China Approves Tax Breaks And Subsidies For Service Outsourcing Industry

The State Council has approved tax breaks and subsidies to boost the growth of Chinas service outsourcing industry.

The measures will also include a series of tax and fiscal policies and intellectual property rights protection, reports Xinhua. Businesses dealing with information technology, training, production materials procurement, logistics, and advertising are qualified to be service outsource providers.

The government is also offering service outsourcing companies a subsidy of up to RMB4,500 annually per college graduate employed for at least one year.

The measure is the latest in the governments efforts to provide jobs for the countrys graduating students and migrant workers. According to a survey done by the Ministry of Agriculture, 20 million out of a total estimated 130 million migrant workers have been forced to return to rural areas because of unemployment.

Companies will also be eligible for favorable tax policies in 20 Chinese cities, including Beijing, Shanghai, Xian, Suzhou and Hangzhou, which have been cited as pilot service outsourcing regions.

Service outsourcing companies will be allowed to implement flexible working hours for employees as long as it gets approval from local human resources departments.

Moreover, companies based in central and west China will be give favorable tax policies for loans to begin service outsourcing projects. The new rule aims to improve the quality of the workforce by developing an outsourcing supervision mechanism, introducing new insurance products and building a network of trained outsourcing personnel.

One example is Suzhou Industrial Park which offers service companies an income tax rate of 15 percent in comparison to 25 percent found elsewhere in the country.

The service outsourcing industry works by having service operations shifted to professional providers thus allowing companies to concentrate on their core business. The global service and software outsourcing business is forecast to reach US$1.6 trillion by 2010.

This article was written for China Briefing, a complimentary monthly magazine and daily news service about doing business in China. It covers topics relating to the Chinese economy, the market in China, foreign direct investment and Chinese law and tax. It is written in-house by the tax and legal professionals at Dezan Shira & Associates

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