Analysis of Export Tax Rebate and Other Related Policy Provisions in the Printing Industry

1. Government Policies to Boost Rural Consumption

China has begun to promote policies for rural market consumption. The government has introduced a policy of 13% subsidies for rural residents purchasing household appliances, as well as subsidies for the purchase of large agricultural machinery. While increasing product consumption, this also drives the consumption of packaging and printing products.

1. Unified Corporate Income Tax Law for Enterprises of All Types of Ownership

The new tax law brings a number of benefits to printing and printing equipment enterprises, mainly by unifying the income tax rate for domestic and foreign-funded enterprises at 25%. It creates a fair competitive market environment, and domestic and foreign-funded printing enterprises will stand at the same starting line. The Implementing Regulations of the Enterprise Income Tax Law took effect on January 1, 2008. Industry insiders analyze that the new tax law will bring seven major benefits to the printing equipment manufacturing industry: the income tax rate for domestic and foreign-funded enterprises is unified at 25%; reasonable wage and salary expenses incurred by enterprises are allowed to be deducted; the deduction ratio for advertising and business promotion expenses is unified and raised; qualified small low-profit enterprises are taxed at a reduced rate of 20%; high-tech enterprises are taxed at a reduced rate of 15%; environmentally friendly and resource-saving printing enterprises can enjoy tax reductions and exemptions; and technological innovation will receive a number of incentives.

1. Enterprises Implement Mandatory Cleaner Production

"Double-exceed" enterprises and "double-have" (toxic and hazardous) enterprises are subject to mandatory cleaner production audits. The photosensitive material waste generated by the printing industry is a "double-have" substance. In July 2008, the Ministry of Environmental Protection issued the Notice on Further Strengthening Cleaner Production Audits of Key Enterprises, requiring environmental protection departments at all levels, in accordance with the provisions of the Cleaner Production Promotion Law, to supervise "double-exceed" enterprises and "XX-have" enterprises in implementing mandatory cleaner production audits.

1. Imported Printing Equipment Can Apply for Interest Subsidies

Printing enterprises that imported three types of offset presses and one type of die-cutting machine within specified technical parameter ranges in 2007 can obtain interest subsidy funds of up to 6%–7% of the import value through application. The Ministry of Finance and the Ministry of Commerce jointly issued the Notice on Doing a Good Job in the Application for 2007 Import Interest Subsidy Funds, stipulating that some equipment imported in 2007 may apply for interest subsidy funds. With the active coordination of the General Administration of Press and Publication, a total of 3 types of offset presses can apply for interest subsidies, namely web offset presses for newspapers (84431100), commercial web offset presses (84431100), and sheetfed offset presses (84431200 and 84431310).

In addition, die-cutting machines (84418090), which are widely used in the packaging and printing industry, can also apply. The standard for import interest subsidies is: the import value serves as the principal for calculating the interest subsidy, and the subsidy rate shall not exceed the most recent one-year RMB loan interest rate published by the People's Bank of China at the time of subsidy settlement. The Ministry of Finance and the Ministry of Commerce determine the subsidy coefficient within the total annual interest subsidy funds and verify the subsidy amount.

1. Export Tax Rebate Rates Raised for Some Printing Products

As of November 1, 2008, the export tax rebate rates for some publications and paper stationery will be raised to 13% and 11% respectively. On October 21, 2008, the Ministry of Finance and the State Administration of Taxation issued the Notice on Raising the Export Tax Rebate Rates for Some Commodities, stipulating that as of November 1, 2008, the export tax rebate rates for some labor-intensive and high-tech, high-value-added commodities would be appropriately raised. The export tax rebate rates for some publications and paper stationery will be raised to 13% and 11% respectively.

First, paper stationery, under Chapter 48 of the Customs commodity codes, commodity codes 4820100000–4821900000, which are mostly paper stationery; the previous export tax rebate rate ranged from 5% to 7%, and is now raised to 11%. Second, publications, under Chapter 49 of the Customs commodity codes, commodity codes 49011000–49040000, 49059100, 49059900, which are mostly publications; the previous export tax rebate rate ranged from 11% to 13%, and an increase is currently under discussion.

1. Printing Enterprises Can Deduct VAT on Equipment Purchases

As of January 1, 2009, all general VAT taxpayers nationwide (regardless of region or industry) are allowed to deduct the input tax contained in newly purchased equipment, and any undeducted input tax is carried forward to the next period for continued deduction. The printing industry will also benefit. In November 2008, the State Council executive meeting deliberated and in principle approved the Interim Regulations of the People's Republic of China on Value-Added Tax, deciding to implement the VAT transformation plan nationwide in 2009.

The main content of this VAT transformation reform is: as of January 1, 2009, while maintaining the current VAT rates unchanged, all general VAT taxpayers nationwide (regardless of region or industry) are allowed to deduct the input VAT contained in their newly purchased equipment, and any undeducted input VAT shall be carried forward to the next period for continued deduction. The scope of fixed assets eligible for deduction mainly covers machinery, mechanical equipment, transport vehicles, and other equipment, tools, and instruments related to production and operation. Real estate such as buildings and structures shall not be included in the scope of VAT deduction.

As supporting measures for the VAT transformation reform, the VAT exemption policy for imported equipment and the VAT rebate policy for domestic equipment purchased by foreign-invested enterprises, which once benefited printing enterprises, will be cancelled accordingly.

1. Lowered Threshold for Hong Kong and Macao Investment in Mainland Packaging and Printing Enterprises

As of January 1, 2009, Hong Kong and Macao investors establishing packaging and decorative printing enterprises in the mainland will be subject to the same minimum registered capital requirements as mainland enterprises. The Ministry of Commerce separately signed the Supplement V to the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Supplement V to the Mainland and Macao Closer Economic Partnership Arrangement with the governments of the Hong Kong and Macao Special Administrative Regions respectively. These two agreements will officially take effect on January 1, 2009.

The annexes to these two agreements stipulate that the mainland's specific commitments on printing and publishing services for Hong Kong and Macao are: the minimum registered capital requirement for Hong Kong and Macao service providers establishing printing enterprises engaged in packaging and decorative printing in the mainland shall be implemented by reference to mainland enterprises. Previously, the minimum registered capital for Hong Kong and Macao investment in mainland packaging and decorative printing enterprises was 10 million yuan, but starting from 2009 they will enjoy "national treatment," with a minimum of 1.5 million yuan, the same as mainland enterprises. This means that the threshold for Hong Kong and Macao investment in the mainland printing industry has been further lowered, which will help the mainland printing industry attract Hong Kong and Macao capital.

— This article is reposted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-362094.html