China boosts services outsourcing industry with tax breaks and subsidies

Release Date

30 September 2011

Reported by Xinhua News Agency, Sydney.

In early 2009, China announced a program to encourage the growth of service outsourcing nationwide. The details, including tax breaks and subsidies, were outlined in a document drafted by the Ministry of Commerce and approved by the State Council, China's Cabinet.

Service outsourcing allows companies to transfer service operations to professional providers so that they can focus on their core business. A service outsourcing company helps its clients manage business operations, such as information technology, training, logistics and advertising. The document said 20 cities, including Beijing, Shanghai, Xi'an, Suzhou and Hangzhou, etc, have been chosen for pilot service outsourcing programs.
Beginning January 1 2010, these companies are eligible for tax breaks, financial support, subsidies and intellectual property rights protection. Technology-advanced service outsourcing companies are allowed to adopt flexible working hours for workers if they get approval from local human resources departments, said the document.

Technology development companies at the national level that are based in central and west China are expected to enjoy favourable tax policies when they apply for loans to launch service outsourcing projects. The government also encourages telecommunication providers take advantage of the outsourcing pilot scheme to communicate more easily with outsourcing service providers.

China also plans to establish and improve an outsourcing supervision mechanism, introduce new insurance products and establish a network of trained outsourcing personnel. The government will offer service outsourcing companies a subsidy of up to 4,500 Yuan (US$662) a year for every college graduate employed on a contract of at least one year. The document cited Suzhou Industrial Park as an example, saying service firms there would enjoy an enterprise income tax rate of 15 percent, versus 25 percent elsewhere in the country, until 2013.

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