REGULATIONS OF THE DALIAN ECONOMIC AND
TECHNOLOGICAL DEVELOPMENT ZONE ON TECHNICAL
PREFERENTIAL TREATMENT

(Promulgated by the Dalian Municipal People's
Government on October 15, 1984)

 

SUBJECT: ECONOMIC & TECHNOLOGICAL DEVELOPMENT ZONES

ISSUING-DEPT: LIAONING PROVINCE

ISSUE-DATE: 10/15/1984

IMPLEMENT-DATE: 10/15/1984

LENGTH: 2001 words

TEXT:

In accordance with the relevant laws, decrees and provisions of China and in view of the Dalian economic and technical development zone, the following preferential treatment shall be provided for corporations, enterprises and individuals (hereinafter referred to as investors) from foreign countries, Hongkong and Macao regions who are to invest in this development zone to establish Chinese-foreign joint ventures, cooperative or wholly-owned foreign enterprises (hereinafter referred to as development zone enterprises).

[Article 1] Income tax on productive enterprises established by the investors shall be levied at the reduced rate of 15%.

[Article 2] Chinese-foreign ventures established by the investors scheduled to operate for a period of 10 years and more, shall be exempted from income tax in the first and second profit-making years, and allowed a 50% reduction in the third to fifth years.

[Article 3] The productive enterprises established by the investors within two years from October 15, 1984, in cases where they are scheduled to operate for a period of 10 years or more, and are technology-and knowledge-intensive projects or with an investment in excess of 5 million US dollars, shall be allowed a further reduction in and exemption from income tax for 1 to 3 years upon approval, in addition to the treatment they are eligible to enjoy specified in the preceding article.

[Article 4] Enterprises engaged in low-profit operations such as farming and forestry established by the investors in the development zone shall be allowed a 15% to 30% reduction in income tax for another 10 years following the expiration of the period for tax exemption and reduction.

[Article 5] Legitimate profits left to the investors after income tax are exempt from tax upon remittance out of China.

[Article 6] An investor in a joint venture who reinvests its share of profits after taxes in the same enterprise or other joint ventures in the development zone for a period of not less than 5 years may obtain a refund of 40% of the income tax paid on the reinvested amount.  Enterprises with exceptionally advanced technology may obtain a higher percentage of refund or the whole amount of it.

[Article 7] Losses incurred by the development zone enterprise in a tax year may be carried over to the subsequent tax year and offset against a corresponding amount drawn from that year's income, but such carry-over shall be completed within a period not exceeding five years.

[Article 8] The incomes gained from dividends, interest, rentals, royalties and other sources in the development zone by foreign companies, enterprises and other economic organizations, which have no establishments in China, are allowed a 10% reduction in withholding tax with the exception of those that are entitled to exemption from withholding tax as specified in the Income Tax Law of the People's Republic of China, Concerning Foreign Enterprises and in its Rules for Implementation.

[Article 9] With respect to equipment and components provided by foreign leasing companies for the enterprises and companies in the development zone through leasing, during the validity of the relevant contract signed, withholding tax shall be levied on the rental fees obtained after deducting the equipment prices at a rate of 10%.  However, an exemption from the withholding tax shall be granted in cases where the rental fees are paid by means of product buy-back or payment in products.

[Article 10] Subsidies or daily substance allowances obtained from China by foreign experts or service people who are dispatched to the development zone under the category of aid given gratis, or those who are assigned to assist in the construction of the development zone are exempt from individual income tax.

[Article 11] Income generated outside China by foreign personnel working in the development zone enterprises, or the foreign personnel of foreign corporations, enterprises and other economic organizations residing in China on assignments of professional work is exempt from individual income tax.

[Article 12] In a period of 8 years beginning from October 15, 1984 productive enterprises established by the investors shall be exempted from local income tax in the first three years and shall be granted a 50% reduction in the last five years.

[Article 13] The contract period of the Chinese-foreign joint ventures, cooperative enterprises may, according to circumstances, be extended to 40 to 50 years or even a longer period of time.  The fixed assets of the enterprises may be allowed accelerated depreciation upon approval.

[Article 14] Productive and managerial equipment, building materials, reasonable amounts of transport and office facilities for enterprise use which are imported by the zone enterprises or by the zone itself, raw materials, parts and components imported for the manufacture of export products shall be exempted from tariffs and consolidated industrial and commercial tax on the import link.

[Article 15] Products produced by the development zone enterprises, (not including the products on which there are restrictions imposed by the State), when exported, shall be exempted from export tax as well as consolidated industrial and commercial tax on the industrial link.

[Article 16] The investors who invest and reside in the development zone, and the foreign technical personnel working and residing in the zone shall be allowed an exemption from tariffs and consolidated industrial and commercial tax on the import link on the household wares and private transport facilities they bring in from abroad (limited to a reasonable amount).

