 15 percent to 30 percent in the coming ten years.
• D. For those foreign invested enterprises whose products are to be exported, there will be a reduction to 10% on business income tax in the light of prevailing tax laws, when the preferential policy of " two-year's exemption and three-year's half " becomes inapplicable, provided that the value of the exported products totals 70% or more of the total enterprise output for the year.
• E. For “Technically Advanced” foreign invested enterprises that prove to be successful in maintaining their title, a 50% reduction in the business income tax can be enjoyed for the following three years according to tax laws after the preferential policy of " two-year's exemption and three-year's half " expires.
• F. If the profit deriving from a foreign invested enterprise is reinvested into the enterprise by increasing the registered capital, or invested in another foreign invested enterprise under a business license of 5 years or upwards, a 40% rebate will be given investor on the business income tax of the reinvestment, if his rebate application is approved by the tax authorities. If the new investment or reinvestment is withdrawn within 5 years, the rebate amount shall be traced back.
• G. If the foreign investor uses the profit deriving from a foreign invested enterprise(s) either to set up or extend an enterprise whose products are to be exported or to establish “Technically Advanced” enterprise, the business income tax levied on his reinvestment will be rebated in full according to the State Council's relevant regulations. However, 60% of the rebate must be handed back if the newly-built or extended enterprise fails reached the export requirements within three years from the month when production commences, or if they fail to be approved as “Technically Advanced” enterprise.
• H. The foreign investor will be exempted from income tax levied on profit derived from foreign invested enterprise(s).
• I. For those foreign invested enterprises who use their own transport and storage facilities to provide clients with warehousing and transport, the status of the foreign invested productive enterprise will be granted, and the preferential policy of " two-year's exemption and three-year's half " on income tax can be applied.
• J. Those foreign invested enterprises who undertake scientific and technological research and development, once the status of the foreign invested productive enterprise is granted, the preferential policy of " two-year's exemption and three-year's half " on income tax will be applicable.
  

Custom duty and import VAT

• For the investment on projects which fall in the “Guide Lists of Foreign Investment” and encouraged for the development, if the imported equipment is used for their own use and within the amount of total investment, custom duties and import VAT will be exempted unless the equipment is listed in the “List of Imported Products Tax Exemption is not applicable”.
  

Others

• The foreign enterprise is exempted from payment of Educational Surcharge and City Construction Tax.