1. Policies and regulations governing the establishment of enterprises with exclusive foreign investment, joint ventures, and cooperative enterprises
Article 1: All the natural resources, industries, and markets in Ningxia except those especially stipulated by the state are open to the whole country. State-owned, collective-owned, private-operated, the three types of enterprises, businessmen working on their own, colleges, universities, and research institutes in and outside of Ningxia are welcome to carry out multi-level, multi-form, multi-factor economic and technological cooperation or run enterprises with investment of their tangible and intangible assets. The autonomous region shall render prompt, satisfactory service in registration, approval of the establishment of projects, and the creation of necessary conditions.
Article 2: Productive enterprises with exclusive foreign investment (including bases established for the production of raw materials) may enjoy exemption from the income tax for five years upon the commission of the enterprises and a refund of 25 percent of the value-added tax, urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, and house tax within a period of five years after the enterprises are in operation. They shall be exempt from the tax for the use of land during the period of construction and for another five years after they are in operation. Enterprises engaged in the development of resources shall be entitled to a refund of the resource tax for three to five years and exemption from the additional fees of the circulation tax. The income of the enterprises during the income-tax exemption period shall be regarded as duty-paid. After the expiration of tax exemption, proper tax reduction shall be granted to the enterprises which have difficulties in operation or need a large amount of investment for technical renovations and expansions. Preferential policies can be liberalized to a proper extent in Taole County and the eight counties in the mountain area of southern Ningxia.
Article 3: Productive joint ventures and cooperative enterprises newly established in Ningxia as well as key extension projects approved by the state and autonomous region with the amount of investment by outside partners accounting for more than 25 percent of the total investment and the term of joint venture and cooperation more than ten years may enjoy a three-five years’ exemption of the income tax for the newly-added economic result in accordance with the ratio of investment by the outside partners, a 25 percent refund of the value-added tax and a 50 percent refund of the urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, tax for land-use, and house tax for five years. They shall also be entitled to exemption from the additional fees of the circulation tax as stipulated by the government of the autonomous region. During the tax exemption and reduction period, the profits distributed to them shall be regarded as duty-paid. Preferential policies may be liberalized in the eight counties in the southern mountain area and Taole County to a proper extent.
Article 4: Ventures with exclusive foreign investment and cooperative enterprises (with outside partner’s investment more than 500,000 yuan and the term of cooperation longer than five years) in tertiary industry (not including the development of real estate, recreational businesses, catering industry, and hotel industry) shall be entitled to a 3-4 years’ exemption from the income tax, a 1-2 years’ refund of the business tax, a three years’ refund of 50 percent of the urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, tax for land-use, and house tax.
Article 5: Ventures with exclusive foreign investment, joint ventures, and cooperative enterprises established in the autonomous region may enjoy a 30-50 percent discount of the fixed land price for using cultivated land upon approval by the government. They shall be allowed to transfer the right for the use of land after five years of operation.
Article 6: Those engaged in the development of agriculture, forestry, animal husbandry, and fishery shall be exempt from the agricultural tax and tax for special agricultural and forestry products for six years from the year they begin to make profit. Those engaged in the development of poverty-relief projects in the eight counties in the mountain area and Taole County shall be exempt from the agricultural tax and tax for special agricultural and forestry products for ten years. The wasteland they need can be provided by means of assignment.
Article 7: Ventures exclusively with one’s own investment and proprietary cooperative enterprises engaged in highly-processing agricultural resources and the amount of investment surpassing two million yuan shall be exempt from the income tax for eight years beginning with the year they are in operation. Those with investment surpassing five million yuan may enjoy income-tax exemption for ten years beginning with the year of operation
2. Policies and regulations governing personnel, technical consolidation and technological development
Article 8: Scientific research institutes, colleges, universities, enterprises, and non-government scientific and technological establishments from other places coming to set up entities or carry out technology transfers, technical consultations, technical services, and technical training in the autonomous region shall be exempt from the income tax levied on earnings they make by offering technical services and the additional fees of the circulation tax as stipulated by the government of the autonomous region. Their business tax shall first be collected and then refunded.
