Policies and Measures Released to Encourage Reinvestments by Foreign-Invested Enterprises
ISSUING AUTHORITIES:
National Development and Reform Commission
Ministry of Finance
State Taxation Administration
Ministry of Commerce
and other authorities
DATE OF ISSUANCE:
July 7, 2025 and June 30, 2025 respectively
EFFECTIVE DATE:
July 7, 2025 and January 1, 2025 to December 31, 2028 respectively
On July 7, the Notice on Implementation of Several Measures to Encourage Reinvestments in China by Foreign-Invested Enterprises (the “Notice”) was released jointly by the National Development and Reform Commission and other six authorities. The Notice contains 12 provisions and is applicable to the foreign-invested enterprises that utilize the undistributed profits or the profits legally distributed in China to foreign investors to make reinvestments in China. Specifically, a local foreign-invested enterprise reinvestment project database shall be established, and the supportive policies shall be applicable to those projects that meet certain conditions. The foreign-invested enterprises shall be allowed to flexibly adopt long-term leasing of industrial land and other means to reduce costs, the industry access and licensing procedures shall be simplified, the relevant preferential tax policies shall be implemented, the foreign exchange capital may be transferred pursuant to applicable regulations, and the import equipment supportive policy shall be applicable to reinvestment projects that satisfy certain conditions. Additionally, the administration of loans of foreign related shareholders shall be optimized, and the relevant innovative services of financial institutions shall be encouraged. Lastly, the pilot program of report on foreign-invested enterprise domestic investment information shall be carried out, the information sharing shall be strengthened, and the investment evaluation shall be improved.
Recently, an Announcement on Tax Credit Policy for Direct Investment by Foreign Investors Utilizing Distributed Profits (the “Announcement”) was released jointly by the Ministry of Finance, State Taxation Administration, and the Ministry of Commerce. According to the Announcement, if the foreign investors utilize profits distributed by Chinese resident enterprises to make direct investments in China from January 1, 2025 to December 31, 2028 and satisfy certain conditions, the foreign investors may enjoy tax credits; the eligible foreign investors may reduce the tax payable by them for current year by an amount equivalent to 10% of their investments, and if the credit cannot be fully utilized in the current year, it may be carried forward to future years.
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