Wine industry in three Western China provinces to receive tax benefits

Winemakers and grapevine planting companies in three Western China provinces and autonomous regions are expected to enjoy a reduced income tax rate later this year, after being listed as ‘encouraged industries’ by the national government.

In the ‘catalogue of encouraged industries in the Western region’, released last month by China’s National Development and Reform Commission, ‘high quality’ vine grape planting and winemaking was included under ‘new entries of encouraged industries’ for Gansu, Ningxia and Xinjiang.

The decision, which has been ratified by the State Council and is set to take effect from 1 October, represents significant recognition of wine’s potential in those regions. The move is part of the government’s ‘Western Development Strategy’, which aims to strengthen the economic development of the more inland, western half of China.

‘From 1 January 2011 to 31 December 2020, for companies within industries listed in the ‘catalogue of encouraged industries in the Western region’, a 15% corporate income tax rate will apply,’ according to a joint statement by the Ministry of Finance, the General Administration of Customs and the State Administration of Taxation released in July 2011. The normal corporate income tax rate in China is 25%.

It has taken three years of research and discussion with local authorities to put a list of encouraged industries together.

DecanterChina.com understands that in order to qualify for the tax benefit, 70% of a company’s major income must be gained from one of the listed industries. Domestic companies can also expect to be exempt from import tax on equipment bought from abroad for their own use.