Tax policies for pilot temporary entry repairs in Shanghai FTZ

The Ministry of Finance, Ministry of Ecology and Environment, Ministry of Commerce, General Administration of Customs, and State Taxation Administration have jointly issued a notice clarifying tax policies for pilot temporary entry repairs in the China (Shanghai) Pilot Free Trade Zone (FTZ), including the Lin-gang Special Area.

Bonded treatment and tax exemptions

The notice, dated June 27, states that in the customs special supervision areas (hereinafter referred to as pilot areas) within the FTZ, bonded treatment will be applied to goods temporarily permitted to enter the pilot areas from abroad for repairs starting from June 27. These goods, when re-exported, will be exempt from customs duties, import value-added tax (VAT), and consumption tax. If the goods are not re-exported and instead converted for domestic sale, import procedures must be completed as required. Import duties, VAT, and consumption tax will be levied based on the actual status of the goods after repair. Taxes already levied on imported goods before the issuance of this notice will not be refunded.

Applicable areas

This policy applies to the Yangshan Special Comprehensive Bonded Zone, Shanghai Pudong Airport Comprehensive Bonded Zone, Shanghai Waigaoqiao Port Comprehensive Bonded Zone, Shanghai Waigaoqiao Free Trade Zone, and other customs special supervision areas within the China (Shanghai) Pilot Free Trade Zone (including Lin-gang Special Area) approved by the State Council.

Eligible goods

The scope of goods eligible for the aforementioned repair business includes:

(1) Goods included in the catalogs of products for maintenance and repair in comprehensive bonded zones, which are jointly formulated by the Ministry of Commerce, the Ministry of Ecology and Environment, and General Administration of Customs;

(2) Other goods allowed to undergo bonded maintenance and repair within the customs special supervision areas of the China (Shanghai) Pilot Free Trade Zone (including Lin-gang Special Area) according to relevant regulations.

Unless permitted by laws, administrative regulations, or provisions made by the State Council or its authorized departments, repair operations for goods prohibited from import and export are not allowed within the pilot areas, nor is dismantling or scrapping through repair methods permitted.

Conditions for domestic sale

Goods within the scope of the aforementioned repairs may be sold domestically after repair if they meet import regulations. However, goods prohibited from import by the State or restricted from import without permission must be re-exported after repair and cannot be sold domestically. Residues, old parts, and defective parts generated or replaced during the repair process should generally be re-exported. If re-export is not possible, they must not be sold domestically and should be destroyed according to relevant regulations. Solid waste must be disposed of in accordance with solid waste management regulations.

Eligible repair enterprises

Enterprises within the pilot areas applying for the aforementioned repair business will be determined by the administrative committee of the respective customs special supervision area, in collaboration with commerce, ecology and environment, and customs departments. The list of pilot enterprises will be reported to the Shanghai Municipal Bureau of Finance, Shanghai Municipal Commission of Commerce, Shanghai Municipal Bureau of Ecology and Environment, Shanghai Taxation Administration, and Shanghai Customs for record.

Source: Ministry of Finance of the People's Republic of China