China alert: Technology, Media & Telecommunications Focus - Issue 1, June 2013 - China extends tax incentives for outsourcing service sector
On 3 February 2013, the Office of the State Council issued Circular 33 to extend tax incentives for the outsourcing service sector until 31 December 2018.
Now is a good time for existing Advanced Technology Service Enterprises (ATSEs) to assess if they continue to qualify for the tax incentives and to act accordingly. Business tax (BT) exemption on qualified outsourcing service income can help companies in the outsourcing service pilot cities to obtain certainty regarding Value Added Tax (VAT) exemption on qualified offshore outsourcing service income up to 31 December 2013.
Furthermore, in conjunction with the VAT pilot program, the future reduction of the offshore outsourcing income threshold for ATSE qualification to 35 percent may attract more multinational companies to set up outsourcing service companies in China, including internal shared service centres.