China State Council to Upgrade Bonded Zones

China is to upgrade “special administrative zones” focusing on bonded warehouses. Under new plans enterprise operating within the confines of the bonded zones will be subject to favorable taxation, streamlined procedures, facilitated logistics etc. Preferential treatment will also be offered to companies involved in R&D or enterprises offering innovative services. Further development of bonded warehouse will focus on developing new technical capacities, infrastructure and entcing industry from the following 5 areas: 1) manufacturing 2) R&D 3) logistics, 4) repair 5) sales.

During a State Council’s executive meeting held early on Jan. 2, 2019, Premier Li Keqiang outlined China’s plans to upgrade comprehensive bonded zones and develop new technologies, processes and solutions. General Administration of Customs, State Taxation Administration, Ministry of Commerce and 11 other government departments drafted proposals on upgrading comprehensive bonded zones to align with advanced international standards, promote trade and investment and nurture new competitive advantages.

On Jan. 10th, deputy director of GAC Li Guo and a high ranking official from the STA explained the proposals and pledged to develop bonded zones into centers of innovation focused on — manufacturing, R&D, logistics, detection & repair and sales. Some schemes revealed are:

Favorable tax status

A pilot program qualifying enterprises operating within the bonded zones for treatment as general taxpayer will be trialed. Enterprises that meet relevant requirements could apply for the general taxpayer status and enjoy benefits of VAT invoice.

Preferential permission for R&D and manufacturing companies

China encourages R&D and innovative organizations to develop within the bonded zones. All goods and items that companies in the zones import for R&D purposes will be exempt from import licensing, except for those prohibited from border entry. The highest credit rating will be directly granted to those R&D, processing and manufacturing companies once evaluated as having met certain requirements.

Logistics to be facilitated

In the course of corporate production and operation, any eligible item entering the comprehensive bonded zones and bonded goods in transfer from one zone to another will be exempted from customs clearance procedures.

Simplified write-off process

A simpler write-off procedure for taxation, social insurance, business, and customs services will be introduced. An online “write-off service platform” will be developed and liquidation reports will be the only document needed for write-off procedures.

As of Jan. 10th, 2019, there are 140 special administrative zones (96 comprehensive bonded zones) in China. Since 1990, China has developed six types of special administrative zones, including comprehensive bonded zones (the most advanced mode out of 6). The first 11 months of last year saw imports and exports of 4.7 trillion yuan ($691 billion), an increase of 12.3 percent over the same period in 2017, in all of China’s 140 special customs administrative zones, including 96 comprehensive bonded zones. They accounted for 16.8 percent of China’s imports and exports.