The Customs Import and Export Tariff of the People's Republic of China for 2007 (the Customs') has set out the import tariff rate, value-added tax rate and export drawback rate on turbo-jets, turbo-propellers and other gas turbines.

The value-added tax rate and export drawback rate are both 17 per cent. The interim duty rate on the imported parts of turboshaft engines in 2007 is zero. In accordance with the Asia-Pacific Trade Treaty, the agreement tariff rate on turbofan engines exceeding 25kN is zero and other turbo-jets exceeding 25kN is 0.5 per cent.

In 2001, the Ministry of Finance, the General Administration of Customs and State Administration of Taxation issued the Interim Provisions Regarding Import Tariff Exemption of Imported Goods for Exploitation of Petroleum (Natural Gas) in the Seas of PRC (the Interim Provisions'), effective from 1 January 2001 to 31 December 2005. According to the Interim Provisions, when exploiting petroleum (natural gas) in the seas of PRC, equipments, devices, parts and components and special tools when imported to be used directly for exploitation are exempted from import tariff and value-added tax. Turbines are included in this. In Appendix 1 of List of Tax Exempted Imported Goods, turbines are included as tax exempted imported goods.

In 2006, the Ministry issued a similar regulation, the Provisions Regarding Import Tariff Exemption of Imported Goods for Exploitation of Petroleum (Natural Gas) in the Seas of PRC (the Provisions'), effective from 1 January 2006 to 31 December 2010.

But when the Provisions were issued, Appendix 1 of List of Tax Exempted Imported Goods (the List') was not provided. Therefore, whether turbines are still included as tax exempted imported goods is unknown.

However, as the provisions continue the Interim Provisions, and if the List's appendix is the same or if the relevant provisions on turbines have not changed, it can be assumed that turbines should be exempted from import tariff and value-added tax:

  • if they cannot be produced in PRC (or if made in PRC whose performance failed to meet requirements); or
  • when imported to be used directly for exploitation of petroleum (natural gas) in the seas of PRC.

PRC authorities are also thinking of implementing preferential import tariff policies on 16 key areas of equipment with vital technology. The first preferential import tariff policy for textile machineries was issued in January 2007. Relevant policies for other equipment with vital technology will be issued gradually in the near future.

It is still not certain whether turbines are regarded as equipment with vital technology in these 16 key areas, since no policies on them have been issued yet. However, if so provided, the parts and components of turbines, when imported, could enjoy the preferential import tariff policy of first collection and later rebate'. The import tax exemption policy, though, would no longer apply to the whole set of equipment.

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