Scope of tax and fiscal preferential policies to be cleaned-up

The tax and fiscal preferential policies to be cleaned-up include:

Tax preferential policies suspected of being illegitimate

Tax preferential policies privately formulated by the local government other than those stipulated in the specific tax laws, regulations and provisions, or the Law of the People's Republic of China on Regional National Autonomy; and any other specific tax preferential policies formulated by government departments without the approval of the State Council.

Non-compliance fiscal policies on non-tax revenue

Reduction, waiver or deferral offered by the local government in the collection of administrative and institutional charges, government funds and social insurance payments from enterprises; transfer of land at a preferential price or at no cost; transfer of state-owned assets at a low price, etc.

Non-compliance fiscal expenditures policies

• Preferential policies on fiscal expenditures linked with tax revenue or non-tax revenue from the enterprise, such as refund after collection, financial bonuses or subsidies, reduction or exemption of land transfer payment by way of subsidy or payment on behalf of the enterprise, etc.
• Other preferential policies, such as payment of social insurance on behalf of enterprises, reducing fee on electricity and water, using financial bonuses or subsidies to attract enterprises to establish or pay taxes and charges locally, providing rebates on local fiscal revenue that some regions have implemented, etc.

Clean-up methods and timeline

According to the new regulations issued by the State Council and the MOF, all local finance and tax authorities should sort out all the tax and fiscal preferential policies issued before 1 December 2014 (particularly in respect of contracts or agreements signed with enterprises, memos, meeting minutes or discussion summaries, as well as the request for instructions, report and official reply on a "case-by-case" basis, etc.), report upward level-by-level to the MOF and the State Council on a consolidated basis. The whole clean-up procedure is expected to be accomplished by the end of March 2015.

In particular, preferential policies which are in violation of the laws and regulations should be abolished from 1 December 2014. For those policies which do not violate the laws and regulations and need to be retained, the local authorities should report upward level-by-level to the State Council for approval, and any policies which are not approved will be abolished.