How is the income tax refund for reinvestment determined?
A limitation is set on the total accumulated amount of reinvestment allowable for tax refund purposes. The formula is:
[Maximum reinvestment amount eligible for tax refund = (Taxable income for tax year - Actual enterprise income tax paid for that year) x Profit distribution percentage of the foreign investor in that FIE].
In addition, the guidelines also states that when an FIE changes its undistributed profits or reserve fund derived from after tax profits into registered capital of the same enterprise, the foreign investor involved will qualify for a tax refund based upon its reinvested portion.