1. Enterprise income tax
1) Any foreign invested manufacture enterprise with an operation term of 10 years or more shall be exempt from the enterprise income tax in the first two years beginning from the first profit-making year, and shall be allowed a 50 percent reduction in income tax in the third-fifth years. Enterprises involved in manufacture in the Economic and Technological Development Area and enterprises of new high technology in the Hi-tech Development Zone shall continue to be charged a 15 percent preferential income tax. In case an enterprise has paid its assessed income tax at a higher rate as listed below, the excess payment shall be refunded by a relevant financial department for a period of five years: a) A 15 percent income tax rate is prescribed for manufacture enterprises in the Economic and Technological Cooperation Zone in the border areas; b) A 24 percent income tax rate is prescribed for non-manufacture enterprises in the Economic and Technological Development Area, High-tech Development Zone or Economic and Technological Cooperation Zone in border areas.
2) Any foreign-invested export-oriented enterprise, following the expiration of the term of exemptions and reductions in income tax, shall be allowed a 50 percent reduction in income tax according to the prescribed rate if and when the output value of its export product in the year accounts for 70 percent or more of the total output value of its products. In case the tax rate is lower than 10 percent after such a 50 percent reduction, the enterprise should pay its income tax at the rate of 10 percent.
3) Any foreign-invested technologically advanced enterprise following the expiration of the term of exemptions and reductions in income tax, shall be allowed to extend the term of 50 percent reduction in income tax for another three years according to the tax regulations if it remains to be a technological advanced enterprise by the time. When the rate is lower than 10 percent after the reduction, the enterprise should pay its income tax at the rate of 10 percent.
4) Any foreign invested technologically advanced enterprise or any export-oriented enterprise (the output value of its export accounts for 70 percent or more of the total output value of its products in a year) in an Economic and Technological Development Area (ETDA) shall be allowed to pay its income tax at the rate of 10 percent with 50 percent of its payment refunded; the above mentioned enterprises in an Economic and Technological Cooperation Zone (ETCZ) in border areas shall pay income tax at the rate of 24 percent with 80 percent of its payment refunded. A relevant financial department where it pays the tax shall refund the income tax for a period of five years.
Other foreign-invested enterprises set up in an ETDA or a ETCZ with the approval of the Heilongjiang Provincial People’s Government shall be allowed to enjoy the same preferential policy as mentioned above.
5) Any foreign invested enterprise with an operation term of 10 years or more, following the expiration of the term of exemptions in income tax for a period of two years according to the state tax regulations, shall be totally refunded the assessed income tax for a period of five years by way of taxation first and refund afterwards if it is in conformity with one of the following conditions: a) It has purchased or merged a local enterprise that had been closed down or was poorly operated and hired 60 percent of its employees from the purchased or merged enterprise, and its foreign investment accounts for more than 50 percent; b) It has a foreign investment of more than US$5 million and has renovated large and medium-sized key enterprises in the province using new and high technologies.
6) Any foreign-invested enterprise engaged in the development of agriculture, forestry, animal husbandry and fishery by introducing advanced technology, following the expiration of the term of exemptions in income tax for a period of two years and reductions for a period of another three years, shall be refunded 30 percent of its actual payments by the relevant financial department to which the tax was paid.
7) Any foreign invested enterprise with an operation term of 10 years or more shall be exempt from local income tax for a period of 10 years starting from the first profit-making year. Any export-oriented enterprise (of which the export volume accounts for 50 percent or more of its total output value in a year) and any technologically advanced enterprise or any other enterprise engaged in the exploration of natural resources, transportation, energy, communications, energy-saving and such enterprises as agriculture, forestry, animal husbandry, and fishery, following the expiration of the term of exemptions of local income tax, shall be allowed a continuation of such exemptions for a certain period if the enterprise has difficulty in operation and upon the approval of a taxation office.
8) Any foreign-invested enterprise enjoying the preferential policy of exemption or refunding of income tax granted by the state or the province shall be exempt from local income tax at the same time.
9) Any joint venture engaged in the construction of harbors and wharfs should pay a reduced income tax at the rate of 15 percent. Those with an operation term of 15 years or more shall be exempt from income tax starting from the first profit-making year to the fifth year and be allowed a 50 percent reduction in income tax in the following sixth-tenth years after they submit the application to relevant department and upon the approval of the provincial office of the State Taxation Administration.
