Relevant preferential policies for encouraging foreign investment in China

Income Tax Law Of The People's Republic Of China For Enterprises With Foreign Investment And Foreign Enterprises
(Abstract)

1. Enterprises with foreign investment which have actually operated for a period of over ten years shall be exempted income tax for the first and second year from the year of earning profits, and pay half of income tax from third to fifth year. For resources development project, such as petroleum, natural gas, rare metal and precious metal, there is another regulations promulgated by the State Council.
2. For foreign investors of foreign invested enterprises, they can reinvest their profits in enterprise, thus increase their registered capital, or use the profits as capital investment to found other foreign invested enterprises. If the enterprise has operated for a period of not less than five years, through application and ratified by taxation authority, 40% of income tax from their reinvestment part will be refunded.
3. If foreign invested enterprises invest in other enterprises in China, their profits (dividends) will not be calculated into the amount of income tax that the enterprise should pay.
4. For industries and projects which encourage foreign businessmen to invest, provincial, municipal and autonomous people’s government can exempt or decrease their local income tax according to the actual conditions.
5. Foreign investors’ profits from foreign invested enterprises will be exempted income tax.
Provisions Of The State Council For The Encouragement Of Foreign Investment (Abstract)
No.95 document of Guofa[1986](i.e., No.95 document issued by the State Council)
1.The State encourages foreign companies, enterprises and other economic organizations or individuals (hereinafter referred to as "foreign investors") to establish Chinese-foreign equity joint ventures, Chinese- foreign contractual joint ventures and foreign capital enterprises (hereinafter referred to as "enterprises with foreign investment") within the territory of China. The State grants special preferences to the enterprises with foreign investment listed below:
(1) Production enterprises whose products are mainly for export, which have a foreign exchange surplus after deducting from their total annual foreign exchange revenues the annual foreign exchange expenditures incurred in production and operation and the foreign exchange needed for the remittance abroad of the profits earned by foreign investors (hereinafter referred to as "product-for-export enterprises").
(2) Production enterprises possessing advanced technology supplied by foreign investors which are engaged in developing new products, and upgrading and replacing products in order to increase foreign exchange generated by exports or for import substitution ( hereinafter referred to as "technologically advanced enterprises").
2. Product-for-export enterprises and technologically advanced enterprises shall be exempt from payment of income tax if foreign investors remit their profits out of China’s boundary.
3. After the expiration of the period for the reduction or exemption of enterprise income tax in accordance with the provisions of the state, product-for-export enterprises whose value of export products in that year amounts to 70 per cent or more of the value of their products for that year, may pay enterprise income tax at a rate reduced by one half of the current tax rate. Product-for-export enterprises in the special economic zones and in the economic and technological development zones and other product-for-export enterprises that already pay enterprise income tax at a tax rate of 15 per cent and that comply with the foregoing conditions, may pay enterprise income tax at a reduced rate of 10 per cent.
4. After the expiration of the period of reduction or exemption of enterprise income tax in accordance with the provisions of the state, technologically advanced enterprises may extend for three years the payment of enterprise income tax at a rate reduced by one half.
5. Foreign investors who reinvest their shares of profits from their enterprises in order to establish or expand product-for-export enterprises or technologically advanced enterprises for a period of operation of not less than five years, after application to and approval by the tax authorities, shall be refunded the total amount of enterprise income tax already paid on the reinvested portion. If the investment is withdrawn before the period of operation reaches five years, the amount of enterprise income tax refunded shall be repaid.
6. except for the payment of or allocation of funds for labor insurance, welfare costs and housing subsidies for Chinese staff and workers in accordance with the provisions of the state.
Execution Proposal for Promoting N.E Old Industrial Base to further Expanding Reform & Opening to the Outside World promulgated by the State Council
(Abstract)
No.36 document of Guobanfa[2005](No.36 document by general office of the State Council in 2005)