Article 9: Colleges, universities, research institutes, enterprises and individuals from other places are encouraged to join hands with the autonomous region in the development of productive projects by becoming shareholders with their famous-brand products or technology. Holders of the technical shares may draw part of the after-tax profits (no more than 20 percent) and then share out the dividends on the basis of the number of shares they hold three years after the projects have been in operation. Special preferential policies may be worked out for projects which put out high-grade, new, precision, or advanced products or products with a high reputation in and outside of the country.
Article 10: Any units and individuals that help productive enterprises in the autonomous region carry out technical transformations and achieve marked economic results, besides being paid according to the contracts, shall be entitled to a bonus equal to 10-20 percent of the newly-added after-tax profit the enterprises make in the year the enterprises are in operation.
Article 11: Colleges, universities, research institutes and technical personnel from other places are encouraged to sign technical contract with enterprises in the autonomous region. The contractors that have fulfilled the contractual technical obligations and achieved remarkable economic results, in addition to the payment they receive according to the contracts, shall be entitled to a bonus of 10-20 percent of the after-tax profit made in the year the contracts are signed or the following year. Those who have turned around money-losing enterprises or reduced money losing by a big margin shall be amply rewarded in accordance with the economic results of the enterprises.
Article 12: Colleges, universities, research institutes, and non-government scientific and technological establishments from other places which join hands with research institutes and enterprises in the autonomous region in developing new products shall have the priority to be included in the plan of science and technology development of the autonomous region and be provided with appropriate loans. The expenses incurred in new product development and technical transformation shall be included in the cost of the year. In case the amount of expenses is large, these expenses may be included in the cost by installments in the following years. Enterprises that develop and manufacture what the autonomous region holds as hi-tech products may draw 10-20 percent of the newly added after-tax profit to encourage and reward research personnel concerned within three years beginning with the year in which they are in operation.
Article 13: Enterprises shall be encouraged to hire on contract or take in talented personnel urgently needed. The wage rates of the needed personnel shall be settled through negotiations by the two sides involved, subject to no restrictions. Those who have made special contributions to the enterprises shall be encouraged with special bonuses. Those with a medium or senior professional title and the term of their contractual services is more than five years shall be allowed to change the domicile of their spouses and children under the age of 18 from rural to urban areas and entitled to exemption from the urban-accommodation supporting fees, subject to approval by the government at the corresponding level. Priority shall be given to their children in attending school and obtaining employment.
Article14: Scientific and technological personnel from other places who come to work in the rural enterprises and urban collective-owned enterprises in Ningxia may bypass the convention to be hired to professional posts and be entitled to appropriate wages and other terms of employment.
Article 15: Managerial personnel from other places are welcome to carry out fair competitions for management posts in Ningxia’s medium-size and small enterprises and exercise leadership over, contract to operate, or become trustees of the medium-size and small enterprises in the autonomous region. Their wage rate shall be fixed according to the economic results of the enterprises, subject to no restrictions. For those who have created marked economic results, the enterprises shall give a nonrecurring reward of less than 500,000 yuan, subject to approval by the people’s government.
3. Policies and regulations governing joint development of existing enterprises
Article 16: Superior enterprises from other places are encouraged to engage in joint operation with enterprises in the autonomous region. Cooperative enterprises with outside enterprises’ investment more than 25 percent of the total investment and a term of cooperation more than ten years shall be exempt from the income tax for the portion of income exceeding the base quota due to the local revenues for three years, on the premise that the said base quota is guaranteed.
Article 17: Outside superior enterprises are encouraged to invest their tangible and intangible assets in transforming money-losing enterprises in the autonomous region and allowed to offset the red numbers of the money-losing enterprises with profits. They shall also be exempt from the business income tax for three years after the losses are remedied. Enterprises engaged in the transformation of the local enterprises with serious losses shall be entitled to a three-year refund of 25 percent of the value-added tax already paid, so as to offset the losses.
Article 18: Outside enterprises are welcome to annex and purchase enterprises in the autonomous region. The annexed and purchased enterprises that have a satisfactory operation shall be exempt from the income tax for the portion of income exceeding the base quota due to the local revenues for three years, on the premise that the said base quota is guaranteed. The annexed and purchased enterprises making meager profits or suffering short-term losses may enjoy exemption of the business income tax and a refund of 25 percent of the value-added tax for the portion exceeding the base quota due to the local revenues for four years, on the premise that the said base quota is guaranteed. The annexed and purchased enterprises with serious losses shall be treated according to Article 2, subject to approval by the government at corresponding level.
