The Chinese Ministry of Finance has issued a circular that offers exemptions for businesses involved in offshore service outsourcing.
Released last week, Circular 64 will provide a 5% business tax exemption for companies operating in 21 cities across the country.
The exemption is effective from July 1 and will run until December 31 2013 in Beijing, Tianjin, Dalian, Harbin, Daqing, Shanghai, Nanjing, Suzhou, Wuxi, Hangzhou, Hefei, Nanchang, Xiamen, Ji'nan, Wuhan, Changsha, Guangzhou, Shenzhen, Chongqing, Chengdu and Xi'an. The circular also states that refunds will be given on any tax already paid.
"Many taxpayers will be pleased with this news," said Leonard Khaw of Deloitte, in Shanghai. "Many companies see this as an area to generate a lot of extra revenue."
Recent information from the government showed that China is second only to India as a provider of outsourcing services.
"This approach is similar to India but I do not think that they will try and compete. The authorities see this as a way of making money and also as a way of employing many people but it is not the way they want to develop their economic development," said Khaw.
The exemption will apply only to Chinese companies established in these selected cities. The circular also set out other local financial credits, grants and subsidies for businesses.
In the first five months of 2010, China's revenue from outsourcing increased by 139% to $5.5 billion, of which $3.9 billion came from overseas orders, up 106% from a year earlier, the Ministry of Commerce said.
