- Overseas-invested businesses may register and establish trade companies
in the zone as independent legal entities and obtain license for doing
import and export trade and acting as trade agents within the Waigaoqiao
Free Trade Zones. No restrictions will be imposed on their business
scope. (Note: Current state policies stipulate that no such trade
companies with the above-mentioned license can be set up by foreign
businesses in non-free-trade-zone areas.)
- Businesses within the Zone are entitled to retain in full their
spot foreign exchange and conduct settlement and sale of exchange
in banks with the approval of the foreign exchange administration.
(Note: Domestic foreign trade companies in non-free-trade zone areas
must submit themselves to current foreign-exchange settlement and
sale systems and are generally not allowed to keep their spot foreign
exchange.)
- Businesses within the Zone are exempted from VAT when they engage
in trade between each other, transit trade, and import and export
trade among themselves.
- Trade companies within the Zone are subject to 15% enterprise income
tax rate. For those with the term of operation longer than 10 years
may enjoy tax holiday in the first profit-making year and a reduced
10% income tax rate in the following two years. (Note: Outside the
free trade zone, the income tax rate for trade-sector businesses is
33% while it is 15% in Pudong, with however no such favorable treatment
as tax holiday or reduction.)
- Trade companies within the Zone may have direct trade relations
with overseas-invested businesses and businesses with import and export
licenses in non-free-trade-zones in the country. They may also conduct
import and export trade and domestic trade through bonded production
factor markets within the Zone or through domestic businesses that
have import and export licenses. VAT incurred in domestic trade may
be deferred or reduced.
- Goods shipped into the Zone from outside China proper are exempted
from import duties and no import license is required; Goods exported
from the Zone to outside China proper are exempted from export duties
and no export license is required (except for those subject to
quotas imposed by importing & exporting countries). Imported
equipment, construction materials and office appliances for the self-use
of the businesses in the Zone (except automobiles) are exempted from
import duties and no import license is required.
- Goods handled by domestic import and export trade companies and
products of Chinese businesses authorized to engage in import and
export of their own products, once shipped into the Zone, are treated
as export.
- Import materials in the Zone are fully bonded. When the processed
products are shipped to the rest of the country, tariffs will be levied
on the imported raw materials. (Note: In many other free trade zones
in China, the establishment of bonded factories is subject to an application
process and close examination is conducted before approval is issued.
Except for those covered in reciprocity contracts, imported raw materials
are subject to 5% to 15% rate of tariff or guarantee deposit equivalent
to import duties and import-related VAT.)
- For import materials that are to be processed into products whose
production requires a license, they may be shipped into the bonded
manufacturing area of the Zone and registered at the Customs at the
same time. When the final products enter the domestic market, the
import licenses of the materials need to be presented for inspection.
For materials and parts, subject to quotas imposed by exporting countries,
that are processed within the Zone, if the final products do not require
an export license, they may go through customs clearance at the time
the final products are exported. If an export license is required
for the final products, the materials and parts of a domestic source
may go through customs clearance as export goods at the time they
are shipped into the Zone.
- Processing businesses in the Zone are exempted from processing-related
VAT. Those with the term of operation more than ten years enjoy an
enterprise income tax rate of 15%. There will be a two-year tax holiday
for the first two profit-making years and reduction by half in the
following three years. In the sixth year, the rate is 10%. (Note:
This treatment is also given to export-oriented overseas-invested
businesses in the development zones.)
- Businesses in the Zone may receive processing orders and sign sub-contracts
with other businesses in the Zone. They may also receive processing
orders and sign sub-contracts with businesses outside the Zone for
processing with given designs, raw materials, and /or equipment and
compensatory trade?
- There is no linkage between business scope and the production volume
for processing businesses. No restriction is imposed except for products
that are prohibited by relevant state regulations. They may also engage
in international trade and bonded warehouse business of various types.
- Businesses in the Zone may purchase raw materials and semi-finished
products made in China with RMB through domestic trade and conduct
deep processing in the Zone.
- Processing businesses in the Zone may apply for permission to sell
part of their products in the domestic market. When approved, after
paying tariff and presenting certificate or license for imported materials,
the businesses may sell the products directly in the domestic market
and collect foreign exchange.
- Processing businesses within the Zone may adjust output or shift
to a different product or type of processing without going through
the examination and approval in advance. (Businesses in a non-free-trade
zone have to obtain approval for using import materials or parts and
have to comply with the volume and variety requirement specified in
the Customs Verification Handbook.)
- Warehouses within the Zone can, without any limit, store any kind
of goods except those prohibited by the state. Import goods going
into the domestic market can also be stored in the warehouses. (Note:
Goods stored in bonded warehouses outside the Free Trade Zone is subject
to certain restrictions imposed in consideration of the business scope
of the owner. Usually the time limit of storage is one year and at
the most two years, with a customs supervisory charge of 0.3% imposed.)
- General trading goods can also be stored in warehouses in the Zone.
(Note: Merchandise that has an owner in general trade is not allowed
to be stored in bonded warehouses outside the Free Trade Zone. Merchandise
under export supervision should be stored in warehouses approved by
the Customs.)
- Businesses from both at home and abroad are encouraged to put on
display their import and export products in the Free Trade Zone and
may conduct commercial activities in exhibition halls.
- Simple commercial processing is allowed in the warehouses in the
Zone, such as sorting out, sub-packing, selecting, trademark labeling,
mark painting, etc..
- Warehouse equipment imported for use by a business itself in the
Zone is exempted from tariff. (Note: Tariffs are levied on warehouse
equipment imported for use by a business itself in bonded warehouse
outside the Zone.)
- Bonded goods entering and exiting warehouses need to be put on record
only and loose supervision is executed by the Customs.
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