1. In accordance with the general requirements for building the socialist market economic structure, and the regulations of the People’s Bank of China, a bank exchange settlement and surrender system was put into practice as of July 1, 1996. A foreign-invested enterprise shall, in accordance with relevant regulations, report to the local Foreign Exchange Administration the establishment of its foreign exchange accounts and make a distinction between current and capital accounts according to sources of exchange income. With the approval of the maximum volume of its exchange settlement account by the local Foreign Exchange Administration after verification, the foreign-invested enterprise may conduct exchange settlement and surrender at a designated bank. Foreign-invested enterprises shall go through the same procedures as Chinese enterprises for exchange purchase and sale and enjoy national treatment. In purchasing foreign exchange, they may only present commercial documents certifying the authenticity of the transaction.
For exchange purchases at the Foreign Exchange Regulatory Center, foreign-invested enterprises need not apply for examination and approval by the Foreign Exchange Administration.
2. A foreign-invested enterprise may, after having paid taxes according to law, directly remit abroad its net profits and dividends through a designated exchange bank by presenting the resolution on the distribution of profits of the board of directors of the enterprise. The foreign exchange remittances shall be made from the enterprise's foreign exchange deposit account. Foreign staff or personnel of overseas Chinese or from Hong Kong, Macao or Taiwan of a foreign-invested enterprise may, after having paid taxes according to law, use their salaries in RMB and other legitimate income to purchase foreign exchange at a designated exchange bank and remit them abroad, by presenting appropriate certification.
3. A bank that engages in foreign exchange business may give priority to foreign-invested enterprises in providing the following kinds of loans in local and foreign currencies:
(1) Medium- and short-term loans;
(2) Medium- and long-term loans;
(3) Seller’s credit for import and export trade;
(4) Interim credit;
(5) Credit-limit loans to those whose value of export products of the year exceeds 70% and who can maintain a balance of payments in foreign exchange on their own; and
(6) Rationed loans to those that have good economic efficiency and credit rating.
4. The medium- and long-term sizable loans needed by major foreign-invested projects will be provided by the province’s banks, or syndicated loans or international syndicated loans under the coordination of relevant departments of the province.
1. Foreign-invested enterprises of a productive nature scheduled to operate for a period of 10 years or more are exempt from business income tax in the first and second profit-making years, and are allowed a 50% reduction in income tax from the third to the fifth year. With respect to foreign-invested export-oriented enterprises, upon the expiration of the prescribed period for income tax exemption and reduction, those whose yearly value of exports accounts for 70% or more of their output value in that year may be allowed a 50% reduction in income tax based on the tax rate set by the Tax Law. When the tax rate is lower than 10% after the 50% reduction, they pay the tax at the rate of 10%. Following the expiration of the prescribed period for income tax exemption and reductions, technology-advanced enterprises may be allowed a 50% reduction in income tax based on the tax rate set by the Tax Law for another three years if they remain technologically advanced. An enterprise that actually operates for a period of less than 10 years must repay the taxes that have exempted and reduced.
2. Foreign-invested enterprises are exempt from local income tax from the first profit-making year and from urban real estate tax from the date of starting business. Foreign-invested export-oriented and technology-advanced enterprises, and those that invest in infrastructure, basic industries and agriculture, forestry, animal husbandry and sideline production development projects are exempt from local income tax for 10 years from their first profit-making year and from urban real estate tax for 10 years from the date of starting business.
3. Foreign-invested enterprises of a productive nature established in the urban area of the capital city of Taiyuan will be levied income tax at a reduced rate of 24%. A foreign-invested enterprise engaged in one of following projects may, with the approval of the State Taxation Administration, have income tax reduced to 15%:
(1) Technology-intensive and knowledge-intensive projects;
(2) Projects where the amount of investment of foreign investors exceeds US$30 million and the time for recovery of investment is long; and
(3) Projects involving construction of energy, communications and port facilities.
