Compilation of Preferential Policies for Investment Production
In Shenyang
I. Preferential Taxation policies Stipulated by the State
(I) Preferential Policies for Foreign-invested Enterprise and Foreign Enterprise Income Taxes
1. Those foreign-invested productive enterprises established in the Economic and Technological Development Zone shall pay the income tax at 15 percent.
2. Those foreign-invested productive enterprises established in the old urban district of the city where the Economic and Technological Development Zone is located should pay the income tax at 24 percent.
3. Those foreign-invested enterprises established in the old urban district of the city where the Economic and Technological Development Zone is located, which belong to energy, communications, port, wharf or other projects encouraged by the state may pay the income tax at 15 percent.
4. A foreign-invested productive enterprise scheduled to operate for a period of 10 years or more shall be exempt from income tax in the first and second profit-making year and allowed a 50 percent reduction of income tax in the third to fifth years, however, the petroleum, natural gas, ore metal and precious metal
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resources exploration project shall follow the provisions stipulated separately by the State Council. A foreign-invested enterprise, which operated for less than ten years actually, should pay back the income tax exempted and reduced.
5. For foreign-invested industries and projects that are encouraged by the state, the municipal and district people’s governments can decide exemption or reduction of local income r tax in line with actual conditions.
6. If the foreign-investors of foreign-invested enterprises use the profits earned by the enterprises to directly reinvest in the said enterprises, to increase the registered capital or use the said profits as investment capital to set up other foreign-invested enterprises, and have operated such an enterprise for no less than five years, they will receive a rebate amounting to 40% of their duly paid income tax after they file an application and get approval by the taxation authorities. In case the state council has formulated other preferential provisions, the same shall be applied. Those that have withdrawn the reinvestment in less than five years shall pay back the tax refunded.
7. Losses incurred by foreign-invested enterprises and foreign enterprises involved in production and operation with organizations and branches in the Chinese territory in a tax year may be carried over to the next year and made up with a matching amount drawn from that year’s income; should the income in the subsequent tax year be insufficient to make up for the said loses, the balance may be made up with further deductions against income year by year over a period not exceeding 5 years.
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8. Foreign investors who earn profits from foreign-invested enterprises shall be exempt from the income tax.
9. International financial institutions that gain interest from loans granted to the Chinese government and Chinese national bank shall be exempt from the income tax.
10. Foreign banks that gain interest from loans granted to Chinese national bank at prime interest rate shall be exempt from the income tax.
11. In terms of royalties gained by providing know-how for scientific research development of energy, transportation, farming, forestry, animal husbandry and other major technology, the income tax can be paid at 10 per cent upon the approval of competent taxation department under the state council.
(II) Preferential Policies for Income Taxes in the Old Northeast Industries Bases
1. Increase of depreciation rate of fixed assets
The depreciation life of fixed assets (excluding house and building) in industrial enterprises in Northeast China can be shortened at a rate of not more than 40% on the basis of current duration.
2. Reduction of amortization period of intangible assets. The amortization
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period of intangible assets received or invested in industrial enterprises in Northeast China can be reduced at a rate of not more than 40% on the basis of current duration. However if the service life of intangible assets is specified in the agreement or contract, they shall be amortized as agreed to.
3. Increase of before-tax deduction standard for taxable wages.
The before-tax deduction standard for taxable wages in enterprises of Northeast China will be raised to 1200 yuan for each person per month. Specific deduction standard shall be determined by the provincial governments within the above quota in light of local average wages. Enterprises can withhold the tax from the wages to be paid within the standard stipulated by the provincial government.
(III) Preferential Policies for Conversion of VAT in Northeast China
1. Specific Lines of business for deduction of VAT
(1) Equipment manufacturing covers general-purpose equipment
manufacturing, special equipment manufacturing, electric machinery and appliance manufacturing, instruments and meters and stationery manufacturing, communication equipment, computer and other electronic equipment manufacturing, aircraft and space craft manufacturing, railway transport equipment manufacturing.