[Article 17] According to the relevant regulations of the Chinese government a certain proportion of products manufactured by the productive enterprises established by the investors, which are part of the domestic shortages of China, or are proved to be provided with advanced technologies and equipment by the investors, or are (mostly) made of domestic raw materials and components are permitted to be sold in the domestic market of China.  However, in accordance with relevant regulations, tariffs and consolidated industrial and commercial tax on the import link shall be imposed on the products which are manufactured with raw materials, components and accessories that are imported duty free when they are offered for sale in the domestic market of China.  The same applies to the above-mentioned imported raw materials, components and accessories when they are sold status quo ante in the domestic market of China.

[Article 18] With regard to products produced by the development zone enterprises that are destined for sale within the zone, consolidated industrial and commercial tax on capital goods, transport and offices facilities shall be exempted; a 50% reduction of prescribed rates in consolidated industrial and commercial tax is granted for tobacco, spirits, cosmetics and mineral oils.  As to products other than those mentioned above, consolidated industrial and commercial tax shall be levied at the rate of 3%.

[Article 19] Consolidated industrial and commercial tax shall be levied on incomes derived from retail trade, building and installation, banking, insurance and other undertakings at the rate of 3%.

[Article 20] Productive enterprises established by the investors may be allowed reductions and exemptions from tax upon approval in case they have difficulties in paying consolidated industrial and commercial tax after going into operation.

[Article 21] Machinery, equipment and other capital construction goods imported for the construction of basic facilities in the development zone shall, regardless of the foreign exchange sources, be exempted from tariffs and consolidated industrial and commercial tax before the year 1990.

[Article 22] The import and export trade of the development zone is self-managed and assumes sole liability for its own profits or losses under the unified policies of the State.  Such transactions may also be entrusted to Chinese foreign trade corporations which will act in the capacity of agencies.

[Article 23] Machinery, equipment, raw materials and other goods procured in China by development zone enterprises shall be priced on the basis of current export prices of China's similar commodities and paid for in foreign exchange.

[Article 24] Land for use in the development zone shall be provided for the investors according to need.  The rates for the land use fee shall be determined by classification and gradation based on the conditions of different regions, the different lines of business and the term of use.  The annual rates per square metre (in Renminbi) shail be:

Land for use of industry and storage facilities,

First grade: 1.3 yuan

Second grade: 1 yuan

Land for use of commerce, service facilities and building for tourism,

First grade: 15 yuan

Second grade: 13 yuan

Land for commercial residential buildings and office building,

First grade: 7 yuan

Second grade: 5 yuan

Land for villas,

First grade: 10 yuan

Second grade: 8 yuan, and

Land for open-air entertainment, crop growing, animal husbandry and aquaculture,

First grade: 0.4 yuan

Second grade: 0.3 yuan

[Article 25] The rates for the site development fee (including land requisition fee, settlement allowance for dismantling and rebuilding, and the apportioned charges for completing the public utilities that directly serve the enterprises such as supply of water and electricity, gas, drainage, communications and roads) shall be 165 to 190 yuan (in Renminbi) based on the conditions of different regions and different lines of business.  Payment may be made in full within two years, free of interest; or it may be made in annual instalments in case payment within two years is found difficult.  The maximum terms are: for the enterprises or other undertakings established by various domestic regions or departments, the term shall not be longer than 25 years; for Chinese-foreign joint ventures, Chinese-foreign cooperative enterprises or enterprises wholly owned by investors established by companies, enterprises or individuals from foreign countries or Hongkong and Macao regions the payment of the fees shall be effected 2 years prior to the expiry of their contracts.  In the case of payment by annual instalments that requires a period longer than two years, interest shall be charged on the development fee at the prescribed rate.

Productive enterprises established by the investors within 3 years beginning from October 15, 1984, shall be allowed, besides a 3-year exemption from the land use fee, a reduction in the site development fee: a reduction of 30% for investment in the year 1985; a reduction of 20% for investment in the year 1986; and a reduction of 10% for investment in the year 1987.

[Article 26] Investors who are to invest in the construction of infrastructure in designated regions, shall be exempted from the site development fee, and the land use fee for a period of 15 to 20 years.

[Article 27] Those who establish educational, cultural, scientific research, medical and health or public welfare institutions in the development zone shall be exempted from the payment of land use fee.

[Article 28] Overseas Chinese who establish enterprises are eligible to receive special preferential treatment.

[Article 29] Agencies that supply that development zone with raw materials or are primarily engaged in the manufacture of goods for export are eligible to gain foreign exchange by retaining a prescribed portion of the foreign exchange earnings from their exports.

[Article 30] Entry and exit procedures will be simplified and convenience will be offered to investors as well as technical and professional personnel from abroad.