10) Any foreign-owned bank, joint-venture bank or other foreign funded financial institutions established in the designated area approved by the State Council with an operational fund of more than US$1,000 invested by foreign investors or by its headquarters and an operation term of 10 years or more, as approved by the local taxation authorities, should pay income tax at the rate of 15 percent, except that it is exempt from income tax for the first profit-making year and allowed a 50 percent reduction in income tax in the second and third years.
11) Any foreign investor of a foreign-invested enterprise who re-invests his share of the profits made out of the enterprise in the same enterprise to increases his registered capital or in other foreign-funded enterprise with a duration of operation of no less than five years shall be refunded 40 percent of the already paid income tax for the amount of his reinvestment after an application is filed and approved by the taxation authorities. If the reinvestment is for the establishment or expansion of an export-oriented, or technologically advanced enterprise, the total income tax paid for the amount of the reinvestment shall be refunded.
12) Foreign investors shall be exempt from the income tax on their share of the profit earned from a foreign-invested enterprise.
13) Fees charged for technologies used in scientific research, tapping energy resources, developing transportation, and the production of agriculture, forestry and animal husbandry, shall be levied on a reduced income tax at the rate of 10 percent upon the approval of the taxation authorities of the State Council. And no income tax shall be levied on projects of technologically advanced or with favorable terms.
2. Individual income tax
Any foreign individual working with a foreign-invested or foreign-owned enterprise in China, or as an employee working in a Chinese enterprise, institute, social organization, or government office shall be levied a personal income tax for the part exceeding the 4,000 yuan deduction in his or her monthly income.
3. Urban property tax and the license tax for vehicle and ship
Any foreign-invested enterprise shall be exempt from the urban property tax and the license tax for vehicles and ships for a period of five years starting from its first year of operation. Any foreign invested export-oriented enterprise, technologically advanced enterprise, and that engaged in the development of natural resources, energy saving, or the production of agriculture, forestry, animal husbandry and fishery shall be exempt from the urban property tax and the license tax for their vehicles and ships.
4. Turnover tax
Any foreign-invested enterprise approved to be set up before December 31, 1993, whose payment in taxes had been increased because of the payment of value-added tax, consumption tax and operation tax, shall be refunded the excess amount of its payment upon the taxation office’s approval of its an application submitted before December 31, 1998.
5. Tax policy on imported equipment
The State Council has decided that, starting from January 1, 1998, any equipment imported for an encouraged domestic project or a foreign-invested project shall, within the prescribed limit, be exempt from the tariff and the value-added tax for imported items.
Any self-use equipment (including the technology and matching components and spare parts imported along with the equipment) imported with a cost included in the total investment of a foreign-invested project, which is conformable to the encouraged group and the limited group B of commodities in “Index of Industries for Foreign Investment” and which the technology can be transferred, except for such commodities as listed in the “List of Imported Commodities of Foreign Invested Projects That Shall Not Be Exempt From Tax,” shall be exempt from tariff and the value-added tax for import items. Any self-use equipment imported with a fund included in the total investment of a foreign-invested enterprise that had been set up before March 31, 1996 in accordance with the relative laws shall be exempt from import tariff and value-added tax for imported items until the completion of such an import.
Bonded goods: The raw material, fuel, bulk cargo, components and spare parts, elements and devices, matching products, auxiliary material and packing materials (except paper product) shall be put under the supervision of the Customs according relevant regulations for bonded goods.
The use of land:
1. Modes of land supply
The system of obtaining land-use right for a certain period of time with payment is practiced. Generally, the land will be provided in the form of assignment (including the forms of auction sale, bidding and agreement). The land to be used for infrastructure constructions, public welfare facilities, energy, transportation and water conservancy projects shall be provided in the form of allocation.
2. Tenure of land use
1) Foreign businessmen who have acquired the right to the use of the land in the designated area of the province shall have the land-used tenure as long as: 70 years for residential houses; 50 years for industrial use; 50 years for the establishments of education, technology, culture, public health and sports; 40 years for commercial tourism and entertainment; and 50 years for a comprehensive use or other uses. Within the tenure of land-use, the investor can transfer, lease and mortgage the land-use right. 2) Under the condition of not changing the land-use right of the “five types of wasteland,” the user can transfer the land-use right to another user with payment. The tenure of the use can be classified accordingly, generally between 30 years and 70 years. The development of the “five types of wasteland” may be in the forms of joint venture, cooperation, share-holding, wholly-funded, and through association. Within the contracted term, the user of the “five types of wasteland” shall have the relevant rights to the land, such as using, making profit, transferring the use-right, leasing, mortgaging and inheriting.
