China Offers Tax Breaks to Boost Outsouring
To promote growth and compete with Indias dominance in outsourcing industry, the finance ministry of China announced business tax exemption of 5 percent for the outsourcing companies that will extend to the end of 2013 starting from July 1
Besides, the companies who were already taxed on offshore service outsourcing income since July 1 will get a refund before the end of 2010, the official Xinhua news agency said quoting a government statement.
According to a ministry, the tax exemptions will apply to all companies offering information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO) in 21 cities in China.
The 21 cities include Beijing, Tianjin, Dalian, Harbin, Daqing, Shanghai, Nanjing, Suzhou, Wuxi, Hangzhou, Hefei, Nanchang, Xiamen, Ji'nan, Wuhan, Changsha, Guangzhou, Shenzhen, Chongqing, Chengdu and Xi'an.
At present, China stands second only to India in the preferred outsourcing destinations globally. In 2009, revenues from outsourcing services in China increased by a record 151.9 percent to $10.1 billion, according to a report from the Commerce Ministry.
In India, revenues from the IT and BPO industry are estimated at more than $73 billion in FY2010, according to National Association of Software and Services Companies (NASSCOM).
According to a recent report from KPMG, China has taken lead over India as a destination for outsourcing and shared services for companies in Asia-Pacific region. KMPG estimates the China¡¯s outsourcing market to reach $43.9 billion by 2014.
"Though at the moment the country has still not reached the level of maturity seen in India, the growth of China's outsourcing market is significant. Many Western companies may still see India as their location of choice, but for executives within Asia Pacific the message is clear - China is now leading the way," said Edge Zarrella, global head, IT Advisory, KPMG China.