Favorable policies for FDI in Shaanxi

【Favorable policies for FDI】

Located in western china, while enjoying the preferential policies promulgated by the State to encourage the foreign investment, Shaanxi Province also enjoys the preferential policy of the Development of Western China, meanwhile, it formulates the special preferential policy provincially in accordance with the laws of the State to encourage the foreign investment.

Part One  Special Preferential Policy of the Development of Western China ( term of validity: 2001-2010)

(Ⅰ)Taxation

1.The category of encouragement enterprises, domestic-funded and foreign-funded, are eligible for a reduced corporate income tax rate of 15%.

2.Enterprises that start operations in such industries as transportation, power, water conservancy, postal service, radio and television are eligible for a preferential policy of reduction or exemption from corporate income tax. Specially, domestic-funded enterprises of the above-mentioned enterprises may be exempt from enterprise income tax in the first two profit-making years and be granted a 50% enterprise income tax reduction from the third to the fifth year.

3. Foreign investment in the infrastructure construction or in the basic industry of agriculture, forest industry, water conservancy, transportation, energy, municipal utilities, environmental protection, etc. in the resource development of mineral and tourism and in the establishment of technology research and development centers may enjoy various preferential policies for the category of encouragement industry with foreign investment.

4.Foreign-funded projects in accordance with The Catalogue of Advantageous Foreign Investment Industries in Middle and Western China and the imported technical equipment within the total volume of investment, except for those which may not be tax-free in accordance with the relevant regulations of the State, are eligible for the exemption from Customs duties and the import VAT (Value Added Tax).

(Ⅱ) Land Utilization

Units and individuals that are capable to be assigned with unused land, such as waste hillsides and unreclaimed land, owned by the State assigned in accordance with the laws of the State, and that proceed with the ecological construction of forest and grass planting may be reduced or exempt from the assignment fee, and enjoy a 50-year term of land tenure. The land user, who has met the volume of investment requires by the Grant Contract, and who has the qualifications for ecological construction, may transfer, lease, or mortgage the land tenure. Upon expiration of the term of use, the land user may apply for its renewal.

(Ⅲ) Exploitation of Mineral Resources

1. The exploration and exploitation of the mineral resources, such as oil, gas, coal-bed methane, uranium, high-grade iron ore, high-quality manganese ore, chromate, copper, potassium, platinum-group metals, and ground water, may be eligible by application for reduction or exemption from mineral exploration and mining right user’s fee: as for mineral exploration right user’s fee, from which the exemption may be enjoyed for the first year when exploration has already been conducted, of which the reduction of` 50% may be enjoyed from the second to the third year, and of which the reduction of` 25% may be enjoyed from the forth to the seventh year; as for mining right user’s fee, from which the exemption may be enjoyed for the first year when the mine is in capital construction and when it is put into mining production，of which the reduction of` 50% may be enjoyed from the second to the third year when the mine is put into mining production, of which the reduction of` 25% may be enjoyed from the forth to the seventh year, and from which the exemption may be enjoyed throughout the exact year when the mine pit is closed down.

2. Exploration and exploitation of non-oil/gas mineral resources with foreign investment may enjoy the policy of the exemption from the mineral exploration and mining right user’s fee for one year and the reduction of` 50% of the mineral exploration and mining right user’s fee for two years. The exploitation of non-oil/gas mineral resources within the category of encouragement in the Catalogue of Guidance for Foreign Investment Industries may enjoy the policy of the exemption from the mineral resources compensation fee for five years.

 (Reference documents: Circular of the State Council on Several Policies Concerning the Implementation of the Development of the Western Regions (Promulgated by the State No.【2000】33) ; Opinion of the Western-Regions-Developing Affair Office of the State Council on Several Policies Concerning the Implementation of the Development of the Western Regions, on August 28, 2001)

Part Two Preferential Policies Promulgated by the State to Encourage the Foreign Investment

(Ⅰ) Corporate Income Tax

1. The tax rate of corporate income tax is 25%.

2. Losses incurred in a tax calendar year by any enterprise are granted to be carried over to the Budget for the following tax year, and to be made up for from the income of next year, however, this process shall not be last for more than five years.

3. Proceeds of enterprises from planting of flowers, tea bushes and other beverage crops and spice crops，seaculture and inland freshwater aquaculture, may be taxed at half of the required corporate income tax rate.

4. Proceeds from agriculture, forestry, animal husbandry and fishing may be reduced or exempt from corporate income tax.

(1) Planting of the vegetable, grain, tuber crop，oil-bearing crop，legume，cotton， bast fiber plant crop，sugar-bearing crop，fruit and nut;

(2) Seed selection and cultivation of new strains of crops;

(3) Planting of Chinese Crude Drugs;

(4) Cultivation and planting of the silva;

(5) Feeding of the livestock and poultry;

(6)Acquisition of forest products;

(7) Service industries for agriculture, forestry, animal husbandry and fishing: irrigation， primary processing of agricultural products，veterinary，promotion of agricultural technology，and agricultural machinery maintenance;

(8) Deep-sea fishing.

