. /.   WORLD TRADE  
ORGANIZATION  G/SCM/Q2/CHN/39 
17 October 2008 
 (08-4987) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions from TURKEY1 Regarding the New  
and Full Notification of CHINA2 
 
  The following communication, dated 16 October 2008, is being circulated at the request of the Delegation of China.    
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Question 1 
 
In China's notification, duration of this subsidy program indicated as "1991 to present".  
Nevertheless, in its replies to questions posed by Turkey, China stated that there was no explicit 
definition of "remote underdeveloped areas" , and thereby no enterprise had received subsidy 
under this policy.     In this context, can China please explain how and when "remote underdeveloped areas" 
will be defined explicitly, and thereby how this program will be implemented in the future?   
 
Reply
 
 
 The preferential tax policy for foreign-invest ed enterprises in remote underdeveloped areas 
was prescribed in Income Tax Law of the People’s Re public of China for Foreign-Invested 
Enterprises and Foreign Enterprises . This law has expired and been replaced by Income Tax Law for 
Enterprises of the People’s Republic of China  on 1 January 2008.  There is no such provision in the 
new law.   
 
Question 2 
 
 According to China's notification, the do mestic and the foreign-invested enterprises 
established in the western regions are exempt fr om the tariff and import VAT for the imported 
equipments for self uses within the total amount of  the capital invested, except for those listed in 
"Catalogue for the imported products not subject to tax exemption in foreign invested projects" 
or in the "Catalogue for the imported products not subject to tax exemption in domestic 
invested projects" under this program.  In its replies to questions posed by Turkey, China 
stated that products listed in the "Catalogue for the Imported Products not Subject to Tax Exemption in Foreign Invested Projects" are ma inly 20 categories of consumer products, for 
example, television, video camera.   
                                                     
 
1 G/SCM/Q2/CHN/37.   
2 G/SCM/N/123/CHN.   G/SCM/Q2/CHN/39 
Page 2  
 
   In this perspective,  
 
a) Can China please explain, what criteria must be met in order to be listed in the 
"Catalogue for the imported products not subject to tax exemption in domestic invested projects"?   
 
Reply
 
  Regarding the Catalogue for the imported products not subject to tax exemption in domestic 
invested projects , please refer to the webpage:  h ttp://www.china.com.cn/policy/txt/2007-
01/22/content_7695089_2.htm .   
  
b) Can China please explain, if those products listed in both the "Catalogue for the 
imported products not subject to tax exemption in domestic invested projects" 
and "Catalogue for the Imported Pro ducts not Subject to Tax Exemption in 
Foreign Invested Projects" are produced domestically, are they also subject to 
VAT exemption?  
 
Reply
 
 
 According to Article 16 of the Provisional Regulation of the Pe ople’s Republic of China on 
Value-Added Tax , there are 8 types of products subject to VAT exemption:   
  (1) Self-produced agricultural products sold by agricultural producers;    (2) Contraceptive medicines and devices;   
 (3) Antique books;   
 (4) Importation of instruments and equipmen t directly used in scientific research, 
experiment and education;   
 (5) Importation of materials and equipmen t from foreign governments and international 
organizations as assistance free of charge;   
 (6) Equipment and machinery required to be  imported under contract processing, contract 
assembly and compensation trade;   
 (7) Articles imported directly by organiza tions for the disabled for special use by the 
disabled;   
 (8) Sale of goods which have been used by the sellers.    
 If the products listed in the Catalogues meet the requirements of Article 16, they can enjoy the 
VAT exemption.    
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