1. according to the requirements of strategic adjustment of state-owned economy, to explore and expand new investment utilization modes, to encourage foreign investment to participate in restructuring and reform, to promote system and mechanism innovation, to enhance market adaptability of state-owned enterprises in N.E old industrial base.
2. to encourage foreign investors to participate in restructuring and reform of state-owned enterprises in the form of merging and equity participation. If foreign investors participate in reform of state-owned enterprises in the form of merging and equity participation, for previous owing debts which were left by the original enterprise in history and hardly paid, the owing debts will exempted according to the relevant regulations and conditions and after being ratified by the State Council. To support eligible foreign invested stock company to go public listing on foreign and domestic capital market.
3. to further standardize and promote foreign investors to merge and restructure domestic enterprise; to set up and perfect property ownership transaction system in northeastern regions in order to provide convenient and standardized environment in the form of merging and equity participation; if foreign investors merge state-owned enterprises, asset assessment will be done according to relevant Chinese laws and policies. The assets transaction price will be determined according to records of relevant departments as well as assessment results.
4. to expand execution range of foreign invested advantageous industry catalogue; the coverage provinces of foreign invested industry catalogue in middle and west regions added Liaoning province( jilin province and Heilongjiang province already listed into); any foreign invested projects in northeastern region which conform to the catalogue, shall enjoy import taxation preferential policies for encouraged foreign invested enterprises.
5. to encourage foreigners to invest in high-new-tech industries and research & development center; to encourage transnational companies to set up research & development center in northeastern China in the form of sole investment or joint venture with local enterprises, scientific research institution and universities; in addition to relevant preferential policies enjoyed by foreign invested research & development center, for ratified foreign invested enterprise technological center, self-use consumable materials, agent, sample machine, samples and etc will be exempt from customs tariffs and import value added tax according to the existing regulations.
6. to encourage development outside China in the form of cooperation, joint funding and merging; to further actively study relevant policies; to perfect policy supporting system; to enhance support of prophase fees subsidiary and domestic loan interest discount for key development projects outside China for enterprises in northeastern China.

Proposals on Policies of Deepening Reform of State-owned Enterprises by Liaoning Provincial People’s Government
(Abstract)
No. 15 Document of Liaozhengfa[2005]( No.15 document issued by Liaoning provincial government in 2005)

1. to lift restriction on stock ownership of local large-scale state-owned enterprises; in addition to the fields prohibited by the state law and policies, enterprise can attract state-owned capital, collective capital and non-public owned capital for equity participation, be restructured to become joint-stock enterprises and realize diversification of investment principal; support eligible enterprises to go public listing for their business scope; to support large-scale state-owned enterprises to restructure across regions, to encourage equity replacement between provincial & municipal administered enterprises and central government administered enterprises as well as enterprises outside the province.
2.Enterprises abroad and private-owned enterprises participate in enterprise restructuring, for loan debts owing to state-owned banks, if it’s difficult to repay within the original term, through consultation with relevant banks, loan repayment term can be re-determined. For tax owing in history of the original state-owned enterprises, in addition to tax exemption according to relevant regulations, if it’s difficult to repay the remaining tax owing, through approval, the repayment can be in several terms and in several years.
3. Enterprises abroad and private-owned enterprises participate in enterprise restructuring. If the annual net income of restructured enterprise, which comes from technological transfer as well as technological consultation, technological service and technological training, is below RMB 300 thousand yuan, the enterprise will be temporarily exempt from income tax; for industrial enterprises of all ownership with complete financing & accounting system, whose income tax are based on checking accounting records, if all relevant fees incurred from development of new products, new technologies and new processes in profit-earning years, increase 10% or above than that of last year, in addition to actual expenditure, 50% of fees can be used as income tax of the year.
4. Enterprises abroad and private-owned enterprises participate in enterprise restructuring. For industrial fixed assets invested projects in Liaoning province, whose income tax are based on checking accounting records, 40% of investment in domestic equipment will be offset with increased income tax. If the increased income tax is not enough for offsets, the un-offset investment can be offset with subsequent increased income tax. However, the offset period cannot exceed 5 years.
5. Enterprises abroad and private-owned enterprises participate in restructuring of state-owned enterprise with franchise rights, such as real estate development, realty management, price assessment of real estate and etc. So long as restructured enterprise conforms to relevant grade & qualifications conditions, it can continue to retain grade & qualifications of the original enterprise when registering for a new enterprise.
6. Enterprises abroad and private-owned enterprises participate in enterprise restructuring. When applying for registration alternation, in addition to administrative fees related to industrial & commercial administration, taxation, land and real estate alternation, other fees will be collected in half. Service fees with governmental pricing or governmental guided pricing will be collected in below 50%. According to relevant regulation, after being assessed and confirmed by assets assessment authority, relevant departments should acknowledge the assessment and cannot require separate assessment.
7. For restructuring of state-owned high-tech enterprise, after being restructured and confirmed by relevant department to reach tax exemption condition, the enterprise’s income tax will be collected with 15% taxation rate. In the process of enterprise restructuring, the purchased enterprise transfers real estate to purchasing enterprise. The land value-added tax will be temporarily exempted. The property ownership transfer will be exempt from sales tax.
8. To relax investment proportion of invisible assets in registered capital. If the investment is in pricing of patent rights, trademark rights, non-patent rights as well as other high-tech results, the maximum proportion can reach 70%. If the investment is in invisible assets and confirmed by all investors, assets assessment will not be done.

