As detailed in MOFTEC’s Circular Concerning the Establishment of Foreign Funded R & D Centers (2008, no. 218), and the Shanghai Muicipal Government's Provisional Regulations  of Shanghai Municipality on Encouraging Overseas Investment in the Establishment of Research and Development Institutions, compaies establishing R&D centers in Shanghai enjoy the following priviledges: Research equipment for company use is exempt from customs duties and accompanying value added taxes; (2) Software purchased from abroad is exempt from custom duties and value added tax; (3) Income from technology transfer, techcnology development, technical consulting, and technical services is exempt from business tax; (4) companies with R&D expenses increasing at over 10% annulally, will receive a 50% reduction of tax rates. Independently owned foreign funded companies can deduct R&D costs from pre tax income.