5.Proceeds of enterprises, which are generated from projects of establishing ports, airports, railways, highways urban public transport , power, and water conservancy in accordance with the Preferential Category of Corporate Income Tax of Public Infrastructure Construction, and which are generated from project of public sewerage disposal, public waste disposal, comprehensive exploitation and utilization of methane, technical reconstruction of energy conservation and emission reduction , sea water desalinization, energy-saving and water-saving, may be exempt from corporate income tax for the first three years, and be taxed at half of the required rate from the forth to the sixth year since the tax calendar year when the first proceeds from production or business operation is generated.

6.The total income, less than the amount of five million yuan, from the technical transfer of a resident enterprise within a tax calendar year may be exempt from corporate income tax; the exact income, more than the amount of five million yuan, may be taxed at half of the required corporate income tax rate.

7. Small-sized meagre-profit enterprises, which proceed non-prohibition/restriction industries of the State satisfying the conditions below are eligible for a reduced corporate income tax rate of 20%:

(1) Industrial enterprises with a taxable income less than 300 thousand yuan of the tax year, the number of employees less than 100, and the total assets less than 30 million yuan;

(2) Other enterprises with a taxable income less than 300 thousand yuan of the tax year, the number of employees less than 80, and the total assets less than 10 million yuan.

8. High-tech enterprises, which should be supported by the State, are eligible for a reduced corporate income tax rate of 15%.

9. R&D costs (research and development costs), which are spent by enterprises to develop new technologies, new products, and new techniques, which do not develop into intangible assets eventually, and which are not accounted as current profits and losses, will be deducted further more from the taxable income as much as 50% of R&D costs on the basis of the deduction of actual expense in accordance with relevant rules and regulations; R&D costs, which develop into intangible assets eventually, will be amortized 150% of the intangible assets costs. Enterprises, which provide jobs for disabled persons, will be deducted further more from the taxable income as much as 100% of the salary paid to the disabled workers on the basis of the deduction of actual expense in accordance with the amount of salaries paid to the disabled workers.      

10. Venture capital enterprise, which invests in unlisted small/medium-sized enterprises with new technology for more than two years by equity investment, may have a deduction of its taxable income in accordance with 70% of its total volume of investment in the exact year when it has held the equity investment for two years; the taxable income of the venture capital enterprise may be carried over to next tax calendar year to be further deducted in case of its insufficiency for the deduction.

11. Proceeds from production of non-prohibited/restricted products, which satisfy the relevant standard of the State and the industry with the resources in accordance with the Preferential Category of Corporate Income Tax on Income from Comprehensive Utilization of Resources as the main raw materials, will be taken as the total revenue at 90%.

12. Enterprises, which purchase and actually use special equipment for environmental conservation, energy saving and water saving, and production safety in accordance with the Preferential Category of Corporate Income Tax on Income from Special Equipment for Environmental Conservation, Preferential Category of Corporate Income Tax on Income from Special Equipment for Energy Saving and Water Saving, and Preferential Category of Corporate Income Tax on Income from Special Equipment for Production Safety, will be offset 10% of the investment on the special equipment mentioned above from the tax payable of the enterprises in next five tax calendar years.

13. Enterprises, which had been granted to be established before the publication of Income Tax Law of People’s Republic of China on Enterprises, may transfer gradually to the current taxation in five years from January 1,2008 if they enjoyed privilege of a law taxation in accordance with the tax law and administrative regulations at that time; may still enjoy the privilege within the exact period if they enjoyed a regular tax reduction and exemption period set at that time; may enjoy the period of privilege from the year 2008 if they did not enjoy any privilege because of no profits.

(Referential documents: Income Tax Law of People’s Republic of China on Enterprises, adopted at the 5th Meeting of the Standing Committee of the Tenth National People's Congress on the date of March 16,2007; Rules for the Implication of Income Tax Law of People’s Republic of China on Enterprises (the Decree No. 242 of the State Council of the People’s Republic of China), promulgated on the date of December 6,2007)

(II) Import and export tariffs

1. Export products of enterprises with foreign investment，shall be exempt from the export tax and value-added tax and shall enjoy policies of tax exemption, reduction and refund.

2. Raw materials，bulk parts， machine component parts and wrappers which enterprises with foreign investment need to import in order to produce export products shall be exempt from the export tax and value-added tax . Products subject to the import license control shall be exempted from import licensing. The Customs shall exercise supervision and control.

