PREFERENTIAL MEASURES FOR THE ENCOURAGEMENT OF
FOREIGN INVESTMENT IN THE LIANYUNGANG ECONOMIC
AND TECHNOLOGICAL DEVELOPMENT ZONE

(Promulgated 9 April 1978 by the Lianyungang
Municipal People's Government)

 

SUBJECT: ENTERPRISES WITH FOREIGN INVESTMENT

ISSUING-DEPT: JIANGSU PROVINCE

ISSUE-DATE: 04/09/1987

IMPLEMENT-DATE: 04/09/1987

LENGTH: 2009 words

TEXT:

In order to better use foreign investment, to introduce advanced technology, to increase foreign exchange earnings through the expansion of exports and to accelerate the construction of the Lianyungang Economic and Technological Development Zone (hereinafter referred to as the Development Zone), foreign companies, enterprises and other economic entities and individuals which invest in the Development Zone shall be provided, in accordance with the relevant laws and in co-ordination with the actual conditions in the Development Zone, with the following items of preferential treatment;

[Article 1] Foreign investment production-type enterprises in the Development Zone shall pay Enterprise Income Tax at a reduced rate of 15%.  If the operational period of such an enterprise is 10 years or more, the enterprise shall be exempt from Enterprise Income Tax for two years from its first profit making year and shall pay Enterprise Income Tax for two years from its first profit making year and shall pay Enterprise Income Tax at one half the prevailing rate in the third to the fifth year, subject to the enterprise obtaining the approval of the Development Zone taxation organ.

After the expiry of the period of exemption from the reduction of Enterprise Income Tax as stipulated in the previous paragraph, an exporting enterprise with an export value for the year amounting to 70% or more of the output value of its products for the year shall pay Enterprise Income Tax at a reduced rate of 10%.  Technologically advanced enterprises may extend for three years the period of payment of Enterprise Income Tax at a rate reduced by one-half.

[Article 2] Exporting enterprises and technologically advanced enterprises in the Development Zone shall be exempt from paying local income tax.

Local income tax levied on other foreign investment enterprises with an annual profit of 1,000,000 yuan or less shall be payable at one-half the prevailing rate.  Before 1990, the payment of local income tax may also be exempted, subject to approval of an application.

[Article 3] A foreign investor shall be exempt from paying income tax on dividends received from an enterprise in the Development Zone when the dividends are remitted abroad.

[Article 4] If foreign investment is made in a law profit-making enterprise, such as one involved in agriculture or forestry, the enterprise may continue to pay income tax at a reduced rate of between 15% and 30% in the 10 year period after the expiry of the period of exemption and reduction as prescribed in Article 1.

[Article 5] If a foreign investor reinvests, for no less than five years, its dividends from an enterprise in the Development Zone in the establishment or expansion of an exporting enterprise or technologically advanced enterprise within Chinese territory, the total amount of Enterprise Income Tax already paid on the reinvested dividends shall be refunded.  If this reinvestment is withdrawn before the expiry of the five year period, the tax payment already refunded shall be returned.  If the dividends are reinvested in something else, the matter shall be handled in accordance with the relevant provisions of the Income Tax Law of the People's Republic of China for Sino-foreign Joint Equity Enterprises.

[Article 6] If a foreign investment enterprise suffers an annual loss, an equivalent amount may be allocated from the income of the following year to remedy the loss.  If the income of the following year is insufficient to cover the entire amount, the loss may be recovered gradually over successive years, but the maximum period shall not exceed five years.

[Article 7] In addition to income tax payments exempted in accordance with the law, a foreign investor which has no establishment in China and which receives income such as dividends, interest, rental or royalties from the Development Zone, shall have income tax levied at a reduced rate of 10%.  If the terms for the funds or equipment provided are favourable or the assigned technology is of an advanced standard, further reductions or exemptions from income tax may be granted, subject to approval from the Municipal People's Government.

[Article 8] Foreign personnel working for foreign investment enterprises shall pay income tax on income received from joint equity enterprises in accordance with State regulations.  Any income obtained by such personnel from outside Chinese territory shall be exempt from inclusion in individual income tax declarations made in China, regardless of whether or not it is remitted to China.

[Article 9] Export products manufactured by a foreign investment enterprise shall be exempt from Customs duty and Consolidated Industrial and commercial Tax, except for those products which are State restricted exports or to which other regulations apply.

[Article 10] A foreign investment enterprise shall be exempt from Customs duty and Consolidated Industrial and Commercial Tax on building materials, production equipment, raw materials, assembly parts, components, means of transport and office equipment which are imported for the enterprise's own use, and raw materials, spare parts, components, packing materials, etc., imported to manufacture products for export.  If products processed from duty free raw materials, assembly parts and components are transferred for domestic sale following approval from the relevant State Department, retroactive payment of Customs duty and Consolidated Industrial and Commercial Tax on the imported materials and parts used shall be carried out in accordance with regulations.

