VII. Favorable policies for foreign investment

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 marketsin 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.

(China Development Gateway December 23, 2009)