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(Promulgated
by the State Council of China on October 11, 1986 and effective
as of October 11, 1986)
Article
1. These Provisions are formulated to improve the investment environment,
to better facilitate the absorption of foreign investment, to introduce
advanced technology, to improve product quality, to expand in order
to generate foreign exchange and to develop the national economy.
Article
2. The State encourages foreign companies, enterprises and other
economic entities or individuals (hereinafter referred to as "Foreign
Investors") to establish Chinese-foreign equity joint ventures,
Chinese-foreign contractual joint ventures and wholly foreign-owned
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-type enterprises whose products are mainly export, which
have a foreign exchange surplus after deducting from their total
annual foreign exchange revenues the annual foreign 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" Products Export Enterprises")
(2)
Production-type 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").
Article
3. Products Export Enterprises and Technologically Advanced Enterprises
shall be exempt from payment to the State of all subsidies to staff
and workers, except for the payment or allocation of funds for labor
insurance, welfare expenses and housing subsidies for Chinese staff
and workers in accordance with the provisions of the State.
Article
4. The site use fees for Products Export Enterprises and Technologically
Advanced Enterprises, except for those located in busy urban sectors
of large cities, shall be computed and charged according to the
following standards:
(1)
Five to twenty RMB Yuan per square meter per year in areas where
the development fee and the site use fee are computed and charged
together;
(2)
Not more than three RMB Yuan per square meter per year in site areas
where the development fee is computed and charged on a one-time
basis or areas which are developed by above-mentioned enterprises
themselves.
Exemptions
for specified periods of time from the fees provided in the foregoing
provision may be granted at the discretion of local people's governments.
Article
5. Products Export Enterprises and technologically Advanced Enterprises
shall be given priority in obtaining water, electricity and transportation
services and communication facilities needed for their production
and operation. These
fees shall be computed and charged in accordance with the standards
for local enterprises.
Article
6. Products Export Enterprises and Technologically Advanced Enterprises,
after examination by the Bank of China, shall be given priority
in receiving loans for short-term working funds needed for production
and distribution, as well as for other needed credit.
Article
7. When Foreign Investors in Products Export Enterprises and Technologically
Advanced Enterprises remit abroad profits distributed to them by
such enterprises, the amount remitted shall be exempt from income
tax.
Article
8. After the expiration of the period for the reduction or exemption
of enterprise income tax in accordance with the provisions of the
State, Products Export Enterprises whose value of export products
in that year amounts to 70% or more of the value of their products
for that year, may pay enterprise income tax at one-half the rate
of the present tax.
Products
Export Enterprises in the special economic zones and in the economic
and technological development zones and other Products Export Enterprises
that have already paid enterprise income tax at a tax rate of 15%
and that comply with the foregoing conditions, shall pay enterprise
income tax at a rate of 10%.
Article
9. 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.
Article
10. Foreign investors who reinvest the profits distributed to them
by their enterprises in order to establish or expand Products 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.
Article
11. Export products of enterprises with foreign investment, except
crude oil, oil products and other products subject to special State
provisions, shall be exempt from the consolidated industrial and
commercial tax.
Article
12. Enterprises with foreign investment may arrange the export
of their products by themselves or may also export by consignment
to agents in accordance with the State provisions. For products
that require export licences, an application for export licences
may be made every six months in accordance with the annual export
plan of the enterprise.
Article
13. Machinery and equipment, vehicles used in production, raw materials,
fuel, bulk parts, spare parts and components, machine component
parts and fittings (including imports restricted by the State),
which enterprises with foreign investment need to import in order
to carry out their export contracts, are not required to apply for
examination and approval and are exempt from the requirement for
import licenses. The Customs shall exercise supervision and control,
and shall inspect and release such imports on the strength of the
enterprise contract or the import and export contract.
The
imported materials and items mentioned above are restricted to be
used by the enterprise itself only and may not be sold on the domestic
market. If they are
used in products to be sold domestically, then they are required
to go through the import procedures retroactively in accordance
with the provisions and the taxes shall be made up according to
the governing stipulations.
Article
14. Under the supervision of the foreign exchange control departments,
enterprises with foreign investment may mutually adjust their foreign
exchange surpluses and deficiencies among themselves.
The
Bank of China and other banks designated by the People's Bank of
China may provide cash security services and may grant loans in
Renminbi to Enterprises with Foreign Investment.
Article
15. The people's governments at all levels and relevant departments
in charge shall guarantee the autonomy of Enterprises with Foreign
Investment and shall support enterprises with foreign investment
in managing their enterprises in accordance with international advanced
scientific methods.
Within
the scope of their approved contracts, enterprises with foreign
investment have the right by themselves to determine production
and operation plans, to raise funds, to use funds, to determine
by themselves the wage levels, the forms of wages and bonuses and
the allowance system.
Enterprises
with foreign investment may, in accordance with their production
and operation requirements, determine by themselves their organizational
structure and personnel system, employ or dismiss senior management
personnel, increase or dismiss staff and workers. They may recruit
and employ technical personnel, managerial personnel and workers
in their locality. The
unit to which such employed personnel belong shall provide its support
and shall permit their transfer. Staff and workers who violate the
rules and regulations, and thereby cause certain bad consequences
may, in accordance with the seriousness of the case, be given differing
sanctions, up to that of discharge. Enterprises with foreign investment
that recruit, employ, dismiss or discharge staff and workers, shall
file a report with the local labor and personnel department.
Article
16. All districts and departments must implement the "Circular
of the State Council Concerning Firmly Curbing the Indiscriminate
Levy of Charges on Enterprises". The people's governments at the provincial level shall formulate
specific methods and strengthen supervision and administration.
Enterprises
with Foreign Investment that encounter unreasonable charges may
refuse to pay and may also appeal to the local economic committees
up to the State Economic Commission.
Article
17. The people's governments at all levels and relevant departments
in charge shall strengthen the coordination of their work, improve
efficiency in handling matters and shall promptly examine and approve
matters reported by enterprises with foreign investment that require
response and resolution. The
agreement, contract and articles of association of an Enterprise
with Foreign Investment shall be examined and approved by the departments
in charge under the State Council.
The examination and approval authority must, within three
months from the date of receipt of all the documents, decide to
approve or not to approve.
Article
18. Products Export Enterprises and Technologically Advanced Enterprises
mentioned in these Provisions shall be confirmed jointly as such
by the foreign economic relations and trade departments where such
enterprises are located and the relevant departments in accordance
with the enterprise contract, and certification shall be issued.
If
the actual results of the annual exports of a products export enterprise
are unable to realize the goal of surplus in the foreign exchange
balance that is stipulated in the enterprise contract, the taxes
and fees which have already been reduced or exempted in the previous
year shall be made up in the following year.
Article
19. Except where these Provisions expressly provide that they are
to be applicable to Products Export Enterprises or Technologically
Advanced Enterprises, other articles shall be applicable to all
Enterprises with Foreign Investment.
These
Provisions apply from the date of implementation to all those Enterprises
with Foreign Investment that have obtained approval for establishment
before the date of the implementation of these Provisions and conform
to the preferential terms of these Provisions.
Article
20. For enterprises invested in and established by companies, enterprises
and other economic organizations or individuals from Hong Kong.
Macao, or Taiwan, matters shall be handled by reference to
these Provisions.
Article
21. The Ministry of Foreign Economic Relations and Trade shall
be responsible for interpreting these Provisions.
Article
22. These Provisions shall go into effect on the date of promulgation.
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