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VII. Favorable policies for foreign investment
Regulations and Policies for Improving the Environment for Investment from Outside Guizhou Province was(China Daily December 23, 2009) formulated on January 24, 1998 by the Guizhou provincial government outlines the following measures:
Exemption of enterprise income tax: For production enterprises invested with capital from Hong Kong, Macao and Taiwan as well as foreign countries (except for development projects in oil, natural gas and rare metals) and those invested with capital from other areas in China outside the province, provided they will operate for more than ten years, they shall be exempted from paying income tax for two years starting from the year they begin to generate profits; all the enterprise income tax they have paid from the third to the fifth year shall be returned by financial departments; those projects in the fields of infrastructure such as energy, transportation, water preservation, urban utilities, green industries and tourism development, provided such projects will continue their operation for over 15 years, they shall be exempted from paying enterprise income tax for two years as of the year they begin to generate profits; all the enterprise income tax they have paid shall be returned to them from the third year to the tenth year.
Exemption of agricultural tax: For agricultural development projects using non-farmland invested with capital from outside the province, exemption of agricultural tax for 3 to 5 years is applicable from the very first year of the project. For taxable products developed on non-farmland, a period of exemption of agricultural tax for 3 years is applicable from the year profits are generated.
Reduction of regulating tax for fixed asset investment for projects with outside-province investment in developing pillar industries and promoting progress in science and technology.
Specially favorable treatment in collecting land use fee for investors from outside the province, in accordance with specific conditions in each area and trade.
Outside-province investors are encouraged to take part in the reorganization and transformation of state-owned enterprises in Guizhou. Investors may choose to buy shares, take control of, jointly operate, annex, buy over, lease, trust-manage and contract these enterprises which now enjoy sound management and have a promising future. For investors from outside China, they are welcome to control shares in the enterprises unless there are regulations by the state stipulating otherwise in certain sectors.
Foreign investors can apply for setting up investment companies once they have invested three or more enterprises in China or actual investment amounts to more than US$30 million.
Investors from outside Guizhou are entitled to loans for floating capital and technical transformation. Projects for developing priority resources and alleviating poverty as well as providing technological transformation of existing state-owned enterprises may enjoy priority treatment in obtaining loans.
Foreign invested enterprises have the freedom to decide the ratio of their products sold locally or exported, unless where there are specific national regulations stipulating otherwise.
Enterprises with outside the province investment enjoy the same utility rates; Foreign investors and their families enjoy the same treatment as local residents in seeking medical treatment, going to schools, travel and buying houses.
Intellectual properties including the patent, copyright, trademark, blueprints, designs, technical explanations, standard and computer software of outside Guizhou investors are protected according to international practice.
Random charge imposed on enterprise with investment from outside the province beyond central government regulations are strictly forbidden.
Well-coordinated and efficient service shall be provided so as to facilitate the business of outside investors.
On June 8, 2000, the Guizhou provincial government issued the following measures to further encourage foreign investment;
Foreign investors are encouraged to establish enterprises producing for export and enterprises producing for replacements of imports.
Foreign investors are encouraged to invest in transformation of the old city districts and housing projects.
Foreign investors may engage in exploration of mineral resources and enjoy priority rights for development.
Foreign investors are encouraged to invest in basic industries and infrastructure including agricultural, energy, transportation and raw materials as well as environmental protection and ecological protection projects. Their investment is particularly encouraged in the area of technological transformation of state-owned large and medium-size enterprises and tourism. Foreign investors may decide to wholly-own, control shares or increase investment in enterprises, unless there are state regulations stipulating otherwise.
Foreign invested production enterprises (except for oil, natural gas, rare minerals and expensive metals) which will operate for more than ten years are exempted from paying enterprise income tax from the first to the third year after they begin to operate with profit. Income tax will be reduced by half during the fourth and fifth year. Such enterprises located in poverty-stricken and minority-inhabited areas may enjoy 15 to 30 percent income tax reduction for the rest years in the ten-year period.
Enterprises with foreign investment producing for export may enjoy income tax reduction by 50 percent after the initial exemption and the following reduction periods are over, if the yearly export value amounts to 70 percent or more of the enterprises¡¯ annual output value.
Those officially recognized advanced technological enterprises may enjoy income tax reduction by 50 percent for another three years after the initial tax exemption and reduction periods are over.
Foreign investors who reinvest their profits into enterprises which shall operate for no less than five years shall receive 40 percent return of the taxes they have already paid. If the reinvestment is made to operate enterprises for export or advanced technological enterprises, they shall receive 100 percent return of the taxes already paid.
Production enterprises with foreign investment established in Guiyang City may enjoy 76 percent reduction of the payable income tax.
Foreign enterprises engaged in hi-tech production in Guiyang High- and New-Tech Development Zone only pay 15 percent of income tax. Enterprises in the fields of energy, transportation, and technology-intensive and knowledge-intensive projects, each with an investment of US$30 million, established in Guiyang only pay 15 percent income tax, upon approval by the State Taxation Administration.
Foreign invested enterprises are exempted from paying local income tax for seven years; enterprises invested by overseas Chinese, compatriots from Hong Kong, Macao and Taiwan are free from paying the tax for ten years. Development projects in energy, raw materials, transportation, telecommunications and agriculture, enterprises producing for export, enterprises of advanced technology and enterprises established in poverty-stricken and minority-inhabited areas are free from this tax for ten years while those invested by overseas Chinese and compatriots from Hong Kong, Macao and Taiwan are free from this tax for 15 years.
Houses built or bought by foreign enterprises for their own use are exempted from real estate tax for three years as of the month built or bought.
Taxes imposed on goods exported by foreign-invested enterprises which are registered with the industrial and commercial authorities after Jan. 1, 1994 shall be returned.
Foreign enterprises have the right to transfer, lease, mortgage and inherit land-use right legally obtained for development, within the legally effective period.
Land obtained by foreign enterprises for development may enjoy a land-use fee reduction period of 3 to 5 years, provided the operation period is beyond 10 years.
Favorable land-use right in development zones may include:
25-30 percent off the land transfer fee for high- and new-technology projects recognized by the state or provincial science commissions;
20-30 percent off the land transfer fee for enterprises in energy, transportation, telecommunication and other aspects of infrastructure;
15-25 percent off the land transfer fee for projects in culture, education, medicine and health;
10-20 percent off the land transfer fee for foreign enterprises producing for export; and Installment payment for land use fee is possible if the investor has difficulty to pay the full amount, provided the owner of the land agrees.
Easy formalities for importing component parts, auxiliary materials and packing materials.
Foreign investors may directly borrow capital in hard currency from banks and enterprises outside China and be responsible for payment of the principal and interest. Guarantees for borrowing that should be provided by the Chinese side proportionate to investment percentage should be incorporated into the state plan for financing outside the country.
The Guizhou Provincial branch of Bank of China shall offer preferential treatment to foreign-invested new- and high-tech enterprises and those producing for export.
Foreign businesses can buy shares of state-owned enterprises and take part in management in share-holding enterprises according to procedures stipulated by the state. Joint-venture enterprises can apply to the state for approval for issuing shares outside China.
Departments responsible for issuing approval to projects with foreign investment shall issue approval or disapproval to the applicant within twenty days after receiving the project proposal, feasibility report, contract and charter, if the right of examination and approval of the projects is held at the provincial level. A decision on submitting or not submitting the documents to higher authorities should be made within fifteen days after receiving the documents, if the right of examination and approval belongs to authorities higher than at the provincial level.
(China Development Gateway December 23, 2009)