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Tax incentives are preferential tax policies offered by the government to incentivize or encourage a particular economic activity or to support disadvantaged business owners or individuals.

In the past 40 years since China’s reform and opening up, the country has implemented a series of preferential tax policies, in turn attracting a large number of foreign investments. However, the differentiated roll-out of incentives led to lopsided development between regions. In recent years, China’s tax incentives have sought to correct these regional imbalances while also creating space for investment and innovation in the industries of the future.

As a legitimate tool for reasonable tax planning and cost saving, tax incentives play an important role. Companies also use tax incentives as a useful indicator for market trends and government priorities. Business decisions are thus influenced, especially when deciding to enter into a sector or set up in a specific location. 

Despite the importance of the preferential tax policies to businesses, companies may find it hard to navigate China’s tax incentives system, as they are provided by different legal policies, take different forms, and follow different procedures.

In this issue of China Briefing magazine, we present an overview of China’s tax incentives system and introduce them by categories. Then, we summarize the major incentives offered in China’s respective regions or special zones, before exploring the specific incentives to encourage technological innovation and industrial upgrade. Finally, we explain the tax incentives provided to small businesses, designed to help them survive and thrive under the pandemic and other challenges.

In this issue:

• An Overview of China’s Tax Incentives Scheme
• Tax Incentives Offered in Specific Regions
• Tax Incentives to Encourage Technology Innovation
• Tax Incentives for Small Businesses