Article 19: Outside institutions and individuals are encouraged to operate under lease contract part or the whole of enterprises in the autonomous region. Institutions and individuals renting an enterprise in red numbers may enjoy a three-year exemption from the income tax after they turn around the money-losing enterprise. Those whose lease contract is more than three years shall be entitled to a nonrecurring refund of 50 percent of the last year’s rent upon examinations and approvals reveal that they have fulfilled or surpassed the operation target at the expiration of their contracts.
Article 20: Enterprises suffering from serious losses in the autonomous region may determine the value-preservation and value-addition norms of their properties and be voluntarily trusted to superior enterprises from other places for a certain period. The term of trusteeship is normally three to five years. During the period of trusteeship, the enterprises may enjoy exemption from the business income tax and the additional fees of circulation tax as stipulated by the government of the autonomous region, a refund of the full amount of urban construction and maintenance tax, tax regulating the orientation of investment of fixed assets, the tax for the use of land, and house tax as well a refund of 25 percent of the value-added tax exceeding the base quota due to the local revenues on the premise that the said base quota is guaranteed. The trustees may have the newly added profits created during the period of trusteeship should they fulfill the target of value-preservation. In that case, the trustees shall be regarded as already paying the tax
4. Financial policies and regulations governing cooperation
Article 21: Outside enterprises annexing enterprises in the autonomous region shall implement the regulations as stipulated in The Circular on Rectification of the Issue of Suspension, Reduction, and Postponement of the Interest of Loans of Annexed, Dissolved, and Bankrupted Enterprises by the People’s Bank of China and other banks (see yinfa document No. 113-1993). In addition to carrying out the above said regulations, outside enterprises annexing enterprises in urban Yinchuan and those included in the autonomous region’s list to experiment optimization of capital structures, and state-designated key enterprises from other place annexing Ningxia’s enterprises shall also carry out the regulations as stipulated in The Circular on the Issue of Bank Loans and Interest After the Enforcement of Encouraging and Supporting Superior Enterprises from 18 Pilot Cities to Annex State-Owned Enterprises in Difficulties by the People’s Bank of China and departments concerned (see yinfa document 130-1995).
Article 22: Priority shall be given by the bank in providing circulating funds and loans for technical transformations and science and technology development to outside hi-tech enterprises which cooperate with the autonomous region’s enterprises in the production of products, ancillary products, and spare-parts and enable the local enterprises to become the backbone of revenues at the autonomous regional, prefectural, or county level and to export products and earn foreign currency after the expansion of their production capacity. The interest rate of loans shall not go up for enterprises that have good economic results or export products to earn foreign currency.
Article 23: In accordance with the principle of equal priority, banks within the autonomous region shall give priority in granting loans to support cooperative projects between China’s eastern and western regions, and the length of maturity shall be as long as the set limit allows. The length of maturity may be prolonged in case that the loans cannot be repaid by the set schedule. Under ordinary circumstances, the interest rate of loans shall not float upward but be handled according to the reference rate or go down within the range of 10 percent. In case that state-owned banks lacks loan quota, the People’s Bank of China shall help the said banks to submit applications to the head office of the People’s Bank of China for the needed loan quota, or cut down other loans to regulate loan quota for the cooperative projects between the eastern and western regions.
Article 24: The People’s Bank of China shall give priority to outside enterprises participating in cooperative projects to establish shareholding system in, annex, or restructure the existing enterprises in the autonomous region in making arrangement for them to issue local enterprise bonds or giving them short-term fund-raising support.
Article 25: The Agricultural Development Bank shall favor loan granting according to the merits of outside enterprises which operate poverty-relief economic entities in the eight mountainous counties and Taole County; engage in land improvement and development in the areas for comprehensive agricultural development as stipulated by the state; support the renewal of economic forests and fruit trees and the development of name-brand, quality, and special products; or engage in deep-processing of forest products and the development of natural resources of the sandy areas in the autonomous region.
