Incentive System

PROVISIONS OF ZHUZHOU MUNICIPAL GOVERNMENT ON OPENING TO THE OUTSIDE WIDER & ENCOURAGING FOREIGN INVESTMENT

These provisions are hereby formulated in order to open to the outside world wider, improve the investment environment, encourage enterprises, economic entities & individuals form foreign countries, Hongkong, Macao, and Taiwan to invest in Zhuzhou and develop Zhuzhou's economy.

Ⅰ.Use of Land

　　Article 1: In accordance with the principle of separation of land proprietary right and land--use right, the use right of land within the area of Zhuzhou can be transferred to foreign investors upon consideration.

　　Article 2: Based on the land developing cost, the land benefit and position difference and the period as well as the way of the usage of land, the prices of the land use right are divided into 4 types and 6 classed. The land used for setting up enterprises of industrial facilities and the service industries, a 15 percent reduction is allowed in the evaluated price. The land within Zhuzhou High and New Technology Development Zone used for setting up enterprises of industrial facilities and the service industries, a 20 percent reduction is allowed in the evaluated price. The land used by those enterprises that approved by Hunan Science Commission as high and new technological enterprises a 25 percent reduction is allowed in the evaluated price.

　　Article 3: The longest period of the use right of land to be transferred:
(1) 70 years for residence.
(2) 50 years for industry, education, science and technology, culture, health and sports.
(3) 40 years for commerce, tourism, entertainment and other usage. Following the expiration of the transfer of the land-use right, the transferee shall apply for an extension within six months before the expiration. After the transferee signs the contract and pay the fees for further transfer, he can get the land-use right again.

　　Article 4: Preferences on prices of land-use right shall be given under the following conditions:
(1) The land used for agriculture, forestry, animal husbandry, sideline and fish on uncultivated mass land and sands is allowed a 35 percent reduction in the evaluated price.
(2) The land used for tourism, commodity and industry reclaimed on uncultivated land and mountains is allowed a 30 percent reduction in the evaluated price.
(3) The land used for setting up export enterprises and technologically advanced enterprises, which are confirmed by the competent department of the state council, reclaimed on the uncultivated land and mountains is allowed a 30 percent reduction in the evaluated price.

　　Article 5: Another 5 percent reduction is allowed if the transferee pays the fees in one time within 15 days from the date when the contract goes into effect. If it is difficult to pay the fees in one time, payment is not less than 50 percent and more than 70 percent is paid in the first year, the interest will be exempt. The interest will be 2.5 percent per month for those fees paid after the first year. And the longest period to pay the fees is three years.
A 40 percent reduction of the city construction system charges is allowed for those enterprises of export, advanced technology, high and new technology and basic installations, which have paid all the fees for the land use right. And a 20 percent reduction in city construction system charges is allowed to other enterprises.

　　Article 6: The transferee can develop and use the land once he pays the land transfer fees. And he can get the certificate for use of land after all the payment is over, The land right can be transferred, rented, mortgaged, presented, inherited and coverted into shares to set up joint ventures and cooperation enterprises.

　　Article 7: Interrelated charges will be exempt or reduced on leased land and site for the following foreign-funded enterprises:
(1) For export enterprises and technologically advanced enterprises, the land use charge will be exempt for 5 years from the day when it is set up.
(2) For enterprises of agriculture and animal husbandry development, the land use charge will be exempt for 8 years from the day when it is approved.
(3) For those enterprises awarded as advanced foreign-funded enterprises by the city or above, the annual land use charge will be exempt.

　　Article 8: For those foreigners who buy building to set up enterprises in Zhuzhou for more than 3 months, the Public Security department will issue certificates for temporary stay or residence permit. Besides the preferential policies granted by the State Council, the foreigners' one or two close relatives in 60-90 square meters or more than 90 square meters of commercial residential buildings.

Ⅱ.Taxes related to foreign investment

　　Article 9: The income tax of all equity or contractual joint ventures and wholly foreign-owned enterprises in Zhuzhou is 30 percent.
(1) Any foreign-funded enterprises of a production nature scheduled operate for a period of not less than 10 years shall, from the year of making profit, be exempt from the income tax in the first and second years and allowed a 50 percent reduction in the third to fifth years.
(2) If the annual value of export products of an export enterprise accounts for more than 70 percent of the total output value, a 50 percent reduction of the annual income tax is allowed upon the expiration of the period of tax exemption and reduction s stated above.
(3) If a technologically advanced enterprise is reconfirmed, a 50 percent reduction of income tax is allowed for a period of anther 3 years upon the expiration of the period of the above tax exempt and reduction.
(4) Enterprises engaged in agriculture, forestry and animal husbandry and enterprises established in remote undeveloped areas may, upon approval by the competent department for tax affairs, be allowed a 15 to 30 percent reduction of income of the period for tax exemption and reduction.

　　Article 10: Any foreign investor of a foreign-funded enterprise who reinvests his share of profit obtained form the enterprise directly into that enterprise as capital investment to establish another enterprise to operate for a period of not less than five years shall, upon approval by the tax authorities of an application filed by the investor, be refunded 40 percent of the income tax already paid for the reinvested amount. If the reinvestment is made to establish or expand an export-oriented or technologically advanced enterprise to operate for a period of not less than five years, 60 percent of the income tax already paid for the reinvested amount shall be refunded.