Household items and means of transport imported for personal use by foreign personnel working or residing in the Development Zone shall be exempt from Customs duty and Consolidated Industrial and Commercial Tax on presentation of a certificate issued by the Development Zone Administrative Commission, provided the quantity of goods is reasonable.

[Article 11] In the case of the import of machinery and equipment, vehicles for production purposes, raw materials, fuels, completely knocked down parts, spare parts, components and accessories (including those whose import is restricted by the State) required by a foreign investment enterprise in order to fulfil an export contract, re-application for approval shall not be necessary.  Exemption from the need to obtain an Import Licence shall be granted and customs shall supervise, inspect and issue clearance of goods based on presentation of the enterprise contract or import/export contract.

The above-mentioned materials and parts shall be restricted to the enterprise's own use and shall not be sold on the domestic market.  If such materials and parts are used in products which are sold domestically, supplementary import procedures shall be conducted in accordance with regulations and the supplementary payment of relevant taxes and duty shall be carried out as stipulated.

[Article 12] A foreign investment production-type enterprise in the Development Zone which has difficulty paying Consolidated Industrial and Commercial Tax in the initial period after constructuion and start up of operations may be granted a reduction of or exemption from the Tax, subject to verification and approval by the Municipal People's Government.

[Article 13] A production-type enterprise invested in and established in the Development Zone before 1990 by a foreign investor shall have its land development fees and land use fees calculated and collected together at an annual rate of between 5 yuan and 8 yuan per square metre, beginning from the date of issue of the right to use the land.  Among such enterprises, those which are exporting enterprises or technologically advanced enterprises, shall be exempt from payment for 5 years and shall pay at an annual rate of 2 yuan per square metre from the 6th year.

If land development fees are calculated and collected in one lump sum or in the enterprise develops the site itself, land use fees shall be exempt for 10 years and shall be payable at an annual rate of 1 yuan per square metre from the 11th year.

[Article 14] A foreign investment enterprise, apart from the allocation of funds for labour insurance, welfare benefits and housing subsidies for Chinese employees in accordance with State regulations, shall be exempt from making contributions to the State for the various State subsidies for employees and other funds and social charges.  The housing subsidy fund allocated by an enterprise shall be retained by the enterprise for use in resolving employee housing problems.

[Article 15] The water and electricity requirements of a foreign investment enterprise for production or business operations shall be entered in the plan and guaranteed priority supply.  Water and electricity charges for exporting enterprises and technologically advanced enterprises shall be levied in accordance with prices stipulated in the plan.  Water and electricity charges for other foreign investment enterprises shall be levied in accordance with the rates which apply to State-run enterprises in the Municipality.

[Article 16] The Municipal and Development Zone commodity departments shall arrange for the priority supply of raw materials required by a foreign investment enterprise for construction and production operations and charges shall be equivalent to those which apply to State-run enterprises in the Municipality.  A foreign investment enterprise may also organise the import of necessary commodities itself.

[Article 17] A capital construction project undertaken by a foreign investment enterprise shall be treated as one of the Municipality's major construction projects and charges for construction and the transport of equipment shall be levied in accordance with the same rates which apply to other local enterprises.

[Article 18] Products of a foreign investment enterprise for sale abroad which are exported through Lianyungang port may receive priority storage and shipment.

[Article 19] Foreign personnel working for a foreign investment enterprise shall be charged at the same rate as chinese personnel for food, accommodation, city transport, postage, telecommunications and other such expenses when within the Municipality or Jiangsu Province onthe basis of presentation of a letter of introduction or their work card from the enterprise.  Payment may be made in Renminbi.

[Article 20] A foreign investment enterprise may, in accordance with bank regulations, use cash or fixed assets as collateral when applying for a loan.  The various banks with which a foreign investment enterprise holds accounts shall provide the enterprise which priority loans to meet its liquid capital a short term revolving fund requirements during the loan quota period.  If necessary for the production or business operations of a foreign investment enterprise, the enterprise may raise funds abroad.  The enterprise itself shall be responsible for the borrowing and repayment of loans.

[Article 21] If a foreign investor leases equipment or other items to a Development Zone enterprise, income tax on the leasing fee, minus the cost of the equipment, may be paid at a reduced rate of 10% during the contract duration.  If leasing fees are paid through such means as products being resold to the lessor or paid in kind, income tax may be exempted.

[Article 22] A foreign investment enterprise in the Development Zone shall also enjoy the various items of preferential treatment prescribed by the relevant laws and statutory regulations of the State and the Province, as well as those prescribed by the relevant regulations of Lianyungang Municipality.

[Article 23] The administration of enterprises established in the Development Zone by Hong Kong, Macao and Taiwanese companies, enterprises and other economic entities or individuals shall be handled with reference to these Measures