1. The preferential policies of Guangxi approved by the central government
A) The policies applicable to the whole region
1) More rights are given to the local government in approving foreign investment projects which are in accordance with state policy in construction, production and operation, which do not need extra state support in foreign currency use, which have nothing to do import and export quota and license and which involve a total investment lower than US$30 million.
2) The foreign-invested projects, which are in accordance with the Guidelines for Industries with Foreign Investment and which involve technical transfer, should be exempted from paying custom duties and import added-value taxes.
3) The custom duties and import added-value taxes on some self-used equipment may be exempted for the projects with domestic investment, which are in accordance with the Guiding Catalog of Industries for Foreign Investment.
4) Those productive projects with foreign investment, which are designed to have a business period of over 10 years, will be exempted from paying enterprise income tax in the first and second profit-gaining year and enjoy a reduction of enterprise income tax by half during the period from the third and fifth year.
5) Since 1994 when the taxation reform was introduced, the added-value tax, consumption tax and business tax have been applicable to all the overseas-funded and foreign-invested business. However, those foreign-invested enterprises, which were established before December 31, 1993, are permitted an exception. These enterprises are allowed to enjoy a drawback to some extent for five years starting from 1994.
6) The foreign-invested enterprises are exempted from paying custom duties and the import added value tax for importing spare parts and raw materials for production of export-oriented goods.
7) The foreign-invested enterprises are exempt from paying custom duties for exporting their own products. But the products the export of which are restricted or concerning which the state has other regulations are not included.
8) The foreign-invested enterprises are exempted from paying custom duties and the import added value tax for importing fuel (not including auto-used gas), grinding materials, catalytic agent and so forth necessary for the export-oriented production.
9) Starting from January 1, 1998, the foreign-invested and domestic-invested projects, which were approved by the government during period from April 1, 1996 to December 31, 1997 or were purchasing equipment from overseas by using the loans provided by foreign governments or international organizations, are exempted from paying custom duties and import added value tax.
10) After the regulated duty-exemption period for foreign-invested enterprises expires, those investing in agriculture, forestry and animal husbandry and those based in remote and under-developed regions are permitted to enjoy amount of tax exemption for some years to come, with the approval of the taxation department under the State Council.
11) The Chinese-foreign joint ventures, which, with a business period of at least 15 year, are devoted to the construction of ports or wharfs, are permitted to enjoy a total exemption of enterprise income tax during the first five-year period of profit earning and half reduction in the following five years.
12) The foreign-invested enterprises with a business period of over five years, which decide to increase their registered capital by using the profit derived from the investment or investing in new projects to contribute to the local economy, are permitted to enjoy a tax reduction by 40 percent.
13) Foreign-invested enterprises devoted to high-tech production are permitted to enjoy tax reduction for a longer period than others.
14) After the state-regulated tax-exemption period, foreign-invested enterprises devoted to export-oriented production whose annual export output value exceeding 70 percent of the annual total are entitled to half reduction of enterprise income tax at the present tax rate.
15) Except for state insurance premium, welfare and housing subsidies, foreign-invested enterprises devoted to high-tech and export-oriented production are exempted from surrendering various state-to-employee subsidies.
16) Foreign-invested enterprises are exempted from investment-oriented adjustment tax on fixed assets, added educational tax and urban maintenance tax.
B) The policies applicable to special zones:
1) Those productive projects with foreign investments in the following areas are eligible to an reduced income tax rate of 24 percent. These areas include Beihai, Nanning (excluding Wuming and Yongning), Gangkou District of Fangchenggang, Wuzhou, Yulin, Qinzhou (excluding Pubei and Lishan), Cangwu County, Hepu County, Fangcheng District, Pingxiang and Dongxing. A reduced tax rate of 15 percent is allocated to projects in the fields of energy, transportation, port, dwarf and technology and knowledge-intensive projects utilizing direct foreign investments, or projects with a foreign-invested volume exceeding US$30 million and with a long investment-returning period.
2) For foreign investors, dividends, interests, rents, monopoly-right fees and other proceeds gained from Beihai, Nanning and Gangkou District of Fangcheng without correspondent organizations can enjoy a reduced 10 percent income tax rate together except those enjoying legal tax exemption. The municipal government withholds the power to grant further preferential policies to projects involving favorable capital conditions or advanced technological transfers.
