TENTATIVE PROCEDURES FOR THE IMPLEMENTATION OF
INDUSTRIAL AND COMMERCIAL TAXES IN THE
GUANGZHOU ECONOMIC AND TECHNOLOGICAL
DEVELOPMENT ZONE

(Adopted at the Guangzhou Mayor's Work Meeting
on March 6, 1985 and Promulgated for
Implementation by the Municipal People's
Government on April 9, 1985)

SUBJECT: ECONOMIC & TECHNOLOGICAL DEVELOPMENT ZONES

ISSUING-DEPT: GUANGDONG PROVINCE

ISSUE-DATE:

03/06/1985

IMPLEMENT-DATE:

04/09/1985

LENGTH: 3376 words

TEXT:

CHAPTER I GENERAL PROVISIONS

[Article 1] These Procedures are formulated in accordance with the pertinent tax laws, decrees, rules and regulations of the People's Republic of China and the Interim Regulations on the Guangzhou Economic and Technological Development Zone.

[Article 2] In order to promote the development of the Guangzhou Economic and Technological Development Zone (hereinafter referred to as "development zone"), to make better use of foreign capital and to introduce technology more effectively, the development zone in levying tax shall adhere to the principles of "alleviating the burden of taxes, widening the scope of preferential treatment and simplifying the imposition of taxes".

[Article 3] The Chinese-foreign joint ventures, cooperative ventures and enterprises operated independently by investors which are established in the development zone (hereinafter referred to as the "development zone enterprises") shall pay consolidated industrial and commercial tax, income tax, urban property tax and vehicle and vessel licence plate tax in accordance with the provisions of these Procedures.

Individuals who work or reside in the development zone shall pay individual income tax in accordance with the pertinent provisions of the Individual Income Tax Law of the People's Republic of China.

CHAPTER II CONSOLIDATED INDUSTRIAL AND COMMERCIAL TAX

[Article 4] The enterprises and individuals in the development zone engaged in the production or business operations in industrial or agricultural commodities, the business operations in communication and transportation, commercial retailing and other service trades shall pay tax in accordance with the Regulations of the Consolidated Industrial and Commercial Tax of the People's Republic of China.

[Article 5] Development zone enterprises may enjoy the following preferential treatment on paying the consolidated industrial and commercial tax:

(1) The construction materials, production equipment, raw and processed materials, spare parts and components, elements, means of communication and office supplies imported by enterprises in the development zone for their own use shall be exempted from consolidated industrial and commercial tax.0 If a development zone enterprise makes domestic sales of products which are made from the imported and tax-free raw and processed materials, spare parts and components, it shall pay consolidated industrial and commercial tax on such materials, parts and components used in accordance with the tax regulations.

(2) A reasonable number of the household articles and means of communication for personal use which are imported by foreign investors of development zone enterprises shall be exempted from consolidated industrial and commercial tax.

(3) The commodities produced for export by development zone enterprises with the exception of those the export of which is regulated by the state, shall be exempted from consolidated industrial and commercial tax.

(4) Advanced technology and equipment produced and supplied by development zone enterprises for the technical innovation of inland enterprises may obtain exemption or reduction in consolidated industrial and commercial tax, upon approval by the tax authorities of the development zone (hereinafter referred to as "Tax Authorities").0 Other products sold domestically shall be taxed in accordance with the tax laws of the People's Republic of China.0 If enterprises have difficulty in making tax payment, they may, upon their application and approval by the Tax Authorities, be allowed a reduction in or exemption from tax payment for a period of three years starting from the month of its operation.

(5) Products which are permitted to be sold domestically and produced by development zone enterprises partly from domestically produced raw and processed material and spare parts and components, except for products such as sugar, cigarettes, wines and spirits and watches, may, upon their application and approval by the Tax Authorities, be allowed a reduction of not more than 50% of the consolidated industrial and commercial tax.

(6) Raw and processed materials and component parts produced by development zone enterprises and sold to enterprises within the zone for production, with the exception of wines and spirits, sugar, cotton yarn and leather, may enjoy exemption from or reduction in consolidated industrial and commercial tax upon approval by the Tax Authorities.

