Interpretation on Adjustment of Import Equipment Policy in 2009

According to the Ministry of Commerce, General Administration of Customs and the State Administration of Taxation, with the purpose of supporting the reform of VAT formulated in January 1, 2009, China takes an adjustment on the preferential policy of taxation on import equipment accordingly, and cancel the VAT exemption of equipment on import linkages.

This VAT reform permits enterprise to deduct VAT involved in the newly purchased equipment, and cancel the VAT exemption policy on import equipment and VAT refund policy on domestic equipment purchased by foreign investment enterprise.

This adjustment on policy involves the VAT reduction and exemption policy on import equipment listed in the Notice of the State Council concerning the Adjustment of the Taxation Policies of Imported Equipments and Notice of the General Administration of Customs on Import Tax Policy of Encouraging Foreign Investment, and VAT reduction and exemption policy on other import equipment listed in the Notice of the State Council concerning the Adjustment of the Taxation Policies of Imported Equipments. After the adjustment, any import equipment with VAT exemption conforming to the document upward, resume to collect VAT on import linkage and continuous exempt tariffs within the original scope.

According to the revised VAT provisional regulations and implementing rules, when calculating the VAT shall to pay, the enterprise is permitted to deduct VAT involved in import equipment, that is revising the import equipment with VAT exemption to deducting the VAT on import equipment, and the import equipment which doesn't enjoy the tax exemption can also be deducted. This adjustment raises the preferential policy on import equipment from policy level to the national regulation, on the basis of without burdening the enterprises' total taxation collection.

This adjustment on policy is set a transition period in conformity with the actual conditional in some industries and enterprises. Projects acquired with Confirmation of Domestic-funded or Foreign-funded Project Encouraged by the State for Development on or before November 9, 2008, and the declared equipment or its supported technology, accessory and spare part for import on or before June 30, 2009, enjoying tariffs exemption and VAT exemption on import linkage according to the original regulations, resumes VAT on import linkage which makes a declaration on or after July 1, 2009.

Analysis from the level of technology, the tax policy adjustment on import equipment is one of the measures to guarantee the growth of national economy, expand domestic demand and encourage enterprise to sales in domestic and out of the country. To the enterprise with export and sales in domestic market and the sales in domestic market taking a certain proportion, the deducting of VAT on import linkage doesn't enhancing tax burden on the enterprise, but takes up a certain capital turnover. To the enterprise to export completely or the export taking a large proportion, this adjustment enhancing the tax burden for enterprise because they can't conduct deduction of VAT or offer enough cash for deduction. To the processing trade only deals with materials for processing, the adjustment on the policy of import equipment tax will brings certain influence on the development of enterprise.

In terms of actual operation, the non-priced equipment which has made a record on or before December 31, 2008, and the special equipment for tax exemption with project confirmation on or before November 9, 2008, shall makes a declaration to customs on or before June 30, 2009 in order to continue enjoying import and export tariffs exemption and VAT exemption on import linkage. To the non-price equipment levied with VAT on import linkages or special equipment for tax reduction and exemption, the enterprise shall file "special case"  in column of import customs declaration.