Shanghai Free Trade Zone Overview

The China (Shanghai) Pilot Free Trade Zone refers to the Shanghai Free Trade Zone or Shanghai Free Trade Area, which is Chinaa��sA�largest free trade zone. The pilot area was formally approved for establishment by the State Council on August 22, 2013 and officiallyA�opened at 10:00 a.m. on September 29.

The Shanghai Free Trade Zone covers four special customs supervision zones, namely; the Shanghai Waigaoqiao Free Trade Zone, theA�Waigaoqiao Bonded Logistics Zone, the Yangshan Bonded Port and the Shanghai Pudong Airport Free Trade Zone. The zones altogetherA�have a total area of 28.78 square kilometers.

Expansion to Six AreasA�
  • The financial services sector includes foreign banks established by permitted and qualified foreign financial institutions;A�Sino-foreign joint-venture banks jointly established by eligible private capital ; foreign financial institutions, and more.
  • The shipping services sector relaxes the foreign equity ratio limits of Sino-foreign joint-ventures and Sino-foreign cooperativeA�international ship transport enterprises. This allows for the establishment of wholly foreign-owned international shippingA�management and other enterprises.
  • In commercial services, foreign operators are able to form a specific portion of value-added telecommunication services andA�foreign companies can engage in gaming entertainment equipment production and sales.
  • Professional services include legal services, credit investigations, travel agencies, talent agency services, investment managementA�services, and engineering and construction services.
  • In terms of the cultural services sector, the FTZ will cancel equity ratio limits of foreign performance agencies and allow for theA�establishment of wholly foreign-owned performance agencies.
  • As for social services, the FTZ will allow for Sino-foreign cooperative education institutions and Sino-foreign cooperative,A�joint-venture vocational training institutions, as well as the establishment of wholly foreign-owned medical institutions.
Policy Support
The objectives of opening up RMB capital are: Firstly, the expansion of cross-border RMB trade in the FTZ. Secondly, theA�implementation of a pilot interest rate market. Thirdly, RMB capital account convertibility in the FTZ. Fourth, the establishment of aA�foreign exchange management system compatible with the FTZ.
Tax Incentives:
  • The revaluation of assets arising from asset restructuring actions for non-monetary assets of foreign investments of enterprisesA�or individual shareholders registered in the pilot zone cannot exceed a period of five years and shall be subject to income taxA�installments. This is referred to as a�?the non-monetary intangible asset investment policya�?.
  • The equity incentive income tax policies for the incentives given to pilot zone enterprises with high-end talent or a shortage ofA�talent in the form of equity such as shares or rent ratios is similar to those policies implemented in other regions, such as theA�Zhongguancun pilot equity incentive income tax policy which is also referred to as the a�?equity incentive policya�?.
  • Financial leasing companies registered in the pilot area, as well as subsidiary companies of financial leasing companiesA�established in the pilot area, will be included in the financial leasing export tax rebate pilot program.
  • An import VAT policy, upon approval from the relevant state departments, can be applied to registered domestic leasingA�companies, or leasing companies that have set up subsidiaries in the pilot zone for airline company aircraft purchased fromA�abroad that are at least 25 tons in weight.
  • The processed goods of manufacturing enterprises established in the pilot zone, in accordance with business applications, canA�be implemented as domestic goods on a trial basis and in accordance with the corresponding tariff policies, which are referredA�to as a�?selective tax policiesa�?.
  • Under the existing policy framework, manufacturers and manufacturing-oriented service companies within the pilot zone canA�import machinery, equipment and other necessary goods tax-free; however, in the case of the importation of consumer serviceA�goods, there is no clear exception from the tax-free policy in the relevant provisions of laws and regulations.
  • Improved FOB Port Refund Policy
Regulatory Model Innovation for Trading: The Shanghai Pilot Free Trade Zone will implement the new innovative model of regulatoryA�services of a�?first gradually opening up, and secondly safely and effectively managing the free flow of goods within the zonea�?.
Promotion of the innovation and development of foreign trade logistics: This incorporates the favorable foreign trade logistics of theA�four free trade zones in Shanghai, namely: the Waigaoqiao Free Trade Zone, the Waigaoqiao Bonded Logistics Zone and the PudongA�Airport Comprehensive Free Trade Zone.
Contact usA�
For more information on China (Shanghai) Pilot Free Trade Zone, please contact the following:
Philip Yu
Principal a�� Corporate and PRC Services
Tel: +852 2541 6632
Email: philipyu@fungyucpa.com

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