3) Under State ratification, the costal open cities can delineate definite area to establish new economic and technological development zones, where the joint ventures with productive projects are allowed a reduced 15 percent income tax rate.
4) Export-oriented, inland-related productive enterprises in the boundary economic cooperation zones are entitled to a reduced 24 percent income tax. But once the profit is surrendered to the inland area, the investor-based area will over-impose a 9 percent tax.
5) Cross-border enterprises are allowed to set up. Those with investment volume below US$1 million can be examined and ratified by the Guangxi government and can receive charters authorized by the Ministry of Foreign Trade and Economic Cooperation.
6) Commodities exchanged on the boundary markets by local residents, so long as they value less than RMB1,000 per day per person, are exempted from custom duties and import added value tax.
7) Between 1996 and 1998, for boundary small-volume trading enterprises that imported commodities from neighboring countries via designated ports, half custom duties and import added value tax were granted, excluding commodities under State tax and duty regulations such as cigarettes, liquor and cosmetics.
8) Import-duty policies for boundary small-volume trade are executed for commodities imported through economic cooperation with the neighboring countries by those boundary companies with foreign-related economic and technological operational rights. Within a reasonable range, export quota and operational division do not apply to equipment and materials under project contracts and labor cooperation with neighboring countries and necessities used by the workers themselves, and export permits are also exempted for these products.
9) Hi-tech enterprises in the Nanning and Guilin hi-tech development zones are entitled to an income tax rate of 15 percent. Those whose export output value exceeds 70 percent of the annual total can enjoy a 10 percent tax rate after the audit of bureau of taxation. After application and ratification, newly-established hi-tech enterprises are entitled to two-year exemption of income tax as of its year of production. After application and ratification by the taxation bureau, the newly-established joint ventures within the development zones whose cooperation period is up to 10 years can enjoy two-year income tax exemption as of the year of gaining profit. Foreign-invested hi-tech enterprises within the economic and technological development zones are still eligible to special taxation policies. After the exemption period expires, preferential tax reduction in a certain period can be granted to those enterprises with difficulty in surrendering taxes.
10) Products developed by hi-tech enterprises in the Nanning and Guilin hi-tech development zones are entitled to export duty exemption, excluding State qualified and specially-regulated items.
11) After ratification, Nanning and Guilin hi-tech development zones can set up technological import and export companies and can grant export operational rights to high-tech enterprises with good export business records.
12) Foreign-invested enterprises in the Beihai Yintan State Tourist Resort are eligible to a reduced 24 percent tax rate. Sino-foreign tourist auto companies employing domestic autos can be set up. Sino-foreign travel agencies can be set up handling overseas travel operation. Foreign exchange shops may also be established.
2. Preferential policies of Guangxi approved by the regional government
A) Tax Reductions
Exemption of local income tax
Local income tax exemptions are granted to the following foreign-invested enterprises in Guangxi: export-oriented and state-of-the-art technological enterprises; enterprise with export output value exceeding half of the annual total and audited by the city and county taxation bureaus; enterprises engaging in infrastructure construction including energy, transportation and port construction; enterprises set up in coastal open cities and zones, boundary open cities and towns, high-tech development zones and 48 mountainous districts and counties; enterprises dealing in agriculture, forestation, livestock raising and fishing; profit gained from conveyance of scientific and technological fruits; enterprises with a total investment volume over US$3 million, exceeding tax exemption period, with annual profits below RMB 1 million and ratified by city or county taxation bureaus.
Real estate tax reduction
Tax is imposed on the remaining value after a 30 percent reduction of original face accounts of self-owned real estate, with an annual rate of 1.2 percent and rent income tax rate of 12 percent. Enterprises that have difficulty in handing in the real estate tax may apply for ratification of the local taxation bureau for partial or all remission.
Reduction in vehicle license tax
The tax volume for passenger cars is RMB140 or RMB160 annually whereas that for load-carrying vehicle is RMB40 per ton annually. Motorboats taxed by the custom offices are exempted from such tax item.
