China has issued Circular Caishui  No. 115 that makes qualified foreign invested R&D centres eligible for the exemption of VAT and customs duty on certain imported equipment.
According to KPMG China the R&D centres should meet different criteria depending on the time of establishment. Circular 115 imposes more strict requirements on the foreign invested R&D centres established on or after October 1, 2009 in terms of the amount of R&D investment, number of R&D specialists and accumulated cost of equipment purchased.
The above mentioned foreign invested R&D centres and qualified domestic R&D institutions and schools are entitled to VAT refund on purchase of domestically-manufactured equipment.
Circular 115 sets out a list of equipment qualifed for the above preferential policies in its appendix.
The circular decreases indirect tax leakage for business, says KPMG.