(2) Petrochemical industry covers petroleum processing, coking and nuclear
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fuel processing, chemical raw materials and chemical products manufacturing, chemical fiber manufacturing, pharmacy, rubber and plastic products other than coke processing.
(3) Metallurgy covers ferrous metal metallurgy and calendaring processing industry other than electrolytic aluminum manufacturing and iron and steel producers of less than 2 million t/a plain steel, 500,000t/a special steel and 100,000t/a iron alloy.
(4) Ship-building industry covers ship and floating attachment manufacturing.
(5) Auto manufacturing.
(6) Farm produce processing covers farm and sideline food processing, food production, beverage production, textile, clothing, shoe making and head wear making, leather, fur, feather (eider down) and their products, timber processing and wood, bamboo, cane, palm fiber, straw products, furniture making, paper-making and paper products, handicrafts and other manufacturing industry.
2. Projects whose taxable amount for procurement items is allowed to be deducted:
(1) Purchase (including acceptance of donations and investment in kind0 of
fixed assets;
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(2) Purchase of goods used for self-made (including reconstruction, expansion and installation) fixed assets or taxable labor service;
(3) Fixed assets obtained by way of financial, where the less or shall pay VAT according to the “Notification of the State Taxation Administration Concerning Collection of Turnover Tax on Financial leasing Business”;
(4) Transport charge paid for fixed assets
The taxable amount for procurement items above refers to the amount the tax payer incurred from July 1st, 2004, who obtained the special VAT invoice and transport invoice issued after July 1st, 2004 as well as legal tax withheld certificate for customs import VAT payment memo.
3. The fixed assets described above refer to
(1) Machine, machinery, means of conveyance as well as other equipment, tool and appliance related to production and operation with a term of service exceeding one year;
(2) Articles not belonging to main production and operation equipment with a unit value of over 2000 yuan and a service life more than two years;
(3) Real property purchased and made by the taxpayer is beyond deduction scope.
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II. Preferential Policies for “Industrial Year” in Shenyang
1. Financial support: Municipal and district finance departments will raise 2 billion yuan of industrial development funds to support the cultivation of 20 ten-billion enterprises, construction of 20 industrial groups and introduction of 20 foreign-invested projects with an output value surpassing ten billion yuan. Priority shall be given to the backbone enterprises and projects, especially those whose 2007 output value will exceed three billion yuan, which have been included in the “Shenyang’s Program for Key Industrial Projects from 2005 to 2010”.
2. Land support: According to the requirement for land use for industrial projects in the city, land acquisition of 5 or 10 sq km will be guaranteed. Industrial land acquisition of 3-5 sq km shall be granted to Dadong and Shenhe District respectively.
3. Soft environment support: Various departments of the municipal government are required to go on with adjusting working mode, improving working method and providing efficient best service in the negotiation, examination and approval as well as resource utilization in line with international practices while offering public products and services and enhancing infrastructure construction.
III. Preferential Policies of Key Districts and Counties in Shenyang
(I) Preferential Policies of Zhangshi Economic and Technological
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Development Zone
Article 1 The following preferential policies are formulated with a view to encouraging and supporting the rapid development of enterprises entering our zone.
Article 2 The administrative committee of Shenyang Economic Innovation Fund for sci-tech SME” and “Enterprise Development Fund” to support industrialization projects of new and hi-tech results, projects with large investment, high technological content and great impetus to the development of the zone as well as the growth of enterprises.
Article 3 A foreign-invested productive enterprise shall pay the income tax at 15 per cent. Those scheduled to operate for a period of 10 years or more shall be exempt from income tax in the first and second profit-making year and allowed a 50 percent reduction of income tax in the third to fifth years upon approval. The profits earned by the foreign investors of foreign-invested enterprises from additional investment projects other than the original contract can be calculated separately and shall enjoy the preferential policy of exemption for two years and reduction for three years as of the profit-making year. For specific clauses, CS (2002) No. 56 document of the Ministry of Finance and State Taxation Administration shall be followed.
