Section B Preferential Policies on Income Tax of Enterprises with Foreign Investment

Article 21 Enterprises with foreign investment shall enjoy the 3 per cent local income tax exemption.

Article 22 The productive enterprises with foreign investment founded in the administrative coverage of Yinchuan City shall be subject to the enterprise income tax at a reduced rate of 24 per cent.

Article 23 The productive enterprises with foreign investment founded in the State economic and technological development zone of Yinchuan (including Yinchuan high tech industry development zone) shall be subject to the enterprise income tax at a reduced rate of 15 per cent.

Article 24 The projects with a foreign investment of over US$30 million and with a longer payback period, the projects on energy and transportation infrastructure, and the technology-intensive and knowledge-intensive projects, upon approval from the State Administration of Taxation, shall be subject to the enterprise income tax at a reduced rate of 15 per cent.

Article 25 The enterprises with foreign investment belonging to the State encouraged industries shall be subject to the enterprise income tax at a reduced rate of 15 per cent by 2010.

Article 26 The export-oriented enterprises with foreign investment, after the expiration of the period of treatment on tax exemption and reduction by law, shall be subject to the enterprise income tax at a reduced rate of 15 per cent (the Yinchuan-based enterprises, 12 per cent) in the year in which their export volume accounts for over 70% of their production value; those founded in Yinchuan economic and technological development zone and those which have enjoyed the reduced tax rate of 15 per cent, shall be subject to the enterprise income tax at a reduced rate of 10 per cent in case they meet the requirement for the proportion of export volume mentioned above.

Article 27 For the productive enterprises with a foreign investment of over US$30 million, in addition to the income tax exemption in 2 years from the year when they start to profit and the 50 per cent income tax reduction in 3 years by law, income tax (the local retention portion) payable for 3 years shall be involved in the local fiscal expense at the same administrative level as a support given.

Article 28 For the productive enterprises with foreign investment with the operation period more than a decade, enterprise income tax shall, commencing from the year in which they start to profit, be exempted in the first and second year; and levied at a 50 per cent reduction from the third to fifth year. In case the advanced technology enterprises certified by the Regional departments for commercial affairs and of science and technology remain in the certification after the expiration of the period of treatment on income tax exemption and reduction by law, 50 per cent of the local retention portion of enterprise income tax shall be refunded at the stipulated tax rate in 3 years.

Article 29 In case the enterprises with foreign investment make use of the resources listed in the Resource Comprehensive Utilization Catalogue (revised in 2003) for production, after they, as productive enterprises, have enjoyed the preferential treatment on income tax exemption for 2 years and the 50 per cent tax reduction for 3 years, the amount of the local retention portion of their payable income tax shall be refunded in 2 years.

Article 30 For the enterprises with foreign investment certified as the Regional high tech enterprises by the Regional competent department of science and technology, which have enjoyed the preferential treatment on income tax exemption for 2 years and the 50 per cent tax reduction for 3 years, the amount of the local retention portion of their payable income tax shall be refunded in 3 years.

Article 31 For the enterprises with foreign investment dealing in technological development, in case their expenses on technological development occurring in the territory of China actually increase by no less than 10% compared with those in the previous year, upon examinations and verification and approval by the tax authority, 50% of their actually occurring amount shall be deducted from the taxable income amount of the year.

Article 32 For the project invested by the enterprises with foreign investment belonging to the State encouraged industries, within its total investment, the imported self-used machinery and equipment, excluding the commodities explicitly prohibited to be duty-free by the State, shall be exempted from tariff and value-added tax on import.

Article 33 In case the enterprises with foreign investment founded in Ningxia purchase home machinery and equipment within their total investment, which meet the requirements for the encouraged and/or Restriction B investment projects defined in the foreign investment directory of a circular on adjusting the taxation policies on the imported machinery and equipment issued by Order No. 37 (1997) of the State Council and the State Administration of Taxation, excluding the items involved in the non-duty-free imported commodities directory for foreign investment projects of the circular, 40% of the investment amount for the purchase of home machinery and equipment shall be deducted from the added amount of enterprise income tax compared with that in the previous year. For the enterprises with foreign investment and foreign enterprises, the annual amount deducted of enterprise income tax cannot exceed the added amount of enterprise income tax in the year when machinery and equipment are purchased compared with that in the previous year. If such added amount is not sufficient to deduct that amount of investment, the investment amount in surplus may be deducted from the added amount of enterprise income tax in the continuing and consecutive tax years compared with that in the year previous to the purchase of machinery and equipment, however, the maximum term may not exceed 5 years. (For enterprises with domestic investment, this Article shall be observed as reference).

Article 34 Enterprises with foreign investment founded in other parts of China are encouraged to reinvest in Ningxia. In case the amount of foreign reinvestment (the actual contributed capital of no less than 2 million RMB) takes the percentage of no less than 25 of the registered capital, the reinvested enterprise shall enjoy the treatments for enterprises with foreign investment.

Article 35 For a foreign investor of an enterprise with foreign investment, its profits earned from the enterprise shall be exempted from income tax. Where he uses such profits directly to reinvest into the enterprise for increasing its registered capital, or as capital to invest and establish other enterprises with foreign investment with the operating period not less than 5 years, 40 per cent of the income tax amount already paid for the reinvested portion shall, upon the application of the investor and approval by the tax authority, be refunded; in case the reinvestment has been withdrawn before the expiration of five full years, the amount of refunded tax shall be paid back.

Article 36 For the enterprises founded in Ningxia invested by enterprises with foreign investment (including investors of other provinces), which can play a supportive and leading role of vital importance in the Regional social and economic development by utilizing advanced technology with larger amount of investment (over 200 million RMB) within a longer term of investment (over 2 decades), the Regional Government shall, based on the preferential policies provided in the preceding paragraphs, grant supportive treatment of policies like discount interests on a financial loan individually.

Article 37 For the management personnel of foreign enterprises, the pre-tax items exempted from the individual income tax shall be observed and implemented at a rate 5 to 10 times as much as that indicated in the relevant terms of a circular on deduction of pre-tax items from the individual income tax issued by Order No. 86 (1999) of Ningxia Hui Autonomous Region People’s Government.