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Foreign investment
incentives offered
by Pudong New Area during
the Ninth -Five-Year-Plan period
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1.Five-year tax holiday and five-year reduction by half Applicable to
overseas-invested projects in such sectors of energy and mass transit i.e.
airport, harbor, highway and power stations. The enterprise income tax rate
for them is 15%. Those with a term of operation of more than 15 years may
enjoy tax holiday from the first profit-making year through the fifth one,
and reduction by half from the sixth through the tenth year, subject to
approval from the tax authorities after application is submitted by the
enterprise concerned. .2.Two-year tax holiday and three-year reduction by half Applicable to
Sino-foreign joint ventures, cooperative enterprises and wholly
overseas-funded manufacturing businesses. Income tax rate for these
enterprises is 15%. For those with the term of operation longer than 10 years
may enjoy tax holiday during the first and the second profit-making year and
reduction by half from the third year through the fifth year, subject to
approval from the tax authorities after application is submitted by the
enterprise concerned. 3.One-year tax holiday and two-year reduction by half Applicable to
foreign banks, branches of foreign banks, Sino-foreign joint venture banks,
finance companies and other financial institutions, on condition that the
capital fund of the said institution or the operational fund from the
headquarter that exceeds US$10 million and the term of operation is longer
than 10 years. In such a case, the income tax is 15%. They may also enjoy tax
holiday in their first profit-making year and reduction by half in the second
and third year, subject to approval from tax authorities after application is
submitted by the business concerned. 4.Tax reduction for two special types of businesses When the tax
holiday and reduction period mentioned above are over, (1) an export-oriented
business may enjoy a reduced 10% income tax rate, on condition that its
export value accounts for more than 70% of its total production of the same
year; (2) business employing advanced technologies may enjoy a reduced 10%
income tax rate for another three years.. 5.Foreign
businesses that have not set up offices in China but regularly receive
revenue in the form of dividends, interests, rents, franchise fees or other
types of income from Pudong New Area may enjoy a reduced 10% income tax rate, except for those that are
exempted from paying income tax according to law. Those of them that are
entitled to additional reduction or a tax holiday for having provided funds
or equipment or for having introduced advanced technology, in both cases on
favorable terms, it is up to the Shanghai Municipal People’s Government to
make decisions.. 6.When foreign
investors in Sino-foreign joint ventures remit their share of profits out of
the country, no income tax is to be levied on the amount remitted. 7..When foreign
investors reinvest their share of profits in the same or other
overseas-invested businesses, or in the founding of new overseas-invested
businesses with a term of operation that is longer than five years, 40% of
the income tax that has been levied on the reinvested amount will be
refunded, subject to the ratification of the tax authorities after
application is submitted by the business concerned. If the reinvestment is made in the founding or expansion of an export-oriented business or a business employing advanced technologies with a term of operation not less than five years, the income tax that has been levied on the reinvested part will be refunded in full. Local income tax and property tax Before the end of 2000,
overseas-invested businesses in Pudong are exempted from local income tax. Overseas-invested businesses founded
before March 31, 1996 may continue to enjoy exemption from import duties and
import-related taxes on production equipment imported for their own use. Overseas-invested businesses approved
and established between April 1, 1996 and December 31, 1997 in accordance
with required statutory procedures, and overseas-funded businesses importing
equipment funded by foreign government loans or loans of international
financial institutions are exempted from import duties and import-related VAT
from January 1, 1998 on, except for those specified in the List of
Non-Duty-Free-Imported Goods for Overseas-Invested Projects. In addition, overseas-invested
projects falling under the "encouraged" category and
"restricted category B" in the Catalogue of Industries Inviting
Foreign Investment and involving technology transfer are exempted from
import duties and import-related VAT on equipment imported for their own use
as part of the total investment, except for those specified in the List of
Non-Duty-Free Imported Goods for Overseas-Invested Projects. Equipment
imported for their own use by projects funded by loans from foreign
governments or international financial institutions and equipment provided
free by foreign businesses engaging in processing trade are exempted from
import duties and import–related VAT except for those specified in the List
of Non-Duty-Free Imported Goods for Overseas-invested Projects.
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