Tax preference for CBZ can only be applied to added value tax, consumption tax and tariff. There is no preference for income tax.
There are three cases of tax preference for turnover tax.
The first case: goods outside the zone that are transported into the zone will be regarded as export and allowed to enjoy export preference. Goods in the zone that are transported to the outside will be regarded as import. The later will go through procedures such as import declaration, taxation, tax exemption or bond implemented by Customs based on the actual status of goods and relevant policies. Goods that are transported into the zone by companies outside the zone will be regarded as export and will go through export declaration procedures conducted by Customs that will sign and issue goods declaration of export (especially for export rebates). “Companies outside the zone” refer to those companies who are authorized to import and export.
The second case: goods outside the zone sold to the zone can apply for export rebates according to relevant procedures. If companies outside the zone sell and transport goods to the processing companies in the zone such as domestically-produced equipment, raw materials, spare parts, components and parts, wrapping materials as well as infrastructure materials (including water, power and gas) for constructing infrastructure facilities, processing companies and production and office buildings for administrative and management departments, these companies can apply for rebates to tax authority based on the goods declaration of export (especially for export rebates) signed and issued by the customs and the export rebates certificate. If companies outside the zone sell and transport goods to the logistics companies in the zone such as domestically-produced machine, handling equipment, management equipment, inspection and detection equipment, and wrapping materials, these companies can apply for rebates (or exemption of tax) as provisioned by relevant regulations based on export invoice.
The third case: the circulation of goods within the zone is duty-free from circulation tax. For goods processed and produced in the zone by companies in the zone, if they are exported directly or sold to other companies in the zone, they are exempt from added value tax and consumption tax. That is, the transaction and circulation of goods among logistics centers and export processing areas or areas integrating the zone and port within the zone are exempt from the added value tax and consumption tax involved in the circulation process.
1. transportation of goods in the zone to the outside (viewed as import and dealt with regularly)
For goods transported from the export processing zone to the outside, the customs will conduct import declaration procedures in accordance with relevant provisions and collect added value tax and consumption tax from the goods declared. (National Tax [2000] NO.155)
2. transportation of goods outside the zone to the bonded zone (viewed as export and dealt with regularly)
Export companies exporting goods or deemed as exporting goods can enjoy added value rebates (or exemption) policies. Goods that are deemed as export include “those, after being declared to Customs by exporting companies, entering into such areas approved by the state as export processing zones, bonded logistics zones, bonded port zones, comprehensive bonded zones, Zhuhai-Macao Cross Border Industrial Zone (Zhuhai Zone), China-Kazakstan Khorgos Frontier International Cooperation Center (the supporting area of China), bonded logistics centers (type B) (hereinafter referred to as a joint name of special zone) and being sold to departments in the special zone or foreign departments and individuals” and “the water (including steam), power and gas (addressed as water, power and gas transported to the special zone hereinafter) sold by exporting companies or other departments to production companies in the special zone that consume but don’t have to declare to Customs”. (Financial Tax [2012] NO.39, Article 1)
If the water, power and gas companies outside the export processing zone sell and deliver water, power and gas to production companies in the zone, they can issue VAT special invoice to companies in the zone based on the rebate registration certificate (copy) signed and issued by local national tax bureau to the companies in the zone. (National Tax [2002] NO.299)
The following cases are exceptions that are not applicable to added value tax rebates and tax exemption. They will pay added value tax complying with the following rules and other regulations concerning goods deemed as domestic sales:
(1). Goods exported by export companies or viewed as exporting goods are clearly deprived of export rebates by Financial Department and National Tax Bureau according to the State Council’s decisions.
(2). Consumer goods and transportation tools sold to the special zone by export companies or other departments. (Financial Tax [2012] NO.39, Article 1)
3. Export between bonded zones and export to overseas areas (added value tax and consumption tax are exempt)
Added Value Tax: goods from the special zone exported by corporations within the special zone, repairs and replacements services provided by corporations in the zone to overseas departments or individuals and goods from the special zone sold among enterprises within a same special zone or different special zones are all exempt from added value tax. (Financial Tax [2012] NO.39, Article 6).
Consumption Tax: Goods exported by export companies or viewed as exporting goods applicable to added value rebates will be free from consumption tax. If the goods are purchased from the export category, the consumption tax collected in the previous procedure will be returned. Goods exported by export companies or viewed as exporting goods applicable to added value tax exemption policies will be free from consumption tax. But the consumption tax that has already been collected in the previous procedures will not be returned. (Financial Tax [2012] NO.39, Article 8).
4. Other Related Issues
For export processing zones with "Four Directions” already approved and verified, when their corporations and administrative departments import infrastructure materials from outside, it is necessary for them to apply to local taxation departments and Customs for permission. The imported infrastructure materials within verification quota are allowed to be officially examined and accepted at export processing zone by Customs. Under the supervision, these companies can apply to local taxation departments for rebates based on the export declaration (exclusively used for export rebates). (National Tax [2000] NO.155)
5. Tariff (outbound and bonded zones are exempt from tariff)
When the following goods enter the bonded port area, they will not be charged import tariff by Customs and other kinds of taxes charged by Customs in place of other taxation departments during the import process unless laws or administrative regulations have special regulations in this regard:
(1) The machine and equipment needed in productive infrastructure projects and infrastructure materials required in building production factories and storage facilities in the zone.
(2) The machine, equipment, mould and spare parts for maintenance needed in the production of companies in the zone.
(3) A reasonable number of office supplies for companies and administrative departments in the zone.
Transportation tools and consumer goods entering into the bonded port area for companies and administrative departments in the zone should go through declaration procedures as imported goods. Customs will collect import tariff and other kinds of taxes in place of other taxation departments during the import process.
Goods transported from bonded port area to the outside are exempt from export tariff except those under the special provision of laws and administrative regulations. Goods transported between bonded port area and overseas areas are free from import-export quota and permit certificates management, except those under the special provision of laws and administrative regulations. For goods under the same quota and permit certificates, Customs will not require companies to present the original quota and permit certificates if their quota and permit certificates have already been verified during the process of entering the zone.