B) Tax Remission
1) A two-year exemption of income tax as of the year of gaining profit is granted to foreign-invested productive projects set up in coastal open cities, coastal economic open zones, boundary open cities and towns, Nanning City and economic and technological development zones under the ratification of the region’s government and having an operational period over 15 years. Between the third and the fifth year, they enjoy half reduction of income tax and full remission from the local financial department. Between the sixth and the 10th year, after a full surrender of income tax, they will be granted a 30 to 50 percent remission from the local financial department. Foreign-invested enterprises engaged in infrastructure construction such as transportation and energy that are in the above-mentioned areas and with an operational period over 15 years are eligible to two-year income tax exemption as of the year of gaining profit. They will also enjoy a full remission of income tax from the local financial department from the third year to the 10th year, and a 30 to 50 percent remission from the 11th to the 15th year.
2) Sino-foreign port projects with a contract period over 15 years are eligible to income tax exemption between the first and fifth year as of the year of gaining profit. For the sixth to the 10th year, they will enjoy half reduction of income tax and full remission from the local financial department, and between the 11th and 15th year, the local tax remission of 30 to 50 percent is available after tax surrender.
3) For foreign-invested export-oriented or state-of-the-art technology enterprises in other areas that have difficulty in returning bank loans after taxation, a reasonable remission in a certain period from the local financial department is available after ratification of various levels of the government.
4) State-ratified foreign-invested enterprises in the high-tech development zones are eligible to half reduction of urban maintenance fee and exemption of securities of state key construction. They are also eligible to two-year exemption of income tax as of the year of gaining profit. Starting from the third year, a 15 percent income tax rate is granted to these enterprises and full tax remission from the local financial department between the third and the 10th year is available.
5) Foreign-invested export-oriented or high-tech enterprises and productive projects set up in coastal open cities and economic open zones, boundary cities and towns and hi-tech economic and technological zones can perform accelerated fixed assets depreciation under ratification of the city or county taxation bureaus.
C) Other Preferential Policies
1) Production and operational autonomy of enterprises are fully regarded. No unit can charge extra fee items or overcharge foreign-invested enterprises unless they have obtained ratification from the local government.
2) According to different usage, region and period of utilization, foreign investment in land development are eligible to a 10 to 30 percent discount in land-conveyance prices, so long as the rate is above the local bottom line. Various cities and counties can make their own specific regulations about exemptions and reductions of land utilization fees and attached infrastructure fees.
3) Foreign-invested hi-tech and export-oriented enterprises are eligible to a 10 to 20 percent discount in various fees.
4) Foreign-invested enterprise employing domestic raw materials, and equipment, export-oriented ones and those with an annual export volume over US$5 million (the figure in poverty-stricken area is US$2 million) enjoy preemptive rights concerning import quota and permits allocation. They will also receive aid in export quota bidding held by the state.
5) Those foreign investors with over 10 enterprises set up in China that engage in production or infrastructure construction, and whose actual registered capital exceeding US$30 million, are encouraged to establish investment companies and comprehensive development companies within the region.
6) For those foreign-invested hi-tech or import-substitute enterprises, their products, excluding the ones under strict regulation by the state, domestic market can be enlarged to achieve foreign exchange balance.
7) Enlarge the examination and ratification powers for regions, cities and counties to utilize foreign investment. Governments at the city level are granted the power to examine and ratify joint ventures with total investment volume below US$30 million, so long as these projects are in accordance with state industrial policies, or has international market and construction and operational conditions, or does not need the region’s comprehensive balance of foreign exchange or quota and permits for export. Governments at the city level in the coastal open zone, Pingxiang City and Dongxing Town are allowed to examine and ratify projects with total investment volume below US$20 million. Governments in other counties, cities and regions are allowed to examine and ratify projects with investment volume below US$5.99 million. Any solely foreign-funded enterprises complying with the above-mentioned criteria and with total investment volume below US$30 million are consigned to city and region governments for evaluation and ratification, but they must be put on file at the Ministry of Foreign Trade and Economic Cooperation. Government of the autonomous region entrust the power of granting ratification certificates for the above-mentioned enterprises to various city and county governments. Bureau for industry and commerce of the autonomous region consign to such bureaus at the city level the task of initial evaluation and registration procedures needed for operational license.
8) Any person that has contributed to the introduction of foreign investment, including foreigners, overseas Chinese, compatriots in Taiwan, Hong Kong and Macao and various personages, will all be rewarded regardless of profession or rank.