Article 4 Export-oriented enterprises on expiration of the exemption and reduction of the income tax stipulated, shall enjoy a reduced enterprise income tax
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rate of 10% if their export value exceeds 70% of their total annual output value. Advanced technological enterprises, on expiration of the exemption and reduction shall further enjoy a reduced income tax rate of 10% for another three years if they remain to be technologically advanced.
Article 5 Foreign investors who invest their profit earned from their enterprises in the same or other enterprises in the Development Zone for a scheduled operation period of over 5 years shall, upon approval, be refunded with 40% of the income tax paid on the reinvested amount; Those who reinvest their profits in export-oriented or advanced technological enterprises for a scheduled operation period of over 5 years shall be refunded with the total amount of the income tax paid on the reinvested amount; In case the new investment is withdrawn by the investor in less than 5 years, the refunded amount shall be paid back; those who fail to meet the export standards in the operation period of 3 years or fail to remain to be technologically advanced shall pay back 60% of the income tax exempted or reduced.
Article 6 Foreign enterprises which gain dividends, interest, rentals, royalties and other income originating from the Development Zone, but without organizations or branches in China, shall pay the income tax at 10% per cent except for those who are exempt from the tax according to the law.
Article 7 After-tax profits remitted abroad by foreign investors shall be exempt from the income tax.
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Article 8 Where technical development expense of a foreign-invested enterprise in the current year is increased by 10% (10% inclusive) over the previous one, the taxable amount in the year is allowed to be deducted at 50% of the technical development expense incurred actually.
Article 9 Various enterprises in the Development Zone shall pay taxes as scheduled on the principle of jurisdiction. Where the following conditions are met, ”Enterprise Development Fund” shall be appropriated in line with corresponding standards within one to three fiscal years if an enterprise files an application, which is approved by the administrative committee of the Development Zone. Meanwhile the Development Zone will give great support and assistance in infrastructure development”, “environment and its protection” and “enterprise technical transformation, R & D and innovation”.
1. Projects with an investment of U.S.$ 5 million –plus;
2. Key industrial projects with a profit-tax of 5 million yuan after being put into operation up to standard;
3. New and Hi-tech projects with an operation period of more than ten years;
4. Relocation transformation projects;
5. Projects of special trade and industry;
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6. Brand name projects exerting a major effect upon the Development Zone.
Article 10 If a foreign –invested enterprise purchases unused home-made equipment with monetary capital within the total investment, the VAT on the home-made equipment can be refunded fully upon approval by the taxation authorities; if the purchase of home-made equipment within the total investment is in conformity with the encouraged investment projects listed in the “Industrial Catalog Guiding Foreign Investment”, 40% of the investment for home-made equipment purchase can be offset from the newly increased income tax in the current year over the previous one.
(II) Main Policies of Hunnan New District to Encourage Investment
1. Enterprise inn the District shall enjoy state policies for foreign-invested enterprises, supportive policies for new and hi-tech industry and other preferential policies.
No share ratio shall be restricted in investment fields where foreign capital is allowed; trial operation may be conducted in the investment fields where foreign businesses are restricted or restricted temporarily; overseas capital and private capital are allowed to participate in the construction of New District by various modes.
3. Where enterprises in the District are engaged in the development and production of new and hi-tech industrial project or construction of infrastructure,
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public welfare establishments and modern service projects, the New District will offer a special discounting for the land-use-right transfer fee in light of project scale, investment and land-use-right fee payment.
4. The finance department of New District will give great financial support to resident enterprises in light of the actual investment and tax payment (finance portion in the New District).
5. The New District establishes development funds for new and hi-tech industry, which are used mainly for innovation fund, guarantee fund, discount fund and bonus fund in new and hi-tech enterprises.
6. Projects of new and hi-tech industrialization, infrastructure, public welfare establishment and modern service sector enjoy the treatment of “No fee zone” and all the administrative charge will be exempted.
7. The World’s Top 500 enterprises, major industrialization, infrastructure investment and public welfare establishment projects shall enjoy more flexible and favorable policies on a case-to-case basis or special measures shall be taken on particular conditions.
8. The new District establishes talent introduction fun d for subsidies in introducing talents.
9. The New District establishes outstanding talent prize and scientists and
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engineers and operators who have made great achievements in industrialization shall be rewarded amply.
