August 20, 2010 --The Ministry of Finance, State Administration of Taxation and Ministry of Commerce of China jointly issued a notice on the exemption of business tax on offshore service outsourcing in pilot cities in a bid to give a further boost to offshore service outsourcing.

Companies registered in 21 pilot cities, including Beijing, Tianjin, Dalian, Harbin, Daqing, Shanghai, Nanjing, Suzhou, Wuxi, Hangzhou, Hefei, Nanchang, Xiamen, Jinan, Wuhan, Changsha, Guangzhou, Shenzhen, Chongqing, Chengdu and Xian, will be exempt from business tax on income from offshore service outsourcing between 1 July 2010 and 31 December 2013.

According to the notice, income from offshore service outsourcing refers to service revenue arising from contracts signed by qualified companies with offshore entities for the provision of services outlined in the annex of this notice, including information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO), either by these companies or by their directly outsourced operators.

Business tax eligible for exemption but already paid between 1 July 2010 and the date this notice is delivered shall be deducted from future tax payable by the taxpayers. Amounts not fully deducted within 2010 shall be refunded.