(Reference document: "Provisions of the State Council for the Encouragement of Foreign Investment", Promulgated in October 1986)

3. Tariffs and import link value-added tax shall be exempted with respect to import equipment for their own use within the total amount of investment in domestic investment projects the development of which is encouraged by the state and foreign business investment projects which are consistent with the category of encouragement under the Catalog of Industries Guidance for Foreign Business Investment and the Catalogue of advantageous foreign investment industries in mid&western China, with the exception of commodities listed in the Catalog of Import Commodities for Foreign Business Investment Projects with no Tax Exemption and the Catalog of Import Commodities for Domestic Investment Projects with no Tax Exemption.

4. When foreign-funded enterprises purchase Chinese-made equipment that fall into the scope of the tax exemption catalogue, value-added tax on the aforesaid equipment can be refunded in full amount and the enterprise’s income tax may be deducted or exempted according to relevant regulations.

5. For any established foreign investment enterprise in the encouraged category( including Catalogue of Priority Industries for Foreign Investment in the Central-Western Region ) , foreign-funded research and development center, or any technical innovation of an advanced-technology-oriented or product-export-oriented foreign-funded enterprise, the import customs duties and the taxes incurred in the import link may be exempted for the import of self-used equipments as well as the technologies, fittings, spare parts attached to such equipments which are imported within the originally approved scope of production and operations but cannot be produced in China or whose performance cannot fulfill the needs.

6. Foreign investment enterprises produce products according to the Catalogue of the National Hi-tech products, equipment imported for self use and supporting technology, parts and spares imported with the equipment in accordance with the contract shall be exempted from tariffs and import-stage value-added tax.

7. Foreign investment enterprises introduce advanced technologies listed in the Catalogue of the National Hi-tech Products, import customs duties and the taxes incurred in the import link may be exempted for the software costs paid abroad in accordance with the terms of the contract.

(Reference ducument: " Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment  (No.37 [1997] Promulgated by the General Office of the State Council) ;  Circular of the General Office of the State Council on Forwarding the Opinions of the Ministry of Foreign Trade and Economic Cooperation and Other Departments on Further Encouraging Foreign Investment(No. 73 [1999] Promulgated by the General Office of the State Council); National Guideline on Medium- and Long-Term Program for Science and Technology Development (2006-2020) (No.44 [2005] Promulgated by the General Office of the State Council)

 (III) Certain Policies on Software and Integrated Circuit

1. Until 2010, value-added tax (VAT) will be levied at the statutory rate of 17% on an ordinary VAT payer's sale of software products developed and produced by itself. The portion of the tax burden in excess of 3% shall be refunded upon collection and used by the enterprise to research and develop software products and to expand reproduction, not as the enterprise income tax which can not be levied.

VAT payer's sale of software products after conversion and other localized renovations shall enjoy preferential tax breaks and be refunded upon collection in accordance with relevant provisions concerning software products developed and produced by itself.

2. Value-added tax (VAT) will be levied at the statutory rate of 17% on an ordinary VAT payer's sale of integrated circuits (including mono-crystalline silicon wafers) produced by itself. The portion of the tax burden in excess of 6% shall be refunded upon collection and used by the enterprise to research and develop new integrated circuits and to expand reproduction, not as the enterprise income tax.

(Reference ducument: " Circular of the State Council Concerning the Issue of Policies on Encouraging the Development of Software Industry and Integrated Circuit industry. (No.18 [2000] Promulgated by the General Office of the State Council on June 24, 2000) ; Circular of the Ministry of Finance and the State Administration of Taxation and the General Customs Administration on the Tax Policies for Further Encouraging the Development of Software and Integrated Circuit Industries (No.25 [2000] Promulgated by the Ministry of Finance on September 22, 2000)

(IV) Other Aspects

1. When foreign investors in product-for-export enterprises and technologically advanced enterprises remit abroad profits realized by them from such enterprises， the amount remitted shall be exempt from income tax.

2. Re-investment projects financed by foreign-funded enterprises in central and western regions with foreign investment exceeding 25 percent can enjoy the treatments granted to foreign-funded enterprises.

(Reference ducument: "The State Council on Encouraging Foreign Investment", Promulgated in October 1986; Circular of the General Office of the State Council on Forwarding the Opinions of the Ministry of Foreign Trade and Economic Cooperation and Other Departments on Further Encouraging Foreign Investment(No. 73 [1999] Promulgated by the General Office of the State Council on August 20,1999)

Part Three  Shaanxi Province enacted referential policies on encouraging foreign investment in accordance with the law

1. Foreign-funded enterprises operating in the industries encouraged or permitted by the State (with the exception of entertainment industry, tertiary industry and real estate) in the region of Shaanxi province shall be exempt from local income tax, urban real estate tax and travel tax.

2. In foreign-invested enterprises, expatriates and members of their families who need to enter and leave the territory of China for commercial activities shall apply to the public security organs for multiple entry documents within a certain period.

3. Enjoy the preferential policies enacted by city government and county government in accordance with the law.

Source:Doing business in Shaanxi of China