10. Talents working in the New District shall enjoy preferential and support-policies in housing, residence registration and employment of their enterprises and schooling of their children.
(III) Preferential Policies of Shenyang New & Hi-tech Development Zone
Shenyang New & Hi-tech Development Zone (formerly Shenyang Nanhu Sci-tech Development Zone) is among the first batch of New & Hi-tech Industrial Development Zones approved by the State Council and also one of the five national comprehensive reform pilot zones determined by the State Science Commission and State Structural Reform Commission. Main preferential policies are as follows:
1. New & Hi-tech enterprises in the Development Zone shall pay the income tax at 15 per cent.
2. New & Hi-tech enterprises with export value exceeding 70% of their total annual output value shall pay the income tax at 10 per cent.
3. New & Hi-tech enterprises shall enjoy exemption of income tax for two years as of their first operation day.
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4. Instruments and equipment used by New & Hi-tech, which can’t be made at home, shall be exempt from import tariff after customs examination on the strength of approval documents of the competent department.
5. Annual income of less than 300,000 yuan earned by new & hi-tech enterprises in the Development Zone organization from technical development, transfer, consulting and service shall be exempt from the income tax.
6. A foreign-invested new & hi-tech enterprise in the Development Zone shall pay the income tax at 15 per cent. Those that are scheduled to operate for a period of 10 years or more shall, upon approval, be exempt from income tax in the first and second profit-making year and allowed a 50 per cent reduction of income tax in the third to fifth years.
7. Advanced technological foreign-invested enterprise, on expiration of the exemption and reduction of the income tax stipulated, shall enjoy a 50 per cent reduction of income tax for another three years as stipulated in the Tax Law if they remain to be technologically advanced.
8. The Taiwanese-invested New & Hi-tech enterprises and export-oriented enterprises in the Across-the-Taiwan Straits Sci-tech Industry Park in Shenyang shall enjoy a 30% reduction of land-use tax according to the current taxation standard as of the year to pay the land use fee.
(IV) Preferential Policies for Shenyang Agricultural New & Hi-tech
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Development Zone
1. Preferential policies for land-use right
(1) The Development Zone can provide land-use right to domestic and foreign investment projects entering the Zone by way of transfer and leasing with the longest land-use period of 50 years.
(2) Land-use price and comprehension fee shall be reduced appropriately by the Development Zone in light of the project scale, technological content and impetus to the Zone.
(3) Both domestic and overseas business people are encouraged to develop a vast stretch of land on a contract basis, build “ Area in the Park” or construct general-purpose factory buildings in the Zone, where investors began to develop land on a contract basis before 2004, the land transfer fee shall be reduced. Developers are allowed to transfer land-use rights and their benefits from the transfer shall be owned by the developers.
2. Preferential policies for taxes
(1) The local retention portion of VAT paid by enterprises in the Development Zone shall be reduced to enterprises fully as the reward in the first and second year and refunded to enterprises at 50% per cent in the third to fifth years for infrastructure construction and new products development.
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(2) Foreign-invested enterprises in the Development Zone shall enjoy exemption of income tax for two years and a 50-percent reduction of income tax for another three years. That is to say, productive enterprises scheduled to operate for a period of 10 years or more shall be exempt from income tax in the first and second profit-making year and allowed a 50 per cent reduction of income tax in the third to fifth years. Export-oriented enterprises, on expiration of the exemption and reduction of the income tax stipulated, shall enjoy a 50 per cent reduction of income tax if their export value exceeds 70% of their total annual output value; advanced technological enterprises shall enjoy a 50 per cent reduction of income tax for another three years if approved by relevant departments.
(3) If domestic-invested enterprises set up projects (with an investment of 20 million-plus) in the Development Zone, the local retention portion of income tax shall be refunded to enterprises in the first and second year and refunded at 50 per cent in the third to fifth years as the reward.
(4) Enterprises engaged in planting, forestry and horticulture should enjoy exemption of agricultural forestry and special product tax in the first to third profit-making years and a 50 per cent reduction in the fourth to sixth years.