　　Article 11: Preferential Policies on Value-Added Tax
(1) Any foreign-funded enterprise of a production nature scheduled to operate for a period of more than 10 years shall, form the day when it is put into production, be refunded 30 percent of the value-added tax kept in the local government by the financial administration in the first two years.
(2) Export enterprises an technologically advanced foreign enterprises scheduled to operate for a period of not less than 10 years shall be refunded 30 percent of the paid value-added tax kept in the local government tin the first two years, and 20 percent in the succeeding 3 years.

　　Article 12: The refund of tax having been paid by foreign-funded enterprises is settled once a year. It's checked by foreign investment promotion departments, confirmed by financial and tax departments and refunded by financial department.

Ⅲ. Finance and Insurance

　　Article 13: A foreign-funded enterprise may open a RMB account and a foreign exchange account with the local bank. All kinds of foreign exchange income may be deposited in the foreign exchange account and normal foreign exchange expenses shall be paid from the foreign exchange account.

　　Article 14: The investment of foreign exchange, foreign exchange capitals borrowed by the enterprise and foreign exchange income in production & business may be regulated freely in the local foreign exchange center.

　　Article 15: The net profit after the tax and other justifiable income may be remitted to foreign countries upon approved by the foreign exchange administrative department of an application filed by the foreigner. Payment and other proper income of foreign employees may be remitted to foreign countries after they have paid the tax in accordance with the law.

　　Article 16: Funds needed in the construction and production of a foreign-funded enterprises may be loaned both from the local bank or borrowed from a foreign bank. Enterprises, which can comply with certain conditions, may, upon approval by the People's Bank, raise money in the form of bonds Export enterprises and technologically advanced enterprises may be given priority by financial organs in applying for loans.

　　Article 17: Zhuzhou Insurance Co. Under takes the insurance of the property equipment and freight of imported and exported goods. They will offer conveniences and best service to all foreign-funded enterprises.

Ⅳ. Personnel Management and social guarantee

　　Article 18: The foreign-funded enterprises shall have the power by themselves to set up its organs and decide their salary, allowances, the way salary payment, the way of awarding & evaluation of professional titles.

　　Article 19: If the foreign-funded enterprises want to employ the Chinese professional technicians and workers, their units and administrative department s shall agree to let them go. If a labour dispute takes place; the arbitration will be made by local labour dispute Arbitration department.

　　Article 20: The personnel files of the technicians and other staff employed by the foreign-funded enterprises shall be kept in the Personnel Exchange center & Unemployment, Child-bearing and Insurance Administration center. The payment adjustment and other things shall be handled. The personnel shall, upon approved by the competent departments, be exempt form the over capacity charge of the city.

　　Article 21: For the directors, managers and other high-level staff of the foreign- funded enterprises, their Chinese competent departments can't change their jobs at will. If thereare are special reasons for them to change, the proposal shall be put forward before three months and get agreement of the board of directors.

　　Article 22: The foreign - funded enterprises shall insure against old, unemployment, child-bearing and medical treatment and pay the social insurance in time.

Ⅴ. Approval of Foreign-funded Project

　　Article 23: The proposal document and feasibility study report for setting up a foreign-funded enterprise shall be examined and approved by the joint meeting organized by the Foreign Trade & Economic Cooperation Bureau. After receiving all the documents needed, the Foreign Trade & Economic Cooperation Bureau shall organize the departments concerned to examine and approve it and make a decision within 7 workdays.

　　Article 24: The Industry & Commerce Administrative Bureau shall make the business registration within 3 workdays after receiving the approval documents, issue the business license and its duplicate.

Ⅵ. Water and Electricity Supply

　　Article 25: Preferences on water and electricity supply for foreign-funded enterprises.
(1) 30 percent of reduction in electricity construction charges shall be allowed to the foreign-funded enterprise, 40 percent of reduction in electricity construction charges shall be allowed to the export enterprises and technologically advanced enterprises.
(2) 30 percent reduction per cubic meter in the over-capacity water supply shall be allowed to foreign-funded enterprises, 40 percent reduction per cubic meter to export enterprises and technologically advanced enterprises.

Ⅶ. Rights & Interests Protection

　　Article 26: Zhuzhou Municipal Government encourages the parties and individuals to introduce direct overseas investment. Those who succeed in introducing shall be rewarded by the government and the benefited units. The way of execution is as per the Regulations of Zhuzhou Municipal Government on Reward Policy on Introducing Foreign Investment.

　　Article 27: Unreasonable Charges, apportion and penalty are forbidden. The Finance Department shall deduct the unreasonable charge, apportion and penalty, which is verified by Zhuzhou Price Bureau, form the administrative fund of the unit or its competent departments. And preferential policies shall be made on the charges. The way of execution is as per the Preferential List on Administrative Charges for Zhuzhou Foreign-funded Enterprises.

　　Article 28: Rights and Interests of every party shall be safeguarded and every party shall be urged to fulfil the clauses in the contract. The way of execution is as per the Annual Examination Regulations on the contracts and Article s of association of Foreign-funded Enterprises.

　　Article 29: The legitimate management, rights and interests and safety of the foreigners investing in Zhuzhou shall not be disturbed and infringed on. The places where they live shall not be checked freely without the approval of Zhuzhou Public Security Bureau. For the cases related to foreign-funded enterprises, the Judicial Department shall investigate and deal with them in accordance with the laws.

Ⅷ. Supplementary Article

　　Article 30: These provisions shall be explained by Zhuzhou Foreign Trade & Economic Cooperation Bureau and come into effect from Feb, 1, 1996.