Preferential Policies for Encouraging Investment in Benxi City(abstract)
No.7 document of benweifa [2004]( No.7 document issued by CPC Benxi Committee in 2004)

1.Financial support preferential policies
(1)All invested in Benxi city administration zone, newly-invested various enterprises according with state and local industrial policies, and want to invest over RMB 1 million Yuan (including 1 million Yuan), in 3 years from the enterprise put into production, the enterprise income tax formed local finance part, the government will give the same number financial support. In 3 years after the enterprise put into production, the government will give 50% financial support by sales tax and added value tax two parts. After financial support period finished, in 3 years formed local finance by income tax, the government will still give 50% financial support.
( 2) Newly-built export enterprise and high-tech corporation after enjoyed state and local financial support period, through the enterprise application and related departments approved, the enterprise formed local financial part by income tax, the government will still give 5 years financial support.
( 3)Through investment, bought, merger and other methods startup Benxi churchyard stop production or long term bad, and installment original employee over 30%, from startup enterprise pit into production, the income tax which formed local finance part, the government will give the same number financial support. In 3 years from the corporation startup, the government will give 50% financial support by added value tax formed local financial finance.
(4)Newly-built enterprise investor put it’s gained profit after tax again invest this enterprise, the government will give 5 years financial support according to invested part paid for income tax part formed local financial.
(5)All newly-built enterprise made the whole city GDP increased over millionth (including millionth), and increased local financial support over RMB 0.5 million Yuan（including 0.5 million Yuan），arranged over 100 persons employees(including 100 million Yuan ), through government approved, from it put into production, the enterprise gained government credit allowance support.
(6)For invested over RMB 20 million Yuan (including RMB 20 million Yuan) production and processing project, large modern business circulated and city important basic facilities project, through government approved, from produced day, local financial will give 3 years allowance support.
2.National land source preferential policies
(1)If we gain land through land-use method (not including property development land), which fixed assets investment over RMB 10 million Yuan (including 10 million Yuan) production and processing project and investment over RMB 20 million Yuan (including 20 million Yuan) in new build corporation of newly the third industry project, and land-use price paid in 20% of land labeled price; and investment over RMB 5 million Yuan (including 5 million Yuan) in new build corporation of newly the third industry project, and land-use price paid in 40% of land labeled price. If you have difficult in paid if land-use price in one time, you may installment paid in by contract.
(2)The investor newly-invested export enterprise and high-tech enterprise, on the basis of enjoying state and local preferential policies, the land-use price will shall be again 30% dawn, in detail we may adopt “Receipt and payment two lines”.
( 3) Possess existing cultivation and don’t change its usage or development and utilization fivehuang resource newly-invested enterprises. The national land source department didn’t again charge for that.
(4)Invest and improve traditional processing enterprise in Benxi, which put national land right of use joint into newly-invested enterprise, the land-use price shall be 20% down.
(5) For other matters uncovered, we will base the principle of one matter, one consultation, and give preferential policies.
3.Administrative and institutional and service preferential
(1) For invested over RMB 1 million Yuan(including RMB 1 million Yuan ) newly building project, exempted the business license cost, pay taxes registered cost, open account fee in bank, licence cost of the hygiene, contract discern fee, safe performance check fee of the lightning device , commodity apartment price check fee, building land plan licence fee , construction land planning allowance fee, construction project address position paper fee, and construction project planning licence fee; Reduced by half collected house property right registration fee or the property right changing registration fee.
(2) For fixed assets invested over RMB 1 million Yuan (including RMB 1 million Yuan) agriculture project, the invested over RMB 2 million Yuan (including RMB 2 million Yuan) production and processing project, and the total invested over 5 million Yuan (including 5million Yuan) newly the third industrial enterprise, exempted land changing registered fee, collect 60% environment protection fee, and exempted business administration in 3 years.
(3) For fixed assets invested over RMB 20 million Yuan (including RMB 20 million Yuan) newly-invested enterprise, can be granted more preferential policies.
(4) All invested infrastructure and commonweal project newly-invested enterprise or through government
(5) The foreign party or foreign-invested need arrange filial study in Benxi elementary school and middle school, the education department will arrange their filial study in emphases school. auction land use right, through national resource department check, exempted land management fee and half land changing registered fee.
(6) The newly-invested enterprise introduced and recruit all kinds of professional talentes, the personnel department and labor guarantee department will give priority to go through relevant formalities for them.

