The results are in. In January and February 2020, the large-scale disruptions and closures associated with the global COVID-19 pandemic resulted in the sharpest contraction of China’s industrial output in over three decades.
To give the national economy a much-needed boost in the wake of the COVID-19 outbreak, the Chinese authorities recently ushered in a package of emergency fiscal and monetary measures. The main beneficiaries of these policies are China-based trading companies, many of which were hit hard by the coronavirus-induced recession. These include export tax rebates for over one thousand product categories, expedited customs procedures for essential materials needed to resume production, credit repayment support, and more.
As these exceptional measures will probably only stay in place until the economy picks up again, and China seems to already have seen the brunt of the pandemic, now is the perfect time for foreign business owners to consider entering the local market and contact a China company registration service provider. Here is all you need to know about the new measures and what they mean for trading businesses.
1. Increased Export Tax Rebates
Eligible Product Categories
Chinese exporters do pay export tax for goods destined for overseas markets. However, they still have to pay value-added tax (VAT) and consumption tax when buying the products from the manufacturer. Once the goods are sold abroad, however, most products qualify for tax rebates or refunds on the VAT and consumption tax.
To support exporters and encourage foreign trade, the government has decided to increase the number of eligible products. On 17 March 2020, the Ministry of Finance released a notice stating that, as of Friday, 20 March 2020, China-based exporters can benefit from higher tax rebates for 1,464 product categories.
More specifically, 1,084 of the 1,464 product types are now eligible for a 13% export tax rebate. These include:
●Stainless steel strip and wire
●Petrochemicals, including ethylene, ethylene glycol, and propylene
●Porcelain sanitary ware
The remaining 380 product categories are eligible for a 9% export tax rebate. These include imported livestock and a wide variety of food products such as nuts, eggs, fruit, vegetables, and meat.
How to Claim Export Rebates
Following an executive meeting of the State Council, Chinese Prime Minister Li Keqiang ordered the relevant departments to ensure that they make all export tax rebate payments in full and without delay. This applies to all industries, with the exception of pollution-heavy and energy-intensive products.
As a general rule, to claim an export tax rebate, eligible companies need to contact the relevant local authorities and:
●Show their business license
●Show their export authorization papers
●Submit monthly tax declarations
However, the specifics of the procedure vary by industry and region. Different rules also apply depending on whether the company is a trading or a manufacturing business.
2. Exemptions from Customs Duties for Materials Used for Epidemic Prevention and Control
That same week, in a further bid to respond to the COVID-19 crisis, the Shanghai government announced new temporary measures that guarantee preferential treatment for key imports.
According to a notice issued by the Shanghai Municipal People’s Government, products imported by the country’s health authorities for the purposes of epidemic prevention and control are now exempt from customs duties. In addition, the national authorities plan to streamline and optimize the procurement procedures for such products.
The complete list of imports eligible for exemption from customs duties will soon be publicly available. These include medical and sanitary equipment such as:
●Rescue and protective equipment
Eligible importers will be able to apply for customs duties refunds before 30 September 2020.
3. Support for Businesses Returning to Work
The government also introduced a number of additional measures to support companies that had to slow or shut down operations altogether due to COVID-19.
Many essential products that businesses need urgently in order to be able to resume normal work will now be eligible for expedited or “green access” custom clearance. These include machinery, raw materials, equipment, parts, components, and more.
The measures will prioritize sectors that support the foreign trade service industry, such as truck transportation and port affairs businesses. This will ensure that the supply chains can resume normal operation as soon as possible.
Furthermore, companies that are experiencing difficulties in maintaining normal production or operation levels as a result of the pandemic will be able to introduce temporary measures. The goal is to address the unprecedented situation and ensure that their business stays afloat. Such measures may be introduced after consultations with the employees and include cutting working hours, rotating shifts, and adjusting wages.
4. Credit Support and Foreign Trade Loans
The fourth package of measures focuses on credit support and foreign trade loans. More specifically, the Chinese government has encouraged the country’s financial institutions to increase foreign trade loans, as well as to allow debtors to defer both principal and interest credit repayments. Banks have also been advised to consider rolling over the loans of small and mid-sized businesses that were severely affected by the COVID-19 pandemic.
The authorities have further promised to boost support for the CITIC Insurance Shanghai Branch. The goal will be to improve cooperation with municipal financing guarantee funds and banks, as well as to extend the scope of policy financing from entities with less than $5 million exports per annum to companies with annual exports of up to $30 million.
Last but not least, the financing guarantee rate for all new business loan applications will be reduced to 0.5% per annum for the entire duration of the pandemic prevention and control period.
The Benefits of China Company Registration in the Current Economic Climate
The latest government policies will provide urgent relief to companies in the trade sector. The reduced tax and other obligations should help decrease the overall operating costs, as well as significantly reduce cashflow stress.
The current unprecedented economic situation and the emergency measures package adopted by the government mean that it might be worthwhile for foreign business owners to consider registering an entity in China. There are opportunities in every crisis, and this one is no different. However, it is important to note that interested import and export businesses should refer to an expert consultant services provider for more details on the full scope of the measures described above.
Why Choose Us? Business China: Your One-Stop Solution for China Company Registration
If you would like to learn more about the process of setting up a company in China and how that could take your business to the next level, contact Business China today for an in-depth consultation. We are among the leading providers of China company registration services and cater to foreign businesses of all sizes.
Business China has an excellent track record of helping over 3,000 foreign businesses enter the local market since 2008. We have assisted our clients in setting up companies in Guangzhou, Foshan, Shanghai, Shenzhen, and other major financial and trading centers. In addition to China company registration, we also provide comprehensive accounting and company management services in customizable and budget-friendly packages.
Our goal is to:
●Cut the red tape
●Provide effective and timely solutions
●Create an environment that helps your business thrive
Get ahead of the competition: call Business China today and get expert advice on all aspects of China company registration.