The PRC Enterprise Income Tax ("EIT") Law and its implementation regulations, effective from 1 January 2008, grant preferential EIT treatment to enterprises involved in public infrastructure, synergistic utilisation of resources, environmental protection, conservation of energy and water and production safety. The five catalogues recently promulgated to clarify the applicable criteria are summarised below:

Title Scope Tax Preferences
Preferential EIT Treatment Catalogue for Specialised Equipment in Environmental Protection (Version 2008) Five categories

  • water pollution control equipment
  • atmospheric pollution prevention and control equipment
  • solid waste disposal equipment
  • environmental monitoring instruments
  • cleaning production equipment

Enterprises may claim 10% of the investment in such equipments for their own use as tax credit.

Excess tax credit can be carried forward for five years
However, a disposal of the equipments within five years will trigger a claw back of the tax credit accordingly



Preferential EIT Treatment Catalogue for Specialised Equipment in Energy and Water Conservation (Version 2008)  Two categories
  • energy conservation equipment
  • water conservation equipment

  



Preferential EIT Treatment Catalogue for Specialised Equipment in Safe Production (Version 2008) Eight categories

  • coal mines
  • mines other than coal
  • hazardous chemicals
  • fireworks
  • highways
  • railways
  • civil aviation
  • emergency relief equipment and facilities

Enterprises may investment in such equipments for their own use as tax credit.

Excess tax credit can be carried forward for five years. However, a disposal of the equipments within five years will trigger a claw back of the tax credit accordingly.



Title Scope Tax Preferences
Preferential EIT Treatment Catalogue for Synergistic Utilisation of Resources (Version 2008) Three categories
  • associated minerals and by-products
  • waste water (or liquid), waste gas, waste residue
  • recyclable resources

 10% of the revenue for the use of such resources may be excluded from taxable income.



Preferential EIT Treatment Catalogue for Public Infrastructure Projects (Version 2008) Seven categories
  • harbour and wharf
  • airport
  • railway
  • highway
  • urban public transportation
  • electrical power
  • water projects

 Three-year exemption followed by a three-year, 50% reduction starting from the first income generating year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.