[Article 6] Administration of the levying of the consolidated industrial and commercial tax:

(1) Enterprises and individuals in the development zone engaged in the production and business operations in industrial or agricultural commodities, the business operation in communications and transportation, commercial retailing and other service trades shall pay tax on sales and proceeds according to the appropriate tax rates.0 Imported products shall be assessed at the appropriate rates on the basis of the amounts paid for the import.0 Enterprises and individuals in the development zone shall, in addition to the consolidated industrial and commercial tax, pay a local surtax of 1% of the amount of the consolidated industrial and commercial tax.

(2) Consolidated industrial and commercial tax shall be levied on a monthly basis.0 The taxpayer shall, within ten days after the end of each month, report and pay the amount of tax payable.0 In case of failure to pay within the prescribed time limit, the Tax Authorities shall, in addition to setting a deadline for the payment, impose a late payment penalty of 0.1 per cent per day on the amount of tax in arrears, counting from the day on which the tax becomes overdue.

(3) Other procedures for levying tax shall be carried out in accordance with the Regulations of the Consolidated Industrial and Commercial Tax of the People's Republic of China promulgated by the State Council on September 13, 1958.

CHAPTER III INCOME TAX

[Article 7] Production enterprises in the development zone shall pay income tax in accordance with these Procedures on income derived from production, business and other sources.0 The rate on income tax shall be 15%.

"Income derived from production and business of production enterprises" mentioned above refers to the balance in any one tax year of the total income of the enterprise after deducting costs, expenses and losses.

"Income derived from other sources" mentioned above refers to income from dividends and interest, lease or sale of properties, assignment of patent rights, technical know-how, trademark rights, copyrights, etc., and profits from other items.

[Article 8] Development zone enterprises which have entered into agreements and commenced their production and business operations before 1990 shall, within the effective period of such agreements, be allowed a 70% reduction in the local surtax payable in accordance with the pertinent law.0 Items with exceptionally advanced technology may, upon approval by the Tax Authorities, be exempted from the local surtax.

[Article 9] Companies, enterprises and individuals from abroad, compatriots from Hong Kong, Macao and other regions (hereinafter referred to as "investors"), which have no establishments in China, but receive income from dividends, interests, rentals, royalties and other sources in the development zone, shall pay income tax at a reduced rate of 10% unless already exempted from tax in accordance with the Foreign Enterprise Income Tax of the People's Republic of China.

"Income from other sources" mentioned above refers to income specified to be taxable by the Ministry of Finance of the People's Republic of China, other than income from dividends, interest, rentals and royalties.

[Article 10] Other preferential treatments for income tax:

(1) Production enterprises in the development zone with an operation period of over ten years shall, upon approval of the Tax Authorities, be exempted from income tax in the first and second profit-making years and allowed a 50% reduction in income tax in the third to fifth years.0 Amongst the production enterprises mentioned above, those with advanced or exceptionally advanced technology, low profits and longer periods of investment returns may, upon approval by the Administrative Committee of the Development Zone (hereinafter referred to as the "Development Zone Administrative Committee"), be allowed appropriate reductions in income tax following the expiration of the term for reduction and exemption.

(2) Losses incurred by development zone enterprises in a tax year may be carried over to the next year and made up from that year's income.0 If the income in the subsequent tax year is insufficient to make up for the said losses, the balance may be made up with further deductions against income year by year over a period not exceeding five years.

(3) The profits received by investors from development zone enterprises shall be exempted from income tax on being remitted abroad.

(4) A foreign investor which reinvests in the development zone for a period of not less than five years its share of profit from development zone enterprises may, upon approval by the Tax Authorities, obtain a refund of not less than 40% of the income tax paid on the reinvested amount.0 A foreign investor which withdraws its reinvested funds within five years shall repay the tax amount refunded.

(5) When investors that have no establishments inland provide advanced technology needed to the important departments of national economy in the development zone, royalties received thereby may, upon approval by the People's Government of Guangzhou Municipality, be exempted from or allowed a reduction in income tax.

