Manufacturing in China:

Setting up a manufacturing facility in China requires closely coordinated execution. We manage the process with your executive team and legal/accounting professionals getting the job done on time and on budget. Our bi-lingual experts in China operate collaboratively throughout the process so your team can make the business decisions that get your plant up and running on schedule. 

Identifying the Right Location:

China has created specialize zones for the location of Foreign Invested Enterprises (FIE).

Three are especially suited for foreign manufacturing and distribution operations.
 

Special Economic Zones (SEZ)
Free Trade Zones (FTZ)
Export Processing Zones (EPZ)

 

Foreign manufacturers established in these zones receive tax holiday on profits for the first 3 to 5 years of operation.
However, they are required to pay duty on imported materials
and 17% VAT on the sale of all merchandise. If the merchandise
is exported, the FIE can receive 13% VAT refund.

Originally, China opened 3 SEZ’s. Today many local cities and towns operate SEZ/s to attract foreign investment.

There are 15 Free Trade Zones (FTZ) and 3 Export Processing Zones (EPZ). The 12 coastal zones are shown on the map to the right.

FIE’s located in these zones do not pay VAT on exported goods
and they can import materials duty free that are used to process exported products. FTZ,s offer the same 3 -5 year
tax holiday on profits and the same business options as SEZ’s.

   
 

Planning for China's Tax Impact:

Deciding where to most efficiently locate your manufacturing plant requires careful analysis of the impact logistics, labor supply, occupancy costs, import duties and taxes will have on your operations. 

Export Processing Zone (EPZ)

A zone designated to encourage the development of exports that require a high proportion of imported materials:  
 All finished products must be exported  
 No duty charged on imported components  
 No VAT invoice; No VAT charged  
 Save 4% on cost of imported raw material
compared with Special Economic Zone:
            VAT in EPZ = 0%   
            VAT in SEZ = 17%-13% = 4%

Free Trade Zone (FTZ)
This zone provides greater trading flexibility to foreign manufacturers than an EPZ:
 Finished products can be exported or sold into the domestic market   Same 0% VAT export policy as an EPZ
 17% VAT applied to domestic market sales   Building rental fees are highest in FTZ.  
Labor costs in EPZ and FTZ are market rates.

China’s Value Added Tax (VAT) significantly impacts the sale of goods.  We help clients determine how the tax will effect their business operations. This model shows the impact selling manufactured goods from on one of China’s enterprise zones into China’s domestic market.

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