Incentives for Energy Conservation Industry Clarified
On 30 December 2010, Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued the Circular Cai Shui [2010] No. 110, which went into effect on 1 January 2011. The circular mainly covers the following tax incentives granted to Energy Performance Contracting (EPC) projects and Energy Conservation Service Companies (ECSEs):
With aim to enjoy the BT and VAT incentives, the technologies adopted by ECSEs in EPC projects and the agreements signed between ECSEs and ECCs should fully comply with the detailed requirements from General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ) and General Administration of Standardization (GAS). With aim to further enjoy the EIT incentives, ECSEs must meet additional requirements on registered capital, capacity, human resource, etc.
Observations:
The detailed tax incentives to ECSEs have been clearly introduced in the Circular. However, with aim to be qualified for such incentives, ECSEs need to meet a lot of detailed requirements.
Suggestions:
ECSEs should assess the possibility of being qualified to enjoy the above tax incentives, mainly focusing on the technology, registered capital, capacity, human resource, etc. If the result is positive, ECSEs need to prepare the agreements in accordance with the Circular and kick off the incentive application immediately.
If ECSEs have both EPC projects and other business, they should separate the EPC projects from the other business. Otherwise, the above incentives will not be applicable to the EPC projects.
For further information contact tax partner Leo Guan at HLB member firm Shanghai ThinkBridge Consulting, China
Mr Leo Guan
Shanghai ThinkBridge Consulting
Unit 1702-1703
Shanghai Central Plaza
No.227 Huang Pi Bei Road
200003
Shanghai
China
Phone: +86 (0)21 6375 8318
E-mail:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
About Shanghai ThinkBridge Consulting
ThinkBridge Consulting is a member of HLB International a leading business management and financial consulting service provider formed by experienced, credentialed and professional consultants.
ThinkBridge Consulting provide professional services with long-term perspectives and integrated solutions. The professionals at this firm have proven expertise in wide array of services and solutions delivery including management processes consulting, financial and tax consulting, financial outsourcing services and professional staff supporting, etc. Corporate clients include multi-national companies, foreign invested enterprises, private companies and state-owned enterprises, some of which are Global 1000 and Fortune 500 companies.