(6) Where foreign, Hong Kong and Macao banks, through their representative offices set up in the development zone, receive interest obtained from loans provided under contracts with China's companies and enterprises, 15% of the amount of interest income received may be taken as the amount of taxable income.0 Interest income received by investors under Article 8 of these Procedures may, upon approval by the Guangzhou Municipal People's Government be exempted from income tax where the interest rate does not exceed the purchaser's credit rate of the banks in their country nor the foreign exchange loan rate of China's banks.0 Interest income may be exempted from income tax where investors which have no establishment inland provide equipment and technology to development zone enterprises and where enterprises use such methods as repayment with the resultant products or the delivery of products to repay the principal and interest of the price or use fees paid for processing or assembly to offset the principal and interest of the price.

(7) Where investors which have no establishments inland supply equipment and related articles to enterprises in the development zone by the leasing trade method, if the rentals received thereby include the costs of the equipment and related articles supplied, the balance of such rentals after deducting the said costs may be taken as the taxable income.0 If the rentals include interest, the rate of which does not exceed the purchaser's credit rate in their country, such interest may be deducted from the rentals in calculating interest tax.0 If rentals are obtained through such methods as repayment with the resultant products or the delivery of products, such rentals may be exempted from income tax.

[Article 11] In respect of the advanced machines and equipment machines and equiment purchased by production enterprises in the development zone, the per-unit cost of which is above 100,000 Yuan Renminbi, an initial depreciation allowance of 30% of the per-unit cost may be made for once when they are put into operation and the depreciation of the balance may be compute under the straight-line method for the numbers of years prescribed may be made.0 Enterprises which need to adopt an accelerated depreciation method or alter the depreciation method may file and application to be examined and approved Tax Authorities.

[Article 12] Administering the levy of income tax:

(1) Income tax on development zone enterprises zone shall be levied on an annual basis and paid in quarterly instalments.0 Shuch payments in adbance shall be made within fifteen days after the end of each quarter.0 The final stsettlement shall be made within five months after the end of a tax year.0 Exces payments shall be refunded and deficiencies shall be made up by the taxpayer

(2) Development zone enterprises shall file with the Tax Authorities their provisional income tax returns in advance within the perod prescribed for the provisional payments in advance; and shall file their annual incone tax returns and accounting statements within four months after the end of the tax year and shall send in at the same time the audit certificate of the chartered public accountants registered in China.

(3) Where the method of financial management and the system of accounting of development zone enterprises are in contradiction with the provisions of the tax laws, tax payments shall be assessed occording to the provision of the tax laws.0 The enterprises shall file their financial accounting reports with the Tax Authorities for examination and shall accpet their investigations at any time.

(4) Development zone endterprises shall present relevant certificates to the Tax Authorities for tax registration when they commerce, cease and change their business operations in accordance with law.

(5) Income tax payable on dividends, interest, rentals royalties of franchi rights and other income received by foreign businessmen in China shall be witheld by paying unit in each of its payment.0 The incomereceiving unit shall be the taxpayer and the paying unit shall be the withholding agent.0 Taxes withheld on each payment by a withholding agent shall, within five days, be turned over to the State Treasury and the income tax return submitted to the Tax Authorities.

(6) Development zone enterprises and withholding agents must pay tax within the preseribed time limit.0 In case of failure to pay within the prescribed time limit, the Tax Authorities, in addition to setting a new time limit for tax payment, shall surcharge overdue payments at 0.5% of the overdue tax for day in arrears, starting from the first day of default.0 The Tax Authorities may, in their discretion and in light of the eircunstances, impose a penalty of five thousand Yuan Renminbi or less on any enterprise which has failed to file tax returns within the prescribed time limit, to register for tax purposes, its financial and accounting statements, or which has refused to cooperate with the tax investigators.0 Further, the Tax Authorities may, in their discretion and in light of the circumstanes, impose a penalty of not more than five times the amount of tax not paid or underpaid on anyone who has evaded or refused to pay income tax.0 Cases of gross violation shall be handled by the Guangzhou Municipal Intermediate People's Court according to law.

(7) Other procedures for administering tax levies shall be carried out in accordance with "The Income Tax Law of the People's Republic of China Concerning Joint Ventures With Chinese and Foreign Ivestment", The Income Tax Law of the People's Republic of China Coucerning Foreigning Enterprises" and other pertinent provision.

CHAPTER IV URBAN PROPERTY TAX

[Article 13] Enterprises or individuals in the development zone owning buildings shall pay property taX.

