Preferential Policies for Investment

I. Regulations on Taxes

II. Preferential Taxation Policies

III. Preferential policy concerning the administration of entry and exit

IV. Hunan Provincial People's Government’s Comment on Speeding up the Development of Service Outsourcing Industries

V. Hunan Provincial People's Government’s Comment on Taking Industrial Shift and Promoting process trade

VI. Applying for confirmation letter concerning the state-encouraged foreign-funded projects

VII. Trial regulation of tax rebate for domestic equipment purchased in foreign-funded projects

Ⅰ. Regulations on Taxes

Concering the applicable taxation to foreign-funed and foreign enterprises. In addition to Provisional Regulations of the People's Republic of China on Value-added Tax, Provisional Regulations of the People's Republic of China on Consumption Tax, Provisional Regulations of the People's Republic of China on Business Tax, and Enterprise income tax law of the People’s Republic of China.the following regulations are applicable to foreign-funded and foreign enterprises.

1．Revision of Provisional Regulations of the People's Republic of China on Urban Land Use Tax promulgated by the State Council on December 30,2006；

2．Provisional Regulations on Vehicle and Vessel Tax promulgated by the State Council on December 27, 2006;

3．Provisional Regulations of the People's Republic of China on Land Appreciation Tax promulgated by the State Council on December 13,1993；

4．Provisional Regulations of the People's Republic of China on Resource Tax promulgated by the State Council on December 25, 1993;

5．Provisional Regulations of the People's Republic of China on Stamp Tax promulgated by the State Council on August 6, 1988;

6. Provisional Regulations of the People's Republic of China on Real Estate Tax promulgated by the State Council on September 15, 1986;

7．Provisional Regulations on Deed Tax promulgated by the Government Administration Council on April 3, 1950.

II. Preferential Tax Policies<top>

1. The enterprise is exempted from income tax, dealing with farming, forestry, animal husbandry and oceanic fishery.

2、The enterprise is exempted from half income tax, dealing with flowers, tea, beverage pand spice plant as well as seawater and inland breeding.

3、The enterprise involved in such state-supporting key infrastructure projects as port, airport, railway, road, urban traffic, power supply, water conservancy, which are included in List of Preferential Income Tax for Public Infrastructure Projects, is, after its first income is earned, exempted from full income tax for the initial 3 years, and from half income tax for the subsequent 3 years.

4、The enterprise involved in such environmentally-friendly, energy and water saving  projects as sewage treatment, garbage treatment, methane utilization, energy-saving technology, seawater desalting, which are supported by the State Council, is, since its first income is earned, exempted from full income tax for the initial 3 years, and from half income tax for the subsequent 3 years.

5、If the tax-reduction project is transferred, the accepter is entitled to enjoy the exemption from the day of transfer to the day when the exemption expires. If the project is transferred after the exemption expires, the acceptor is refrained from the preferential taxation.

6. The enterprise whose technical transfer in 1 taxation year is worth less than RMB 5 million is exempted from full income tax; for the amount over RMB 5 million, half income tax is reduced.

7、The non-resident enterprise is entitled to pay 90% of its income tax if it does not set any branch in China, or its income does not come from the branch.

8、The income tax is exempted for the following incomes: 

（1）the interest income from the national debt issued by the financial department under the state council;

（2）the income from equity investment in the resident enterprise, such as dividend and bonus ;

（3）such income as dividend and bonus from equity investment in the resident enterprise by the non-resident enterprise which sets branches in China and whose income comes from its branches;

（4）the income made in non-profit activities by non-profit organizations.

The equity investment income excludes the revenue from stocks which, issued by the

resident enterprise, circulates less than 12 months.

9、The small-profit enterprise is allowed a 20% reduction in its income taxation.

10、The hi-tech enterprise supported by the state is allowed a 15% reduction in its income taxation.

11、The government of the ethnic autonomous district is entitled to make a decision concerning reduction or exemption of its shared tax-income, however, it should approved by provincial government.

12、The research expense for developing new technology, new product and new processing is to be deducted in 50% of its amount if it does not turn into the intangible asset. It is to be amortized in 150% of the asset cost if it has turned into the intangible asset.

13、The enterprise which offers the handicapped jobs is exempted from 100% of the wage amount paid to the handicapped on the basis of actually deducting the paid wages to the handicapped. The handicapped employee is recognized in accordance with Law of the People's Republic of China on Supporting the Handicapped.

14、The business-initiation enterprise which invest, with equity capital, the unlisted hi-tech enterprise for more than 2 years is exempted from the income tax payable based upon 70% of the equity capital at the second year of holding it, or in the following years.

15、 Cutting depreciation year or speeding up depreciation applies to the fixed asset which upgrades within short period due to technical progress or keeps staying in strong chock and frequent erosion.

For the former, the shortest number of years should not be less than 60% of the legal number, for the latter, double-balance degression or year summation should be adopted.

16、The enterprise which chooses as the main raw material the resource prescribed  in List of Preferential Income Tax for the Resource-Comprehensive-Utilization Enterprises and whose products are not restricted or prohibited by the state, is allowed 10% deduction from the income earned from those products. The raw material percentage of production claimed the standard is in accordance with the List.

17、The enterprise which purchases and uses the environmentally-friendly, water & energy-saving and safe-work equipment prescribed in List of Preferential Income Tax for the environmentally-friendly-equipment Enterprises, List of Preferential Income Tax for the water-energy-saving-equipment Enterprises and List of Preferential Income Tax for the Safe-Work-Equipment Enterprises is allowed 10% of the equipment cost from its tax payable in the same year, or in the subsequent 5 years.

The enterprise should be denied that taxation favor if it puts the equipment on transfer or lease within 5 years. In addition, it should compensate the deducted tax.

18、If an enterprise involves different projects in terms of the income tax treatment, the preferential project should be individually handled, reasonably bearing the cost during the enterprise operation; Otherwise it is denied the favorable taxation.

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