4. Foreign-invested enterprises engaged in farming, forestry and animal husbandry or established in economically underdeveloped areas within the boundaries of this province may, upon approval by the tax authorities of an application filed by the enterprise, be allowed a 15 to 30% reduction in income tax on the taxable amount of income for another 10 years following the expiration of the period for income tax exemption and reductions.
5. To further open up and encourage foreign businesses to invest in Shanxi, the provincial people’s government has decided that part of income tax will be refunded to foreign-invested enterprises, a practice that enables them to actually pay business income tax at a rate lower than 15%.
Use of land
1. The land administrative departments of the people’s governments at the city/county level or above will handle the examination and approval procedures for the use of land by foreign-invested enterprises through allocation or assignment.
An enterprise that invests in industrial, commercial, financial, tourism, service or commercial housing projects can obtain the right to use of land through assignment.
An enterprise that invests in projects involving agriculture, energy, communications and urban infrastructure construction and facilities for other purposes can obtain the right to the use of land through allocation.
2. Foreign-invested enterprises may transfer, lease or mortgage the right to the use of land they obtained through assignment. When there is added value on the land in the transfer, the land value-added tax should be paid in accordance with relevant state regulations. The right to the use of land obtained through allocation must not be transferred, leased or mortgaged. When there is a real need, the transfer, lease and mortgage of the right to the use of land may be allowed after the enterprise has gone through the appropriate assignment procedures and paid charges for the assignment, upon the approval of the land administrative departments of the people’s governments at the county level or above within the limit of their authority for examination and approval.
3. For the foreign-invested enterprises that obtain the right to the use of land through allocation, the standards of charges for land development and use should be set by local people’s governments at county/city level in accordance with relevant regulations of the State and province.
The land use fees for export-oriented enterprises and technology-advanced enterprises are exempted for five years from the date of obtaining the right to the use of land and reduced by half based on the low-end standard set by county/city-level authorities for the following five years. The land use fees for foreign-invested enterprises of other nature are reduced by half based on the low-end standard set by county/city-level authorities within the five years from the date of obtaining the right to the use of land. In one of the following cases, the land use fees can be exempted during the period of land use upon approval by authorities according to the limit of their authority for examination and approval:
(1) Projects involving agricultural, forestry, animal husbandry and fishery development;
(2) Projects involving construction of communications, energy and other infrastructure facilities;
(3) Projects for development and utilization of beaches or transformation and utilization of abandoned land; and
(4) Projects involving development of educational, cultural, sci-tech, health, sports and other social welfare undertakings.
4. Maximum period for the use of land by foreign-invested enterprises:
(1) 50 years for industrial purposes;
(2) 40 years for commercial, communications and other public undertakings;
(3) 70 years for residential housing;
(4) 50 years for sci-tech, educational, cultural and health projects; and
(5) 50 years for other purposes.
5. Payment of land development and use fees:
A solely foreign-invested enterprise must pay the fees by itself according to schedule.
If the right to the use of land is used as investment by the Chinese partner of a Sino-foreign joint venture or contractual joint venture, it is responsible for paying the fees according to schedule; if it has not been used as investment by the Chinese partner, the enterprise should pay the fees according to schedule.
Other encouragement measures:
1. Competent departments and relevant enterprises give priority to foreign-invested enterprises for the supply of coal, power, water, gas and oil.
2. Foreign-invested enterprises must submit their plans for the transportation of export products to the competent department of foreign trade and economic relations of the province, and the latter should incorporate the plans into the province’s overall plan for foreign trade transportation and provide guarantees. The transportation of products for domestic sale should be included in the province’s overall transportation plan and priority given. Enterprises may purchase vehicles to set up their own fleets for the transportation of their products.
3. A foreign-invested enterprise may select its own terminal equipment for connection with a public network, within the scope permitted by the state. For the enterprise that needs local switching equipment, if it is in keeping with relevant technical regulations, priority should be given in installation of a trunk line. Priority will also be given to those needing to rent a private long-distance communication line.
4. The materials and equipment needed by foreign-invested enterprises for capital construction, technical transformation and production, which cannot be satisfied by market, will be guaranteed supply by the material supply departments of various localities. Those for major projects may be supplied by the provincial capital construction material company.