1)Governmental Service

Zhongshan government actively carries out the functional transformation by implementing a series of measures, such as accelerating the process of building an electronic government and reforming the administrative examination and approval system. With the principles of administering by the rule of law, enhancing the transparency and efficiency, supporting foreign enterprises in different ways, being helpful to the foreign investors in a real way, Zhongshan government has set up a clean, pragmatic and efficient image.

Zhongshan government also makes great efforts to straighten the market order, establish and better the legal system, and improve social security conditions, so as to ensure the coordinative development of different social causes and to create a good environment for the foreign investors.

2)Policies

Taxation for Foreign-invested Enterprises

1.Corporate income tax and local income tax

The foreign-invested enterprises and the manufacturing and business establishments set up by foreign enterprises within the territory of China shall pay corporate income tax at a tax rate of 30% and pay local income tax at a tax rate of 3% based on taxable income.

The manufacturing enterprises involving foreign investment in Zhongshan may pay corporate income tax at a reduced tax rate of 24%.

The manufacturing enterprises with foreign investment in Zhongshan which invest in technology-intensive or knowledge-intensive projects or the ones of energy, communication and port construction with investment amount of over USD 30 million and long investment recovery period may pay corporate income tax at a reduced tax rate of 15% after the approval of State Administration of Taxation.

The manufacturing enterprises involving foreign investment with operation tenure of over 10 years enjoy 2 years of corporate income tax exemption from the first profit making year and half reduction for the next 3 years. During the period of exemption and reduction of corporate income tax, local income tax is exempted simultaneously.

The enterprises using advanced technology are entitled to half exemption of corporate income tax for a 3-year extension should they be still technologically advanced at the expiration of specified tax exemption and reduction period. When the foreign party of the foreign-invested enterprise uses its profit for reinvestment and to increase its registered capital or branches out for new businesses for at least 5 years, it can have a rebate of 40% of the income tax already levied on the added amount at the taxation department’s  approval of the investor ’s application.  Total refund is applied to cases of direct investment for setting up or expanding export businesses or technologically advanced companies. The foreign-invested enterprises established in National Torch High-tech Industrial Development Zone of Zhongshan and appraised as high-tech enterprises may pay corporate income tax at a reduced tax rate of 15%.

Certified hi-tech enterprises or enterprises manufacturing hi-tech products may use such expenditures to claim a rebate on the administrative charges as ones for research and development of new products, technology and techniques, including all relevant costs for new product design, process flow formulation, equipment adjustment, raw materials, semi-finished products test, technical books and data, mid-test without the state plan, researchers' wages, facilities' depreciation and so on. And if the expenditure for such research and development of new products, technology and techniques is increased by over 10% each year, 50% of such expenditure  may further be made a rebate on the income tax (referring to the regulations of the tax authority for details).

The annual loss incurred by the foreign-invested enterprise can be compensated by the profit to be derived from the following tax year. This process can go on within a maximum period of 5 years. 

Export companies at the expiration of specified tax exemption and reduction period may enjoy half exemption of enterprise income tax provided that the annual export volume accounts for 70% the total annual industrial output or above.

For any enterprise with foreign investment which engages in the encouraged category of projects in the Catalogue for the Guidance of Foreign Investment Industries approved by the State Council and meets any of the following conditions, the investor may, with regard to the proceeds from investment items increased other than the original contract, separately calculate and enjoy the regularly reduced or exempted enterprise income tax preferences provided for in Paragraphs 1 and 2 of Article 8 of the tax law: (1) the newly increased amount of registered capital due to the increase of investment is no less than USD 60 million; (2) the newly increased amount of registered capital due to the increase of investment is no less than USD 15 million, and also no less than 50% of the enterprise' original registered capital.

2. Value Added Tax (VAT), Consumption Tax, Business Tax, Resource Duty and Customs Duty in regard to Foreign-invested Enterprises

(1) VAT: VAT is levied on tangible movable goods sold within China or on services of processing, repairs and assembly as well as imported movable goods. The VAT rate is divided into three grades. The basic VAT rate is 17%. The VAT of lower level is 13%. Unless otherwise specified by the State Council, the policy of tax rebate is applicable to exported goods.

If the homemade equipment purchased by foreign-invested enterprises within the total investment falls into the catalogue of duty-free equipment, the VAT for such homemade equipment can be fully refunded.