Awarding Method for Joint Funding & Cooperation of Beitai Iron & Steel Group
No.57 document of Beigangjifa[2005]( No. 57 document issued by Beigang Group in 2005)

In order to further transform the enterprise’s business mechanism, to realize diversification of investment principals, to fully mobilize all employees as well as external individuals or collectives( units) to participate in Beigang’s joint funding & cooperation, we work out the method according to Awarding Policies for Encouraging Investment in Benxi as well as relevant regulations and policies.

Chapter 1 General Rules
(1) The method is suitable for individuals or collectives (units) inside and outside Beigang Group which make contribution to joint funding & cooperation in Beigang Group.
(2) The awarding range includes investment attraction and financing.
Investment attraction means that individuals or units transfer fund, practicality, patent technology, transfer of creditor’s rights to stock rights of natural person and artificial person outside Beigang Group to Beigang Group in the form of investment.
Financing means that individuals or units transfer fund of natural person and artificial person outside Beigang Group to Beigang Group in the form of loan (including rolling usage of loan and accepted bill of exchange).
(3)The awarding object includes project initiators, middlemen and organizers in the process of joint funding and cooperation.
Project initiators refer to persons that initiate joint funding & cooperation projects towards Beigang Group, and finally realize joint funding and cooperation.
Middlemen refer to persons that introduce natural persons, artificial persons or financing authority towards Beigang Group, and finally realize joint funding and cooperation.
Organizers refer to persons that organize and execute joint funding & cooperation work, and finally realize joint funding and cooperation.

