. /.   WORLD TRADE  
ORGANIZATION  S/WPGR/W/25/Add.5/Corr.1* 
14 May 2007 
 
 (07-1977) 
Working Party on GATS Rules  
  
SUBSIDIES FOR SERVICES SECTORS 
 
INFORMATION CONTAINED IN WTO TRADE POLICY REVIEWS 
 
Background Note by the Secretariat
1 
 
Corrigendum  
  The table below replaces Table III.12 on page 50 of document S/WPGR/W/25/Add.5.  
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Table III.12 
Income tax concessions and preferences for foreign-invested enterprises 
 
Preferential tax rate of 15% 
FIEs in the Shenzhen, Zhuhai, Sh antou, Xiamen and Hainan SEZs; 
FIEs engaged in production and establishe d in economic and technological developm ent zones approved by the State Council; 
FIEs established in the Pudong New Area in Shanghai; 
Technology-based FIEs in old urban distri cts of SEZs, economic and technological deve lopment zones, and coastal economic open 
areas approved by the State Council with long investment recovery periods and fo reign investment exceeding US$30 million; 
FIEs engaged in energy, transpor t, and port construction projects; 
FIEs engaged in export pr ocessing in bonded zones; 
High technology FIEs in new and high tec hnology industrial development zones at st ate level approved by the State Council. 
Preferential tax rate of 24% 
Production FIEs based in the old urban districts of coastal economic open areas, special economic zones, and economic and 
technological development zones where the 15% preferential tax rate is not applicable; 
open coastal cities, open cities along the Yangtze River and in in land and border regions, as well as other areas designated by  the State 
FIEs in Council; 
FIEs in State tourist resorts. 
Tax exemptions or reductions 
Production FIEs with an operating period of over ten years (excluding oil, natural gas,  and rare and precious  metal exploration ):  
eligible for tax exemption for the first tw o profit-making years and 50% reduction in the following three years;  with SAT appr oval 
FIEs engaged in agriculture, forestry, and animal husbandry or es tablished in economically backward and remote border areas may  pay 
a reduced rate between 15% a nd 30% for another ten years; 
Foreign joint ventures engaged in port and wharf construction and with an operating pe riod of over 15 years:  eligible for a co rporate 
tax exemption for the first five-profit making years, followed by a 50% reduction in the corporate tax rate for the next five y ears;   
Infrastructure projects in airports, ports, wharfs, railways, highw ays, power stations, coal mines and water conservation, as w ell as 
agricultural development in the Hainan SEZ with an operating period of over 15 years:  eligible for a corporate tax exemption d uring 
the first five years, followed by a 50% reduction for the next five years; FIEs providing services in the SEZs with foreign investment over US$5 million and with an opera ting period of over ten years;  and 
foreign invested banks, Sino-foreign joint venture banks and other financial instituti ons in SEZs and other areas designated by  the State 
Council with foreign capital investment exceeding US$10 million and w ith an operating period of over ten years:  eligible for c orporate 
tax exemption in the first profit-making year followed by a 50%  reduction in the second and third years upon approval from the local 
tax authorities; 
Recognized high tech Sino-foreign joint venture enterprises in state level high technology develo pment zones with an operating period 
of over ten years:  exempt from corporate income tax during th e first two profit-making years with the approval of the tax auth orities;  
foreign-invested export-oriented enterprise s with export values of over 10% of their total output value, and foreign-invested h igh tech 
enterprises whose status remains unchanged:  entitled to a lower co rporate tax rate of 15% or 10%  following the expiry of the c orporate 
income tax exemption period. 
                                                      
* In English only. 
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO.  S/WPGR/W/25/Add.5/Corr.1 
Page 2  
 
  Tax rebate 
Reinvestment by an FIE of profits obtained from an enterprise in an en terprise with an operating period of at least five years:   eligible 
for a 40% refund of the corporate income tax paid on the reinvest ed sum with approval from the competent tax authorities;  100%  
refund if profits are reinvested in establishing or expanding an export-oriented enterprise in China. 
Other tax exemptions and reductions 
Profits of foreign investors derived from FIEs:  exempt from income tax; 
Royalties paid to foreign enterprises for the provision of technol ogy for scientific research, exploitation of energy resources , 
development of transportation, agriculture, forestry, and anim al husbandry production and development of technologies:  eligibl e for a 
reduced tax rate of 10% with SAT approval;  companies provi ded advanced technologies inco me tax will be exempted; 
FIES engaged in production or business operati ons in China;  can offset 40% of purchas es of domestically produced equipment aga inst 
the incremental corporate income tax of the prior year. 
FIEs that have increased expenditure on technology development by more than 10% over the previous year:  may offset their taxab le 
income in the current year by 50% of the expenses on technol ogy development;  with the approval of the tax authorities; 
Interest income of international financial institutions from loans to the Chinese Gove rnment or state banks, and interest incom e of 
foreign banks derived from loans to Chinese state banks  at preferential rates:  exempt from income tax; 
Local income tax exemptions or reductions may also apply for t hose sectors or regions where foreign investment is encouraged. 
Tax concessions for central and western regions 
FIEs under the "encouraged" category in the western region of Chin a that are eligible for a two-year income tax exemption follo wed by 
a three year tax reduction by half:  eligible for a reduced cor porate tax rate of 15% for three more years;  FIEs recognized as  high tech 
or export oriented, exporting over 70% of th eir annual output:  eligible for a 50% reduc tion in corporate income tax during the se three 
years although the tax cannot fall below 10%.  It is not clear whet her this means that the tax rate can be between 10% and 50%.  
 
Source:  Hong Kong TDC Research Department (undated), Guide to Doing Business in China (2004/05) .  Available at:  
http://www.tdctrade.com/chi naguide/eng/04/4-2.pdf.  
 
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