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Regulations on VAT Reduction and Exemption (purchased or self-producing fixed assets)

Tax items

Specific conditions

Reduction and exemption regulations



From Jan.1, 2009, the input tax for the purchased or self-producing fixed assets of the VAT common payer

Deduct according to the regulations concerned

Note: Pursuant to the Circular of the Ministry of Finance and State Administration of Taxation about the Tax Reimbursement Policy for Foreign-invested Enterprises Purchasing Home-made Equipment (CSZ [2008] No.176), from Jan.1, 2009, the policy that the VAT for purchasing domestic equipment with the cost included within the investment amount may be fully refunded to the foreign-invested enterprises is suspended.

Accelerated Depreciation of Fixed Assets

If the enterprise’s fixed assets need accelerated depreciation because of technical upgrade etc, the depreciation period may be shortened or the accelerated depreciation method may be adopted. The fixed assets which are applicable to the method of depreciation period shortening or accelerated depreciation include: (1)the fixed assets require constant replacement because of technical upgrade; (2) the fixed assets always at the condition of strong vibration and corrosion. Upon the adoption of depreciation shortening, the minimum depreciation period shall be no less than 60% of the minimum depreciation period specified in the tax law; Upon the adoption of accelerated depreciation, the double declining balance method or the sum-of- the-years-digits method could be adopted.

Deduction Plus of Technical Development Expenses

The enterprise's expenses for research and development of new technology, new product and new process could enjoy deduction plus when calculating the taxable income amount. If it does not form the intangible assets and is excluded in the current profit and loss, the deduction plus shall be carried out at the rate of 50% of the research and development expenses in addition to the actual specified deduction. If the intangible assets are formed, such intangible assets could be amortized at the rate of 150% of the cost of intangible assets.

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