[Article 14] Property tax shall be levied per annum on the basis of basis of the construction cost or purchasing price of the buildings at the rate of 1.2%.0 Buildings on lease shall be taxed on the basis of their rentals at the rate of 18%.

[Article 15] Sel-owned newly constructed buildings shall be taxed from the date of their completion.0 Purchased buildings shall be taxed from the day when ownership is acquired.0 Property owners shall file the relevant documentation Tax Authorities to declare their properties and to register for tax purposes.

[Article 16] Newly constructed or purchased buildings owned by enterprises or individuals in the development zone shall be exempted from property tax for a period of five years starting from the month when the building is completed or purchased.

[Article 17] Property tax shall be levied on an annual basis and paid by two instalments.0 The first instalment of 50% of such tax shall be paid in July of each year and the final balance of the tax shall be fully paid in January of the following yera.

CHAPTER V VEHICLE AND VESSEL LICENCE PLATE TAX

[Article 18] Enterprises or individuals in the development zone shall pay Vehicle and Vessel Licence Plate Tax on its mechanized vehicles and vessels.

[Article 19] The schedule of the amounts of the licence plate tax for vehicle and vessel is as follows:

[Article 20] The following mechanized vehicles and vessels shall be exempted from the vehicle and vessel licence plate Tax:

(1) Vehicles and vessels owned and used by administrative or military units, schools and the social organizations themselves.

(2) Hulks and pontoons used exclusively for passengers, loading or unloading cargoes and storage of goods.

(3) Fire trunks, sprinkler trucks, ambulance vehicles, garbage trucks and vessels.

[Article 21] Those who are liable to pay the vehicle and vessel licence plate tax shall apply to the Tax Authorities to register and make payment and obtain the certificate of tax payment.

[Article 22] The vehicle and vessel licence plated tax shall be collected annually by two instalments, the commencement date to be determined by the Tax Authorities.

CHAPTER VI SUPPLEMENTARY PROVISIONS

[Article 23] These Procedures are not applicable where enterprises or individuals in the development zone carry on various kinds of production and business operations outside the development zone.0 They shall pay tax according to the tax regulations of the region where the operations are being carried out.

[Article 24] State owned enterprises, collective enterprises and indivedual enterprses carrying on production and business operations in the development zone shall pay all industrial and commercial taxes in accordance with the current Chinese tax regulations to the Tax Authorities.

[Article 25] The right of supervision and interpreation of these Procedures is vested in the Development Zone Administrative Committee.

[Article 26] These Procedures shall come into force on the date of promulgation.

Table on Amounts of the Mechanized Vehicles
Category	Standard and	Annual Tax	Notes
	Unit	Payment
	seven or less than	$ 160 Renminbi	(driver's seat not
	seven seats		calculated)
Passenger	per car
Cars
	eight and nine	$ 180 Renminbi
	seats per car
	ten seats	$ 200 Renminbi
	per car
	eleven and	$ 240 Renminbi
	more than
	eleven seats
	per car
Vehicles for	per ton (net loading	$ 48 Renminbi
Freight	capacity)
Motor	per motor bicycle	$ 48 renminbi
cycle
	per motor tricycle	$ 60 Renminbi
	per motor bike	$ 6 Renminbi	Restricted to Shanghai
			style 102 motorbike
			only

 

Table on the Amounts of the Tax for Vessels
Category	Standard an	Annual Tax	Note
	Unit	Payment
	equal to or	$ 1.2 Renminbi	To be
	less than 150 ton	per ton	assessed
	151 to 500	$ 1.6 Renminbi	on net
Mechanized	tons	per ton	tonnage
Vessels
	1501 to 3000	$ 3.2 Renminbi per
	tons	ton
	3001 to 5000	$ 4.00 Renminbi per
	tons	ton
	5001 to 10,000 tons	$ 5.00 Renminbi per ton
	10.001 tons and above	$ 6.00 Renminbi per ton
	equal to or less than	$ 0.60 Renminbi per ton
	10 tons	††††††††††S
	11 to 50 tons	$ 0.80 Renminbi per ton
Nonmechanized			To be
Vessels	51 to 150 tons	$ 1.00 Renminbi per ton	assessed on
	151 to 300 tons	$ 1.20 Rneminbi per ton	net tonnage
	301 tons and above	$ 1.40 Renminbi per ton