China Offers Tax Breaks for Enterprises Engaged in Shantytown Renovations

October 31, 2013 Posted by China Briefing Reading Time: 2 minutes

Oct. 31 – With the view to encourage enterprises to participate in “shantytown” renovation projects, China’s Ministry of Finance and the State Administration of Taxation jointly released the “Circular on Corporate Income Tax Policies for Enterprises Participating in Shantytown Renovations Led by the Government (caishui [2013] No.65, hereinafter referred to as the ‘Circular’),” which offers tax breaks to enterprises engaged in government-led shantytown renovations. Detailed information can be found below.

Applicable Scope
According to the Circular, expenses incurred by enterprises participating in the following government-led renovations may be deducted prior to the calculation of corporate income tax:

Shantytown renovations in industrial mining areas and forestry areas; and
Renovations of dilapidated buildings in reclamation areas.

Eligibility Requirements
The Circular puts forward the following six conditions for companies engaged in the renovation projects to enjoy the above-mentioned preferential policy:

The shantytown is located in the remote mining areas, forestry areas or reclamation areas that are short of public infrastructure and social public services;
The mining areas, forestry areas or reclamation areas fail to meet the conditions for commercial real estate development;
The shantytown is short of water drainage services, water and power supply services and other municipal services or public utilities;
The shantytown has at least 50 houses connected with each other;
The dilapidated buildings occupy at least 25 percent of the construction area of the shantytown; and
The renovation project is led by the government and has been included in the government planning.

As part of the country’s efforts to provide affordable accommodations to low-income urban residents, China’s central government has allocated a total of RMB35.5 billion to renovate shantytown areas in various cities this year. Among which, 44.4 percent goes to the country’s central region, 39 percent to the western region and 16.6 percent to the eastern region.

The country aims to renovate 3.04 million households in shantytown areas this year, and another 7 million in the coming five years.

The Circular is retroactively effective from January 1, 2013.

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