Shenzhen - Reduction and Exemption of Business Tax

1. Sales Threshold of Business Tax

From April 1st, 2003 (the taxable period), the rules of sales threshold of Business Tax for individual taxpayers in Shenzhen have been made the following adjustment:

(1) For tax payment on a monthly basis, the threshold for leasing private property is 1000 yuan of its monthly turnover, for other business operation the threshold is 1000 yuan of its monthly turnover.

(2) For tax payment at each time (or day), the threshold is 100 yuan of its turnover each time (or day).

The taxpayer whose sales turnover does not reach the threshold as above-mentioned rules shall be exempt from Business Tax.

2. Reduction and Exemption of Business Tax

The following items may be exempt from Business Tax:

(1) Nursing Services provided by nurseries, kindergartens, home for the aged, welfare institution for the handicapped, matchmaking and funeral services;

(2) Services provided by the disabled on individual basis, which refer to services provided to the public by the disabled individuals.

(3) Medical services provided by non-profit medical institutions, which refer to such services as diagnosis and treatment to the patients, epidemic prevention, child delivery and family planning, as well as the business of providing medicine, medical apparatus, hospital lodging and meals in relation to those services.

Non-profit medical institutions in Shenzhen refer to those non-profit medical institutions which have registered in Shenzhen Health Bureau and have been notified publicly.

(4) Educational services provided by schools and other educational institutions, and services provided by students participating in their part time. Schools and other educational institutions herein refer to ordinary schools of various kinds approved to be established by the People's government above the prefecture and city level or departments for educational administration under government of the same level and where the academic qualifications of their students are recognized by the State.

(5) Agriculture mechanical ploughing, irrigation and drainage, prevention and treatment of plant disease and insect pests, insurance for farming and animal husbandry and related technical training services; breeding, disease prevention and treatment of poultry, livestock and aquatic animals.

Agriculture mechanical ploughing refers to the business of farming operation applying agriculture machinery in farming, forestry and husbandry (including ploughing, planting, harvesting threshing and plant protection).
Irrigation and drainage refers to the business of irrigation and drainage of farmland.

Prevention and treatment of disease and insect pests refers to the business of forecast, prevention and treatment of disease and insect pests for farming, forestry, husbandry and fishery.

Insurance for farming and husbandry refers to the business of providing insurance to animals and plants grown and raised in planting, breeding and husbandry.

Related technical training refers to technical training services related to the business of agriculture mechanical ploughing, irrigation and drainage, prevention and treatment of disease and insect pests, and plant protection, as well as services to enable the farmers to obtain knowledge of insurance for farming and husbandry.

The tax exemption for the breeding, prevention and treatment of diseases of poultry, livestock and aquatic animals applies for the business of providing medicine and medical apparatus in relation to those services.

(6) Admission fees for cultural activities conducted by memorial hall, museum, cultural center, art gallery, exhibition hall, academy of painting and calligraphy, library and cultural protective units; admission fees for cultural and religious activities conducted at places of religious worship.

Cultural activities conducted by memorial hall, museum, cultural center, art gallery, exhibition hall, academy of painting and calligraphy, library and cultural protective units herein refer to cultural activities that fall within the taxable scope of taxable items under culture and sports activities conducted by those units in their own location. The admission fees refer to the sales at the first entrance.

Admission fees for cultural and religious activities conducted at the places of religious worship refer to that for cultural and religious activities held by temples, Taoist temples, mosques and churches.

(7) The transfer of land-use right to farmers for agriculture production. Agriculture herein includes agriculture, husbandry, forestry, fishery.

(8) The transfer of copyright by individuals.

(9) The income derived from transfer of technology by science and technology units.

For supporting technology innovation and the development of Hi-tech enterprises, Business Tax may be exempt for the business income derived from the technology transfer, technology development and related technology consultation and technology services engaged by units or individuals (including foreign investment enterprises, Research and Development Center established by foreign investors, foreign nationals working in foreign enterprises in China). Besides the above-mentioned regulations, the individual taxable income which does not reach the minimum threshold shall be exempt from business tax.

Technology transfer herein refers to the action that the transferor transfers his own patent-technology and technical know-how to others at agreed price. Technology development refers to the action that developer entrusted by others makes research and development systematically on new technology, new products, new technique or new materials. Technology consultation refers to providing feasibility demonstration, technical forecasting, technical investigation on special topic, analyzing and appraisement report etc. on given technology projects. Related technology consultation and technology services as above-mentioned refer to the technology consultation and technology services that the transferors provide to help transferee to grasp the transferred technology (or the technology developed by entrusted party) in accordance with the clauses of technology transfer or technology development contracts. Furthermore, the price of technology transfer (or development) should be listed in the same invoice with the price of the related technology consultation and services.

If the existing technology or development production is provided by the medium of drawings and documents etc., the total price and other charges for acquiring it shall be exempt from business tax. If the existing technology or development production is provided by the medium of goods such as sample products, prototype equipments, equipment etc., the revenue with the exception of the goods price may be exempt from business tax, and the goods (sample products, prototype equipment, equipment etc.) shall levy value-added tax. If providing biological technology is incident to providing microbial bacterium matrixes and new varieties of animals and plants, the total revenue including the price value of these matrix samples shall be exempt from business tax, but batch-selling these microbial bacterium matrixes and new varieties of animals and plants shall levy value-added tax.

