1. Income tax

Income tax is a kind of tax enjoyed by the central and local government. Under general conditions, the central government levies income tax at the rate of 30%. The local government levies income tax at the rate of 3%. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding income tax incentives:

1. For foreign-invested enterprises, corporate income tax rate stands at 15% while the local income tax levied at the rate of 3% is also exempted.

2. Foreign-invested enterprises engaged in the development and operation of ports, wharves, energy and traffic projects with duration of over 15 years may enjoy 5 years of corporate income tax exemption from the profit-making year and half reduction for the ensuing 5 years.

3. Manufacturing foreign-invested enterprises may enjoy 2 years of corporate income tax exemption from the profit-making year and half reduction for the ensuing 3 years. Export-oriented enterprises at the expiration of tax exemption and reduction period enjoy a reduced rate of 10% for income tax provided the export volume accounts for 70% of the total industrial output. Manufacturing enterprises using state-of-the-art technology at the expiration of tax exemption and reduction period are entitled to a reduced tax rate of 10% for a 3-year extension.

4. The foreign-invested enterprises engaged in service sector with investment of over USD 5 million and duration of over 10 years may enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years.  

5. Sino-foreign joint venture or foreign banks established in Shenzhen Economic Special Zone with total investment of over USD 100 million and duration of over 10 years may enjoy 1 year of corporate income tax exemption from the profit-making year and half reduction for the ensuing 2 years.

6. Manufacturing high-tech foreign-invested enterprises may enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 6 years. At the expiration of tax exemption and reduction period, such enterprises enjoy a reduced rate of 10% for income tax provided the export volume accounts for 70% of the total industrial output.  

7. High-tech result transformation projects owning independent intellectual property right may enjoy 5 years of corporate income tax exemption and half reduction for the ensuing 3 years. After the new projects constructed by high-tech enterprises by absorbing and digesting high technologies are put into production, such enterprises may enjoy the exemption from corporate income tax for three years on the profit obtained from such projects regardless of previous tax incentives.

8. The municipal financial authority shall return 100% of the income tax actually paid for the profit increased by state-level new products or the invention patented products first produced in Shenzhen and provincial/municipal-level new products and utility model patented products first produced in Shenzhen within three years (for the first case) or two years (for the latter case) from the date of sales.

9. Software enterprises may enjoy 2 years of corporate income tax exemption from the profit-making year and half reduction for the ensuing 3 years. Those certified as high-tech enterprises may enjoy 2 years of corporate income tax exemption and half reduction for the ensuing 6 years. Key software enterprises enjoy 5 years of corporate income tax exemption and half reduction for the ensuing 5 years. For the corporate income tax paid for the third to fifth year which is levied at half reduced rate, the municipal financial authority shall provide corresponding allowance. If key software enterprises did not enjoy tax incentives in the current year, the corporate income tax shall be levied at the rate of 10%.

VAT

The rate of VAT is 17%. A low rate of 13% is provided. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding tax incentives:

1. As for high-tech result transformation projects with independent intellectual property right, 50% of the local-sharing portion of VAT shall be returned by municipal authority for eight years.

 2. The municipal financial authority shall return 50% of the local-sharing portion of VAT increased by state-level new products or the invention patented products first produced in Shenzhen and provincial/municipal-level new products and utility model patented products first produced in Shenzhen within three years (for the first case) or two years (for the latter case) from the date of sales.

3. Simultaneous levy and refund is applied to the part exceeding 3% of the total VAT paid by software enterprises that are general taxpayers of VAT at the statutory tax rate of 17% for the sales of independently developed software products before the end of 2010. The refunded tax shall not be subject to the levy of corporate income tax.

4. Simultaneous levy and refund is applied to the part exceeding 6% of the total VAT paid by integrated circuit manufacturers that are general taxpayers of VAT at the statutory tax rate of 17% for the sales of self-produced integrated circuit products. The refunded tax shall not be subject to the levy of corporate income tax.

5. Self-use equipment and relevant technologies (including software), supporting parts and spare parts imported by software enterprises are exempt from tariff and import-related VAT.

6. Integrated-circuit technologies, complete set of production equipment, equipment and apparatuses specially for integrated-circuit, self-use raw materials and consumables for production imported by integrated-circuit manufacturing enterprises are exempt from tariff and import-related VAT.

7. 50% of the additional local-sharing portion of VAT will be refunded to the high-tech enterprises and high-tech projects within three years with the figure of the previous year as the base.

8. The additional local-sharing portion of VAT will be refunded to the computer software reaching domestically advanced level whose annual sales amount exceeds RMB 10 million within three years.

Business tax

Business tax is divided on trade basis. Business tax rate ranges between 3%-20%. The business tax rate applicable to traffic, transportation and construction is 3%. The business tax rate applicable to commercial service, insurance and entertaining business is 5%, 8% and 20% respectively. Foreign-invested enterprises satisfying the following conditions may enjoy corresponding tax incentives:

1. Foreign banks or sino-foreign equity joint venture banks with a duration of over 10 years and total investment of over RMB 100 million are exempt from business tax for the income from financial business for 5 years commencing on the date of opening.

2. High-tech result transformation projects owning independent intellectual property right may enjoy 5 years of business tax exemption and half reduction for the ensuing 3 years. 

3. Individual income tax Individual income tax adopts progressive tax rate in excess of specific amount. The part of monthly wage of domestic employees exceeding RMB 1,600 is subject to individual income tax. The part of monthly wage of foreign employees exceeding RMB 4,000 is subject to individual income tax. The individual income tax rate has 9 levels and ranges between 5%-45%. The individuals satisfying the following conditions may enjoy corresponding tax incentives: If the shares rewarded and distributed by high-tech enterprises and high-tech projects to their employees are reinvested in their production and operation, individual income tax shall be exempted. If dividends have been paid or transferred, individual income tax shall be levied according to the actual amount of gains.