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China: Tax Incentives for Clean Development Mechanism Projects Published

(Apr. 28, 2009) On April 2, 2009, the Ministry of Finance (MOF) published a Circular on the Corporate Income Tax Policies of the China Clean Development Mechanism [CDM] Fund and CDM projects (CS [2009] No. 30). Dated March 23, 2009, the Circular for the first time clarifies the corporate income tax incentives available to CDM enterprises in China and the China CDM Fund. Under the Circular, part of the revenue derived by the China CDM Fund, a wholly state-owned fund managed by the MOF, is exempted from corporate income tax, such as greenhouse gas emissions reduction transfer income turned over to the state.

With regard to enterprises implementing CDM projects, the Measures for the Operation and Administration of CDM Projects (CDM Measures) establish that certain revenue derived from the transfer of greenhouse gas emission reductions by CDM projects will be turned over to the state (art. 24). (CDM Measures [in Chinese] (effective from Oct. 12, 2005), China CDM website, (last visited Apr. 22, 2009).) Under the Circular, the turned-over revenue is exempted from corporate income tax. The Circular also provides tax holidays for income derived from specified CDM projects. (Text of the Circular [in Chinese], Central People's Government of the People's Republic of China official website, Apr. 2, 2009, available at