(5) Self-produced farm produce sold by farmers engaged in planting, livestock industry, forestry and aquiculture should be exempt from VAT.
(6) New projects constructed in 2002 shall be exempt from service charge and water capacity increase; local retention portion of land mapping fee and soil
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facilities compensation shall also be exempted.
(7) Means of production imported according to the state annual plan, including seeds (seedlings), breeding stock (poultry), fish breed (fry), seed resources of non-profitable wild animals and plants as well as part of chemical fertilizers, pesticides, feedstuffs and plastic films shall be exempt from import-link VAT.
3. Special preferential
(1) Agricultural new & hi-tech enterprises and large industrialized major projects entering the Agricultural Development Zone shall be granted a certain amount of discount loan and infrastructure subsidies in light of the physical circumstance of projects.
(2) Resident enterprises shall pay no fee except taxes stipulated by the state.
(3) Resident enterprises shall be helped with going through inspection and guaranties formalities for animals and plants.
(4) Scientists and technicians or returned students from abroad who come to set up enterprises or research institutes in the Zone with technology and project shall enjoy more preferential in land-use-right transfer, tax, capital and living conditions.
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4. Incentive policies for intermediary (institution)
(1) Any intermediary who introduces a project with a foreign capital of over US$ 10 million (inclusive) or 100 million yuan (RMB) shall be entitled to 5‰ of the actual investment as the reward.
（2） Any intermediary who introduces a project with a foreign capital of over U.S. $ 10 million and U.S.$ 5 million (inclusive) or less than 100 million yuan (RMB) and more than 50 million (inclusive) yuan (RMB) shall reap a reward of 3‰ of the actual investment.
(3) Any intermediary who introduces a project with a foreign capital of less than U.S. $ 5 million or less than 50 million yuan (RMB) and more than 50 million (inclusive) yuan (RMB) shall reap a reward of 2‰ of the actual investment.
(V) Preferential Policies for Qipanshan Mountain
1. The profits earned by foreign businessmen who make investments in the scenic spot in hi-tech intellectual development recreation projects with an amount of over U.S. $ 10 million and long recovery period shall pay the income tax at 15% percent.
2. Sino-foreign joint ventures scheduled to operate for a period of 10 years and more shall, upon approval of the tax authorities, be exempt from the income tax in the first and second profit-making year and allowed a 50 per cent reduction
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of income tax in the third to fifth years.
3. Foreign businessmen are encouraged to lease land in the scenic spot with the longest duration of 50 years. The land used by foreign-invested enterprises can be transferred, leased, mortgaged, inherited or presented legally within the validity term of the land-used agreement (construction fund has been injected, accounting over 20% of the investment), but must be approved by the land administrative department before going through the formalities in addition to payment of land value added charge and land registration fee after the transfer as stipulated.
4. Both foreign and domestic-invested enterprises making investments in the scenic spot to operate tourist projects shall enjoy exemption of income tax for two years and a 50% reduction of income tax in the third to fifth years on a collection-before-refund basis.
5. Both foreign and domestic-invested enterprises engaged in infrastructure construction in the scenic spot scheduled to operate for a period of 15 years and more shall be exempt from income tax for ten years as of the profit-making year.
6. Large cultural and recreational facilities in the scenic spot shall enjoy a 20% reduction of the land-use charge payable according to the contract if the investment totals over US$ 10 million and shall enjoy a 50% reduction of the land transfer charge and exemption of business tax and land-use charge for three years.
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7. Where a super-large cultural and recreational project totaling US $ 100 million, the scenic spot can cooperate by land-use right and land-use charge is exempted.
8. Investments in infrastructure facilities, public facilities, and residents’ relocation project in the scenic spot shall be exempt from the fixed assets adjustment tax for its capital construction project on a collection-before-refund basis.
9. Where investment is made in encouraged projects in the scenic spot, urban land-use tax and real estate tax shall be exempted temporarily (other than house to let).
10. Administrative charges levied on enterprises shall follow the lower limit of current standard.
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