Benefits for energy service companies

Key policy tools include a financial subsidy or rebate for those energy saving projects by Escos that meet relevant requirements, and the encouragement for financial institutions to support Escos by providing them with adequate financing, creating and making innovative credit products available, broadening the scope of collateral acceptable for financing, and simplifying application and approval procedures.

A significant portion of the measures are dedicated to tax-related benefits.

For example, if an Esco implements an energy performance contracting project, it will be exempt from income tax. Additionally, the transfer of assets due to the implementation of this project will be exempt from value-added tax.

Another benefit for an Esco is that if it implements an energy performance contracting project under certain conditions, it may receive a corporate income tax exemption for the first three years and receive a 50% reduction between the fourth and sixth year.

Reasonable expenditures paid to the Esco by an energy consuming company in accordance with the energy performance contract can be deducted without reference to service fees and assets price.

For the full scope of the new policy tools, Chen recommends that foreign-invested companies “should consult with their local tax authorities and their bank to better understand these policies and operational rules in practice.”

One small disadvantage for foreign-invested companies in this sector is that central budget funds and special funds will likely favour domestically-owned companies.