In 2016, the Chinese government has taken various measures in view to increase its foreign direct investment (FDI). Such action led to introduction of numerous tax incentive schemes which are appealing to foreign investors in some industries and sectors. The below summary provides you with the details.

Summary on China’s FDI Tax Incentives
Applicable industries or sectors / Criteria to be met
Tax incentives

Special type companies

  1. Small sized 
  2. Low profit
  3. High technology 
  4. New technology

Preferential corporate income tax rate at 20% (compared to the normal rate at 25%)

Technology Advanced Service Enterprises (TASE)

  1. Information Technology Outsourcing (ITO) 
  2. Business Process Outsourcing (BPO) 
  3. Knowledge Process Outsourcing (KPO)

Preferential corporate income tax rate at 15% (compared to the normal rate at 25%) and a higher education expense deduction cap of 8%

Environmental companies

  1. Companies or projects focusing on technical/high-tech development 
  2. Environmental conservation or protection 
  3. Energy conservation 
  4. Safeguarding of water resources

May be eligible for various income tax incentives

Passive income earned by foreign enterprises sourced in China

  1. Gains on stocks 
  2. Interest 
  3. Retirement pay 
  4. Online work 
  5. Capital gains 
  6. Net rental income and income from a business in which the taxpayer does not materially participate

Concessionary withholding tax rate at 10% (compared to 20% previously)

Reinvestment in China

Companies that reinvest their profits in China

Tax deductions


Companies that import goods if the finished goods made of imported material is re-exported

Import VAT exemption or deduction

Special Economic Zones

  1. Companies set up in one of the five China Special Economic Zones 

Lower corporate income tax rate at 15% 

A benefit of "2+3 years" tax holiday (i.e. tax exemption fo the initial two years and tax at 12.5% for the subsequent three years

  1. For certain projects in basic infrastructure, environment protection and energy

A benefit of "3+3 years" tax holiday

  1. For certain term enterprises investing in integrated circuits production

A benefit of "5+5 years" tax holiday

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