Q&A for the Company Registration in Bonded Area of Shanghai FTZ-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Q&A for the Company Registration in Bonded Area of Shanghai FTZ

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Recently, with the official unveiling of Jinqiao Comprehensive Bonded Zone, five comprehensive bonded zones approved for transformation in Shanghai have been completed the acceptance and listing procedures, becoming new highlands of Shanghai's open economy. Taking Jinqiao comprehensive bonded zone as an example, the investment superiority and significance of economic strategy of the bonded zone are self-evident, However, some people often confuse bonded area with free trade area. As an important part of the FTZ, it is better to know more about the bonded zone before you want to invest and register a company in the Bonded Area. So, let us get to know Shanghai Bonded Area?

Q:	What are " Bonded Area" and "Free Trade Zone"? What is the difference between them?
A:	" Bonded Area " is a type of FTZ, also known as bonded warehouse zone, which is level below comprehensive bonded zone. This is an area set up by the customs of a country or registered with the approval of the customs, supervised and managed by the customs, where goods can be stored for a long time. It is an economic area established with the approval of the state council and under the special supervision of the customs. "FTZ", namely free trade zone, it has two meanings: first, it refers to a special area designated by a country within its own territory outside the customs jurisdiction, with trade as the main content, namely domestic free trade zone; second, it refers to a trade zone composed of countries that have signed free trade agreements, namely free trade zone between countries. The difference between the free trade zone and the free trade zone is mainly reflected in the investment management and foreign exchange policy. The free trade zone allows foreign goods to enter and leave freely without customs duties, while the free trade zone belongs to the domestic customs, that is, once goods enter the free trade zone, they will be subject to the supervision of the customs.
Q:	What are the bonded areas in Shanghai? What is the functional orientation?
A:	Shanghai free trade zone covers five areas, namely Shanghai Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area, Shanghai Pudong Airport comprehensive free trade zone and the newly established Jinqiao comprehensive free trade zone on April 21, 2020. The function of "bonded zone" is defined as "bonded storage", export processing and entrepot trade". The bonded zone has the functions of import and export processing, international trade, bonded storage commodity display, etc., enjoys the policy of "free of license, duty-free and bonded", and implements the operation mode of "domestic and overseas customs". It is one of the economic zones with the highest degree of opening, the most convenient operation mechanism and the most preferential policies in China.
Q:	What is "bonded warehouses", "bonded areas" and "logistics parks"?
A:	"Bonded warehouse" is a multi-functional warehouse used to store goods in the bonded area that have not yet paid customs duties. "Bonded area" is an area set up by the customs of a country or approved and registered by the customs, supervised and managed by the customs, where commodities can be stored for a long time. "Bonded warehouse" and "bonded zone" have three functions of "bonded storage, export processing and entrepot trade". "Bonded warehouse" and "bonded area" are approved and registered by the customs, supervised and managed by the customs. "Logistics park" is an area where the logistics industry is concentrated. It gathers a variety of logistics facilities and enterprises together to form a logistics enterprise concentration area with multiple service functions. The function orientation of "logistics park" is the function of flow organization and management and the function of economic development relying on logistics services. The registration and management departments of "logistics park" belong to multiple departments according to different functions, such as the development and Reform Commission, the industrial and commercial bureau, the Transportation Bureau, etc.
Q:	What are the special policies of "bonded area"?
A:	Unless otherwise provided by laws and regulations, the import tariff and import link tax of goods entering the bonded area from abroad shall be handled in accordance with the following provisions: Machines, equipment and other capital construction materials required for productive infrastructure construction projects in the area shall be exempted from tax; The production and management equipment, reasonable amount of office supplies for self-use and the fuel for production of maintenance spare parts required by the enterprises in the zone, and the materials, equipment required for the construction of production plants and storage facilities shall be exempted from tax; A reasonable number of management equipment and office supplies for their own use and the maintenance spare parts needed by the administrative organ of the bonded area shall be exempted from tax; The enterprises in the zone shall be bonded with the raw materials, parts, components, packaging articles needed for processing export products. Transit goods and goods stored in the bonded area shall be managed in accordance with bonded goods For the import and export of goods between the bonded area and foreign countries with simple procedures, the consignee or consignor of the goods or their agent shall file with the customs. In addition to the passive export quota management, the above-mentioned goods shall not be subject to the import and export quota and license management.
Q:	What are the advantages of enterprise registration in the "bonded area"?
A:	From the perspective of regulatory authority: The free trade zone belongs to the domestic and foreign customs. The customs generally do not interfere with the goods entering the free trade zone. For example, the goods can be freely sold and stored in the free trade zone, without dealing with the customs. Only when the goods in the free trade zone need to enter the domestic non free trade zone, they need to declare customs and pay taxes. The bonded area belongs to the domestic customs, that is, once the goods enter the bonded area, they will receive the supervision of the customs. The bonded area is equivalent to a larger bonded warehouse. From a policy point of view: The bonded area has the functions of import and export production and processing, international trade, bonded storage commodity display, etc., enjoys the policy of "free of license, tax-free policy, bonded", and implements the operation mode of "domestic and overseas customs"; The bonded goods can be freely traded in the area without time limit. Meanwhile, the enterprise's own equipment, building decoration materials and 20 kinds of office equipment in the area are all exempt from tax and license. In addition, the enterprise income tax rate in the area is 15%, while the productive enterprise is exempt from tax by two and three halves from the profit-making year. If the non-productive enterprise is exempt from tax by 10% for one year and two years from the start-up； It can carry out bonded simple production and processing, bonded storage (duty paid out of the bonded area), bonded display (temporary import and export of duty-free policy) in the area; If the raw and auxiliary materials of the company need to be purchased from abroad, build a factory in the bonded area, your materials can be bonded, and the materials purchased from home can enjoy the tax refund within March to facilitate the entrepot trade and increase the income of relevant expenses. Commodities transported into the bonded area may be stored, refitted, classified, mixed, exhibited, and manufactured. When foreign goods are deposited in the bonded area, they do not have to pay import duties, but can be freely exported, only paying storage fees and a small amount of fees.

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