What are the basic tax privileges for FIEs?
In order to encourage foreign investors to make more investments in China, the government provides many incentives including tax privileges to FIEs. We brief the basic tax privileges for FIEs as follows: (1) Only designated industries are eligible for tax incentives, e.g. production-oriented, advanced technology-oriented or export-oriented, etc. (2) The location in which the FIE is established (or going to be established) is relevant. There are different special zones where reduced tax rates may apply. (3) The operating period of the FIE must be considered (e.g. more than 10 years for production-oriented enterprises to enjoy tax holidays). (4) Local governments may require the investment to reach a certain amount. Tax incentives are available for corporate income tax (two-year tax holiday followed by three years of 50% deduction starting from the first profit-making year), import duty and VAT (imported equipments of qualified FIEs within the range of their total investment may be exemp
