China's Notice on Equipment-Import Taxation Policy

On Nov. 14, 2011, China's Ministry of Finance, Ministry of Commerce, General Administration of Customs and State Administration of Taxation jointly released a notice on issues about the taxation policy on equipment imports by legal-person enterprises that are transformed from business firms engaging in processing trade with client-supplied materials.

Some regulations are hereby announced:

1. As per the notice, where a legal-person enterprise is formed during July 1, 2011 till December 31, 2012 through a processing-with-supplied-materials firm that has no legal personality by investment of all of its unevaluated foreigner-supplied equipment, or where the processing firm wholly incorporates during July 1, 2009 till December 31, 2012, by investing all of its unevaluated equipment, into a legal-person enterprise already established by the same investor, exemption from import duties and import value-added tax (VAT) may be applied to those unevaluated equipment that are under China Customs supervision and that have been registered for the processing trade no later than December 31, 2008 and declared for import no later than June 30, 2009.

Consecutive calculation may be applied to the customs supervision period on such unevaluated equipment.

2. Also according to the notice, where a legal-person enterprise has been formed from September 9, 2008 till June 30, 2009 through such a processing-with-supplied-materials firm as a whole, disposal as investment and exemption from both import duties and import VAT may be applied to its unevaluated equipment that have been already carried over to the legal-person enterprise but that are still under the customs supervision.

And consecutive calculation may be applied to the customs supervision period on such unevaluated equipment.