3. Tax on agriculture:
1) The reclaimed land used for agriculture shall be exempt from agricultural tax within a period of five years starting from the first year of sowing;
2) Any user of the “five types of wasteland,” except for the internal support for information, technology, fund, materials and marketing, shall also be exempt from tax for a period of three years starting from the date of the land’s auction.
4. Time for land-use examination
In case the land-use right is with the province, the formality shall be completed within a month after all the relative documents and materials are submitted. And license of land-use shall be issues within 10 days after the date of approval. In case it should be examined and approved by the State Council, the provincial government shall submit relative documents and materials to the State Council within a month after receiving them from the user, and a license of land-use shall be issued within 10 days after the date of approval.
Foreign exchange control:
1. China has carried out reforms in its foreign exchange system so as to improve the environment for foreign currency.
Since January 1 of 1994, China has abolished the dual exchange rate system, following the international practice. It has introduced the controlled single floating exchange rate system based on the demand and supply on the market and has designated banks for transaction. The reforms, particularly the integration of the dual exchange rate, are in conformity with the requirements proposed by the International Monetary Fund Organization and the General Agreement on Tariff and Trade on the part of their member countries and signatory countries, having further improved the environment for foreign exchange business. It is good for China’s further opening up and the influx of foreign capital. It is of significant to the economic cooperation and exchange and trades between China and other countries.
2. The integration of the dual exchange rate system benefits the development of foreign-invested enterprises.
As the rate is higher than that before the integration, the foreign investment in a project shall be converted to a higher proportion of the total investment. At the same time, the problem that the registered capital and the gains of profit are counted by different exchange rates shall be solved. So, the single exchange rate system means that foreign investors can enjoy an equal citizen treatment in this regard, and the interest and right of foreign investors shall be better guaranteed. Foreign investment in China will be benefited as a whole.
3. The preferential policy for foreign investors on the balance of payment in foreign currency will continue.
After the institution of the new exchange rate system, the rules governing foreign investors’ money-exchange remain the same, allowing foreign-invested enterprises to freely select their designated Chinese bank or foreign bank in China to open an account to reserve their foreign exchange. The exchange to be used in the operation of their enterprises can be drawn directly from the balance of their accounts. In case the balance in the account book is not enough for the payment, the enterprise can purchase foreign exchange for the payment in a designated bank.
4. Preferential policy is offered for foreign-invested enterprises who cannot keep the stabilization of foreign exchange.
It is the principle that foreign-invested enterprises should keep their exchange stabilization by themselves. But in case such an enterprise is unable to keep the stabilization, it is allowed to adopt a comprehensive measure to make it up. Funds for putting into the operation of manufacture projects encouraged by the state can be purchased after getting approval from the Administration of Foreign Exchange.
5. Foreign investors are allowed to reinvest their share of profits in RMB, and the re-invested capital shall be treated equally as that in foreign exchange.
When foreign investors, with the approval of the government, reinvest their share of the profit made from the company to any enterprise in China whose products can earn or increase its income in foreign exchange, apart from getting the paid amount of the income tax refunded, shall also obtain a share of the newly increased exchange and be allowed to remit the money abroad. When their reinvestment is subjected to examination and approval and their registered capital subjected to ascertainment, they should provide the document of the decision on the profit distribution made by the board of directors of the former enterprise in which they invested and the evidence of reinvestment in RMB issued by the local foreign exchange control department.
6. Policy on the development of foreign funded banks in China
For the time being, China allows foreign banks and their branches, and Sino-foreign joint-venture banks, according to the scope of business approved by the People’s Bank of China, to handle partly or wholly the following business: (1) deposit of foreign exchange; (2) Loan of foreign exchange; (3) discount on foreign exchange notes; (4) approved investment in foreign exchange; (5) remittance of foreign exchange; (6) foreign exchange guarantee; (7) settlement of import and export; (8) exchange operation and exchange marry for clients; (9) transaction of foreign currency and exchange notes; (10) payment for credit card in foreign currency; (11) business of deposit and depositary box; (12) credit investigation and consultancy; (13) business of the bank’s domestic currency and other foreign currency as approved. Their normal business and legal rights and interest shall be protected by Chinese law.
1. Preferential policy on urban construction tax
Foreign-invested enterprises in the province shall be allowed delaying, exemption or reduction of the urban construction tax upon the approval of the local government.