Chapter 2 Awarding Standard of Joint Funding & Cooperation

(4) awarding for investment attraction
for introduced cash, awarding will be based on the actual input amount; for non-cash assets, awarding will be based on assessment results of assessment authority identified by both partners of joint funding and cooperation; for debt transfer to stock rights between enterprises, awarding will be based on amount of debt transfer to stock rights. The detailed awarding standard is as follows:
introduced investment below RMB 5 million yuan (including RMB 5 million yuan), awarding 0.4%; introduced investment RMB 5 million yuan to 10 million yuan( including 10 million yuan), awarding 0.6%; introduced investment RMB 10 million yuan to 30 million yuan( including 30 million yuan), awarding 0.8%; introduced investment RMB 30 million yuan, awarding 1%.
(5) awarding for financing
for financing, if the loan term is over one year or rolling usage term can reach over one year, awarding is based on 0.5% of financing amount.
(6) other awards
for polices on direct investment and introduced fund of state assets, special appropriation, subsidiary and interest discount through governments and departments of all levels, if it brings benefits to Beigang Group, awarding will be based on standards corresponding to investment attraction and financing standards. If it belongs to financing subsidiary, tax exemption and special appropriation, which don’t need to be refunded and increase the enterprise’s net assets, awarding will be based on awarding standard; if it belongs to financing, which increases Beigang’s debts and needs to be repaid or bear interest, awarding will be based on financing standard.

Chapter 3 Awarding method and procedure

(7) Before joint funding and cooperation, Beigang Group should sign Agent Agreement with external project initiator, middleman and organizer, which defines duties and liabilities of both partners as well as awarding standard; The internal project initiator, middleman and organizer should register with beneficiary units.
(8) the proportion for awarding distribution among project initiator, middleman and organizer are 10%, 50% and 40%, respectively.
(9) In light of the principle of who benefits and who assumes, awarding will borne by beneficiary units. Financing award is directly listed into financial expenditure; awarding for investment attraction is listed into public entry. Foreign invested enterprise can also list the awarding into employee bonus fund according to after-tax profits.
(10) awarding for non Beigang employees will be in cash; awarding for Beigang employees will be in cash and stock shares, 40% and 60%, respectively. For awarding of stock shares, Benxi Beifang Investment Co., Ltd will award its stock shares to awarding person. They can also form stock shares of other companies according to willingness of awarding person.
(11) For individuals or units inside Beigang Group, who bear targets of joint funding and cooperation, after the target is fulfilled, awarding can only be given for over-fulfilled targets and be paid in cash in year end. For individuals or units inside Beigang Group, who don’t bear targets of joint funding and cooperation, awarding will be based on actual input amount. Awarding will be given by beneficiary units within 30 days.
(12) after the fund of investment attraction and financing is fulfilled, the awarding person will fill in awarding auditing table for joint funding and cooperation, submit agent agreement as well as other valid evidence document(report on the verification of capital or loan contract, bank records). After confirmed by auditing division and financing division of Beigang Group, it will be executed by development division of Beigang Group.
The awarding distribution program for above-mentioned joint funding and cooperation will be laid out by project execution units, and register with personnel resources department of Beigang Group.
(13) the above-mentioned awarding cannot overlap with other awarding policies. Individuals should pay income tax for their awards.

Chapter 4 Supplementary article

(14)if the investment is in US dollars or other currencies, investment attraction amount will be based on converted RMB according to quotation of foreign exchange published by Bank of China( buying price of spot exchange).
(15) for individuals and units who make remarkable contribution to joint funding and cooperation, in addition to the awards, his or her contribution can also be used as one of reference for appraising excellence by Beigang Group, and necessary spiritual encouragement and honor titles should be given.
(16) for joint funding and cooperation(for example, to use Beigang’s idle assets, patent rights, copyright, business reputation, trademark and etc to invest outside Beigang ) uncovered in this method can be awarded with the method of one matter one discussion.
(17) The method goes into force from the issuing date. The original awarding method for investment attraction in Beigang Group.( No. document of Beigangjifa[2003], i.e., No. document issued by Beigang Group in 2003).
(18) for matters uncovered, it will be interpreted by development division of Beigang Group.