(10) Tax policies for re-employment of laid-off workers:

A. For the newly-established companies engaged in service industry (excluding advertising industry, sauna, massage, internet bar, oxygen bar) whose newly employment of the lay-off workers covers more than 30% (including 30%) of its staff within the taxable year and have signed more-than-one-year-servicing-period labor contracts with them, the business tax, city maintenance and construction tax, educational surcharge and enterprise income tax may be exempt within 3 years upon the cognizance of labor and social security department and examination of taxation department.

For those companies whose newly employment of the lay-off workers cannot cover more than 30% (including 30%) of its staff within the taxable year and have signed more-than-one-year-servicing-period labor contracts with these laid-off workers, enterprise income tax may be reduced according to computed tax-reduction proportion within 3 years upon the cognizance of labor and security department and examination of taxation department. Tax-reduction proportion = (newly-employed laid-off workers ÷enterprise staff ×100%)×2.

B. For newly-established commercial and trading enterprises ( excluding commercial and trading enterprises engaged in wholesale, pluralizing wholesale and retail, and other non-retailing business) whose newly-employment of laid-off workers covers more than 30% ( including 30%) of its staff and have signed more-than-one-year-serving-period labor contracts with these laid-off workers, the business tax, city maintenance and construction tax, educational surcharge and enterprise income tax may be exempt within 3 years upon the cognizance of labor and social security department and examination of taxation department.
For those companies whose newly employment of the lay-off workers cannot cover more than 30% (including 30%) of its staff within the taxable year and have signed more-than-one-year-servicing-period labor contracts with these laid-off workers, enterprise income tax may be reduced according to computed tax-reduction proportion within 3 years upon the cognizance of labor and security department and examination of taxation department. Tax-reduction proportion = (newly-employed laid-off workers ÷enterprise staff ×100%)×2.

C . For the existing companies in service industry (excluding advertisement industry, sauna, massage, internet bar, oxygen bar) and the existing commercial and trading companies (excluding commercial and trading enterprises engaged in wholesale, pluralizing wholesale and retailing, and other non-retailing business) whose newly-employment of laid-off workers covers more than 30% (including 30%) of its staff and have signed more-than-one-year-serving-period labor contracts with these laid-off workers, the enterprise income tax may be reduced 30% upon the cognizance of labor and security department and examination of taxation department.

D. For those economic entities (excluding enterprises engaged in financial and insurance, post and tele-communications, construction, entertainment , sales of immovable properties, transfer of land-use rights; service enterprises engaged in advertisement, sauna, massage, internet bar, oxygen bar; commercial and trading enterprises engaged in the wholesale, pluralizing retailing and wholesale, and other non-retailing business) which sate-owned large or medium enterprises establish to separate accessorial business from major business and reform it for recruiting their redundant staff , if those economic entities can reach the following conditions, the enterprise income tax may be exempt within 3 years upon the cognizance of relevant departments and examination of taxation department.
a) utilizing non-major-business assets, leaving-and-unused assets of original enterprise and virtual assets of closed and bankrupted enterprises;
b) accounting independently with legible shareholders , and realizing the diversification of the shareholders.
c) the redundant staff in the original enterprises recruited to above-mentioned enterprises who has cover more than 30% (including 30%) of the total staff of above-mentioned enterprises;
d) altering original labor contract or signing new labor contract with the redundant staff in original enterprises.

E. For those laid-off workers who engaged in individual operation (excluding construction, entertainment and advertisement industry, sauna, massage, internet bar, oxygen bar), the business tax, city maintenance and construction tax, educational surcharge and individual income tax shall be exempt within 3 years since the date of acquiring tax registration license.

(11) For the ordinary residential building acquired and lived in for more than one year by individuals, the Business Tax shall be exempt at the time of sales. Business Tax shall be computed and levied on the balance of the selling prices after deduction of acquisition costs for the ordinary residences purchased land lived in for less than one year. The residences self-constructed for self-use by individuals shall be exempt from business Tax at the time of sales.

Business Tax is temporarily exempt on the revenue derived from sales of residences at house-reform cost prices and standard prices by enterprises, institutional units and administrative units. Before the end of 2002, the overstocked commercial-selling residences should be exempt from Business Tax at the time of sales.

(12) The interest of the loan derived from annual special public debt since 1998 may be exempt from business tax.

(13) For the special loan that is provided by People's Bank and re-lend to the local government by local commercial bank for discharging the debts of country cooperative fund, the interest may be exempt from business tax.

(14) The insurance premiums derived from paid-back life insurance business on one-or-more-than-one-year-period basis, which are operated by insurance companies, may be exempt from business tax.

Paid-back life insurance business on one-or-more-than-one-year-period basis refers to ordinary life insurance, annuity insurance and health insurance on one-or-more-than-one-year-period basis and with principal and interest paid back at maturity.

Ordinary life insurance refers to insurance business on one or-more-than-one-year-period basis and insuring people's survival, death, injure and disablement and paying the maturity insurance, death insurance and injure and disablement insurance to the policy holder once for all.

Annuity insurance refers to the insurance business that policy holder (or insured party) pay certain-amount insurance premium within certain period and shall be paid annuity at stipulated age by insurer (insurance agent) in accordance with the insurance contract.

Health insurance refers to the insurance business insuring the sickness, children delivery and conduced injury, disablement and death, and compensating the loss conduced by the sickness or injury and disablement.