2. Preferential policy on the fund paid to the state for various allowances
Any foreign-invested enterprise which is export-oriented, technologically advanced, or engaged in resource development, energy saving, the production of agriculture, forestry, animal husbandry and fishery, except for turning over to the state the funds on pension, industrial insurance, and the allowance on housing for the Chinese workers and staff members according to the state’s relative regulations, shall be freed from payment for other allowances. Enterprises not included in the above mentioned categories shall continue enjoy the favorable treatment of low payment. That is, they shall pay 10 yuan per month for each person for the allowances to the local financial department.
3. Preferential policy on housing allowance
The housing allowance provided by any foreign-invested enterprise for each of its employees shall not exceed 30 yuan a month. The money is to be used by the Chinese partner to make up the cost of building and purchasing dormitories for its workers and staff members. In case that deficiency occurs after paying the housing allowance, the enterprise shall be allowed exemptions or reductions in the allowance. Any enterprise shall be free from paying the housing allowance during the stage of preparation and in the first year of operation. Any enterprise that provides housing for its workers and staff members shall be freed from paying housing allowance.
4. Preferential terms on finance
Any foreign-invested manufacture enterprise shall be allowed to shorten the term of its depreciable fixed assets appropriately. The commodities to be used by any foreign invested enterprise for its production, in daily life and office shall not be limited by the rules for social group purchase of the province. Local state-run enterprises that have absorbed foreign capital to undergo technical renovation or to develop a new project in accordance with the state’s industrial policy, with foreign investment accounting for 60 percent or more of the total investment, shall be preferentially supported by the province to make up the rest of the investment in terms of using the fund for key project or the circulating fund of local financial departments.
5. Regulations on the settlement of family members of foreign investors
Any overseas investor (including overseas Chinese, and compatriot from Hong Kong, Macao and Taiwan) who invests US$100,000 in the cities or US$50,000 in counties and townships of the province can apply for the resettlement of a relative from the rural area to the city or town. The number of the resettled members shall be in accordance with the amount of the investment, but not exceeding six in total.
6. Regulations on the reward for people who help introduce foreign investment
Intermediaries who help introduce foreign investments to the local state-owned enterprises shall be rewarded 1-3 per thousand of the invested amount of foreign capital in RMB according to the exchange rate at the time by the local government upon the ascertainment of the invested foreign capital by an registered accountant and confirmation of the local government. The intermediary shall be rewarded 1 per thousand of an investment of 15 million yuan or lower; 2 per thousand for an investment of more than 15 million and up to 40 million yuan; and 3 per thousand for an investment of more than 40 million yuan. After the application for the reward is submitted to the local government, with the ratification by the financial department at the same level, the middlemen shall be paid 50 percent of the assessed reward and the rest shall be paid after the project having been put into operation.
Preferential taxation policy for the development of western Heilongjiang
1. Domestic and foreign-invested enterprises involved in the industries encouraged by the state shall be allowed to pay income tax at the preferential rate of 15 percent within a certain period of time.
2. Enterprises in an autonomous area of minority ethnic groups, with the approval of the provincial government, shall be allowed exemption or reduction in income tax for a certain period of time.
3. Newly established enterprises in the western part of the province engaged in the operation of transportation, power, water conservancy, post and communications, and broadcast and television, shall be exempt from income tax or allowed a 50 percent reduction in income tax for the first three years of operation.
4. Enterprises newly set up in old revolutionary bases, areas of minority ethnic groups, and border, outlying or poor districts, shall be allowed reduction or exemption in income tax for a period of three years.
5. Income from the agricultural specialties produced from farmlands that have been restored to original eco-forests or grasslands for the purpose of environmental protection shall be exempt from the agricultural specialty product tax within a period of 10 years.
6. Land used for the construction of state or provincial highways in the western part of the province shall be exempt from the tax on the occupied farmland accordingly in consideration of the practice in the use of farmland for constructions of railways and airfields. It shall be decided by the provincial government on whether the land used for the construction of other roads shall be exempt, or not exempt, from the tax on the occupied farmland.
7. The advanced technological equipment imported with a fund within the total investment in the enterprise for self use of any domestic industrial enterprise, foreign-invested enterprise involved in encouraged industries or priority industries in the western area of the province, except for those excluded in the list of the tax-free commodities prescribed by the state, shall be exempt from tariff and the import circulation value added tax.