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Issue 02, 2001 (15 February)
 Western Express

Yunnan Establishes Private Economy Experimental Zone at Kaiyuan

With the approval of the central government, Yunnan is establishing an experimental zone for private small businesses at Kaiyuan. The following preferential policies have been formulated to encourage foreign investors to start business there.

Land Concessions

1) For projects with an investment of over Rmb60 million, the Experimental Zone Management Committee (EZMC) will assign land-use rights free of charge; for projects with an investment of Rmb50 million, Rmb40 million, Rmb30 million, Rmb20 million and Rmb10 million respectively, land-use rights will be assigned at Rmb20,000, Rmb40,000, Rmb60,000, Rmb80,000 and Rmb100,000 per mu respectively. Production enterprises are exempt from land-use fees for five years, and projects with an investment of less than Rmb10 million may be offered concessions on the merits of each case. 2) "Hi-tech enterprises" recognised by authorities at and above the provincial level are eligible for a 20% discount on land-use fees. 3) Investors with total investment exceeding Rmb10 million and experts holding senior positions in the experimental zone are offered 250 sqm of premium residential land for the construction of housing units at Rmb100 per sqm. 4) If an investor has difficulty paying the assignment charge within the same year of the signing of the land-use rights assignment contract, he may, with the approval of the EZMC, pay 60% of the charge first and commence with construction, with the remainder to be paid up in two years at current mortgage rate. 5) Enterprises taking up leaseholds of five years or more are offered a 6-18 month rent-free period depending on the size of their investment.

Supplementary Concessions

1) Enterprises in the experimental zone enjoy the same preferential policies as their counterparts in provincial-level economic development zones, hi-tech development zones and private economy experimental zones. 2) New enterprises are exempt from income tax for the first three years. They are eligible for fiscal incentives in proportion to their contributions to local revenue from the fourth to seventh years, and are granted a 50% income tax reduction from the eighth year. Export enterprises with export output exceeding 70% of their total annual output are taxed at a rate of 10%. 3) For VAT payable in the first three years of operation, the city government will give fiscal incentives to 25% of the tax that goes to local revenue. 4) Investment direction regulatory tax on fixed assets has been suspended since January 1, 2000. For business tax, enterprises are eligible for government fiscal incentives in proportion to their contributions to local revenue in the first two years. 5) Raw materials, parts and components imported for the production of export goods are exempt from tariffs and imported-related VAT. Enterprises approved by Customs may apply for permission to set up bonded factories. Imports of prototypes, samples, reagents, foodstuff and equipment that cannot be produced in China are exempt from tariffs and imported-related VAT. 6) Shares offered to staff members are exempt from personal income tax if re-invested into their enterprise, but personal income tax is levied on dividends paid or shares transferred. 7) Enterprises engaged in imported consumer goods with a business turnover of over Rmb5 million are eligible for government fiscal incentives at 50% of their consumption tax or VAT payable in the first five years. 8) Foreign investors that turn loss-making enterprises in the zone into operations producing or exporting products with a high technology content through merger or acquisition, leasing, contracting or joint-venture are eligible for the same preferential policies as those extended to new enterprises. 9) If over 55% of the total employees of an enterprise are recruited from among local laid-off workers, the enterprise is eligible for government fiscal incentives in proportion to their business and income taxes payable in three years. 10) Foreign enterprises that sustain losses in a particular year may make up for the losses with income from the following year. If income in the following tax year cannot make up for the shortfall, the amount may be carried forward to the next year for up to five years. 11) Enterprises investing in schools, kindergartens, water treatment plants and other infrastructure facilities in the zone are assigned land at cost. They are also eligible for government fiscal incentives in proportion to their income tax payable in the first 10 years of operation. 12) Enterprises eligible for multiple incentives in the above tax concessions may opt for two policies most favourable to them.

Fee Concessions

1) All fees payable under state laws and relevant stipulations of the State Council, Ministry of Finance, State Development Planning Commission, provincial governments and other ministries and commissions will be charged at the lowest prescribed rates. 2) All taxes and fees payable are levied and collected by the EZMC. 3) Fees in relation to public infrastructure are charged at 50%. 4) The EZMC is responsible for unifying and collecting charges for road construction, water, electricity, gas supply, and telecommunications services within the zone.

Xi'an Hi-Tech Zone Introduces Preferential Policies

Xi'an Hi-Tech Zone has recently introduced a number of policies to attract investment from venture capitalists.

To begin with, the threshold for venture capital companies is lowered. Companies may register for business if they meet the ceiling of the minimum capital requirement (Rmb 500,000) in the Company Law. Second, venture capital companies may invest to the full value of their assets and are not restricted by their registered capital. Third, venture capital companies are required to set aside no more than 3% of their investment for risk reserve to cover possible losses in future investments. Fourth, venture capital companies investing in hi-tech industries are eligible for all concessions granted by the state to hi-tech enterprises. Fifth, a registration system is established and it is clearly stipulated that venture capital companies may only engage in investment, investment consultancy and management.