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Tax Insights

2018-06-30
1363 | 42 | 5

Why should you expand your business to China?

China is the most populous nation in the world with it’s 1.373 billion people and soon the biggest market in the world as well. They are producing the most goods. It looks like they are the Mount Everest in the economy.



China during the last quarter-century, has transposed to a more market-friendly economy that has a fast growing private sector. It is a big force in the global economy. The reform began in the late 1970’s, and grew to include the gradual iberalization of prices, decentralization, more independence for state ventures, the establishment of an eclectic banking system, the development of stock markets, and the welcoming of overseas trade and investment. China has instigated reforms in a step-by-step fashion. Its currency was tightly linked to the US dollar for years and it is considered as the second biggest economy in the world after the United States.   And it is not surprising to see countless companies of all sizes from the rest ofthe World currently thriving and there is no reason why you cannot join them. China is accommodating, with more markets, industries and niches than you canshake an investment at. Local authorities are famous for competing over foreign business, throwing incentives and exemptions at entrepreneurs to secure investment in underdeveloped provinces and cities.

China’s predominant industries were mining, iron, steel, aluminium and other metals, coal, machine building, textiles and apparel, cement, chemicals, consumer products, toys and electronics, food processing, transportation equipment, telecommunication equipment and commercial space launch vehicles. But nowadays the Chinese economy is turning more towards the modern service industry. The Chinese government is issuing a plethora of regulations and incentives and adopting business reforms in different business zones to allow for these industrial changes. Some of the regulations and incentives offered by the Chinese government can be summarized below:

＊ Incentives for modern financial industry, like Alipay of Alibaba

＊ No Value Added Tax (VAT) and surtaxes* on modern cross border industry, for example, businesses within the scope of InformationTechnology Outsourcing (ITO), Knowledge Process Outsourcing (KPO) and Business Processing Outsourcing (BPO). And also only 15% Corporate Income Tax (CIT )applicable

＊ Export tax refund incentives for modern Cross border technology industries and also 0.05-0.12 RMB subsidy on every 1 USD of revenue

＊ Different incentives are being offered in different business zones across China, for instance, Fengxian district, which is a suburbof Shanghai, is in the process of building a business zone called “Beauty of Valley” and some of the biggest cosmetic brands like Nu Skin, Cosmax and so on have already been responsive to this project. These companies located in these business zones benefit from attractive incentives policies and enhancement in their services. Other business zones are Shenzhen Qianhai, Tianjin Wuqing, Ningbo,Shanghai Free Trade Zone, Xiongan new business zone and so on.

＊ The e-commerce business which was formerly strictly regulated is now slowly opening to foreign investment, but, the operation is only restricted to certain specific business zones like the Shanghai Free Trade Zone.

For more information about how you can enter the Chinese market and benefit from all these incentives, please feel free to contact our tax experts. RTF is one of the most influential tax strategy consultancy and financial services firms for foreign investment enterprises across Asia. Founded in 2008, we employ over 100 employees across our Beijing headquarters and our offices in Shanghai, Shenzen, HongKong, Singapore and NewYork. We specialize in providing our international clients with expert financial, legal and tax consultancy services. Also, please visit our website at www.rtfcpa.com.sg/.
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