Article 26: Outside investors who come to establish joint ventures with state-approved enterprises producing articles for minority groups may enjoy preferential interest rate for the loans they borrow from the bank as circulating funds according to relevant regulations, a refund of interest differential subsidization from the bank at the end of every quarter of the year to subsidize their own circulating funds.
Article 27: To provide various branches of insurance to enterprises with lateral economic ties. Insurance companies shall render various insurance services including service by special arrangement, adopt a flexible approach to insurance period and insured amount, and give preferential treatment by reducing the premium or rewarding for safety in production in light of the specific amount an enterprise insures. When handling claims by large and medium-size enterprises for disasters or accidents outside their domain, the insurance company may prepay 50 percent of the indemnity according to the extent of liabilities or an initial estimate of the losses prior to the settlement of the claims, so as to help the affected enterprises restore production as soon as possible.
5. Policies and regulations governing intermediary services
Article 28: Any units and individuals providing the autonomous region’s productive enterprises with new techniques, new technologies, and new products or transferring scientific and technological achievements shall be entitled to a reward of 10 percent of the yearly newly-added after-tax profits from the beneficiaries for three to five years after the new techniques, new technologies, new products or scientific and technological achievements are put into production, in addition to receiving a nonrecurring transfer fee from the beneficiaries according to the contracts. The beneficiaries shall give a nonrecurring bonus of 1-3 percent of the yearly newly-added after-tax profits to the intermediaries according to the advanced degree of the new techniques, new technologies, and scientific and technological achievements, the notability of the new products the intermediaries introduced, and the economic results of the beneficiaries. To those who cooperate with the autonomous region’s enterprises in other forms and bring about good economic results, the beneficial enterprises shall give a nonrecurring bonus of 1-2 percent of the annual newly added after-tax profits.
Article 29: To those who introduce domestic and foreign funds to the autonomous region, the beneficiaries shall give a nonrecurring bonus of 5-10 percent of the received amount according to the amount of funds they introduced, the actual sum received, the rate of interest, and the time of service of the funds, subject to approval by government at the corresponding level.
Article 30: To those who provide the autonomous region with sophisticated technologies and valuable information that bring about remarkable economic results to the local enterprises, the local beneficial enterprises shall give a nonrecurring bonus of 5-10 percent of the yearly newly-added after-tax profits
Article 31: In accordance with the need in production and work, personnel who come from other places and work in the autonomous region’s enterprises may apply for credentials to visit foreign countries and Hong Kong and Macao. The Department of Foreign Trade and Economic Cooperation and Foreign Affairs Office under the government of the Ningxia Hui Autonomous Region shall be responsible for examining and approving applications and issuing the said credentials.
Article 32: Priority shall be given by the autonomous region in offering services concerning the design, construction, and the supply of building materials, water, electricity, gas, and communication facilities to ventures with exclusive outside investment and joint ventures established through lateral economic ties. Priority shall also be given to them in arranging railway transport of their goods and products to other parts of the country.
Article 33: Enterprises funded wholly by outside enterprises and joint ventures in the autonomous region shall have the right to decide their way of operation, labor, pay scale, financial relations, product development, technical transformations, and gain distribution according to law. They shall also have the full right to make decisions on employment, subject to no restrictions of employment quota and urban or rural areas.
Article 34: These policies and regulations are suitable for all ventures with exclusive outside investment, joint ventures, cooperative enterprises to be established by individuals and enterprises from other parts of the country in the autonomous region in future as well as intermediary economic and technological services. In case that the policies and regulations concerning the establishment of lateral economic ties promulgated by the government of the autonomous region in the past are not in consistent with the above said policies and regulations, take the above said policies and regulations as the guideline.
Article 35: The Department of Foreign Trade and Economic Cooperation and the Commission of Science and Technology under the government of the Ningxia Hui Autonomous Region shall share according to their scope of official duties the responsibility for identifying the hi-techs, name-brand products, and new products involved in the above said policies and regulations and the economic departments and the competent departments in charge of the market of technologies at various levels, for identifying the introduction of funds and technologies and economic information intermediary services. The implementation, management, and supervision over the preferential treatment of tax exemption, reduction, and refund as well as the return of paid tax shall be the responsibility of the Department of Finance under the government of the Ningxia Hui Autonomous Region.