(2) Consumption tax: Consumption tax is levied on 11 kinds of taxable consumption goods listed in the tax law which are produced at home, processed by contract or imported, such as cigarettes, wines, cosmetics, cars, etc.

(3) Business tax: Business tax is a kind of tax levied according to business turnover on the entities and individuals that provide paid services and labor related to communication and transportation, building industry, finance and insurance, post and telecommunication, cultural and sports undertakings, entertainment business and service sector within the territory of the People's Republic of China, transfer of intangible assets, and sales of real estate. The tax rate is divided into three grades, i.e., 3%, 5% and 10%.

(4) Resources duty: Resources tax is a kind of tax levied on the entities and individuals that exploit taxable mineral products or produce salt within the territory of the People's Republic of China.

(5) Customs duty: Chinese customs levies on import and export goods in accordance with the Customs Law and the Import and Export Rules of the Customs of the People's Republic of China on Imports and Exports. As for import and export duties, a tariff rate table is formulated based on a classified catalogue of commodities. The import duty rate is divided into ordinary duty rate and preferential duty rate. Ordinary duty rate is applicable to the imported goods originating from the countries or areas with which China has not entered into agreement on reciprocal tariff. Preferential duty rate is applicable to the imported goods originated from the countries or areas with which China has entered into agreement on reciprocal tariff. At present, the tax calculation methods used in China include ad valorem tax, specific duties, compound duties and sliding scale duties. Apart from import and export duties, the Customs also levies import VAT and consumption tax on taxable imported goods on behalf of the tax authority in accordance with the provisions of Provisional Regulations of the People's Republic of China on VAT and Provisional Regulations of the People's Republic of China on Consumption Tax.

3. Other types of taxes

(1) Personal income tax: This is a kind of tax levied on individuals (including Chinese citizens, self-employed individuals, overseas Chinese, compatriots from Hong Kong, Macao and Taiwan and foreign individuals) for all their taxable incomes. Entities or individuals shall withhold on behalf of tax authority the personal income tax according to the regulations of tax law when paying taxable income to individuals (whether being registered personnel of the unit or not).

(2) Land VAT: This is a tax levied on the entities and individuals who obtain added value from the paid transfer of the use right of state-owned land, buildings on the ground and their attachments.

(3) Stamp Duty: This is a kind of tax levied on the formations, issue and reception of vouchers during the economic activities and intercourse.

(4)  Urban real estate duty: This is a tax levied on the owners of property right according to the taxable value of houses or the rental income of leased houses with the real estate as the object of taxation.

(5) License duty for vehicles and vessels: This is a tax levied on the owners or users of vehicles and vessels running on public roads, rivers and seas within the territory of the People Republic of China.

Preferential Policies on Investment in Zhongshan

1. Preferential policy on the charging of land use for the newly established industrial projects within any of the industrial zones approved by the city government:

(1) Land usage charge shall be decreased by RMB 2,000 per mu;

(2) Land usage charge shall enjoy a further deduction of RMB 3,000 per mu for an industrial project recognized as the priority project by the Bureau of Development Planning of Zhongshan City;

(3) The proceeding charge shall enjoy a 20% reduction on the basic land price of the township level.

Acknowledgement of the industrial development projects of top priority is based on:

(1) in regard to the domestically-invested industrial projects, industrial projects, products and technology lists of top priority set out in the relevant development policies by the state and the province;

(2) in regard to the foreign-invested industrial projects, the encouraged foreign investment projects listed in the Guidance Catalogue of Foreign-invested Industries (issued and implemented by State Development Planning Commission,  State Economic and Trade Commission, and Ministry of Foreign Trade and Economic Cooperation on 1st April, 2002);

(3) the industrial projects invested in the industrial towns specialized in lighting, hardware, electrical home appliances, air conditioners, garment, furniture and food, and in compliance with the relevant industrial policies.

The foresaid preferential policies for the foreign-invested industrial projects may be applicable, as reference, to the enterprises that engage in processing and assembling with imported materials, assembling supplied components, manufacturing according to supplied samples or designs and compensation trade.

2. Preferential policies on the charges on land use for development projects of modern logistics and tourism:

The encouraged development projects of modern logistics and tourism, which are established through the procedures of construction and acknowledged by the Tertiary Industry Office as meeting any of the following conditions, may enjoy preferential policies on land use application fees:

(1) Projects of tourist spots and hotels with investment over RMB 100 million;

(2) Other logistics and tourist projects which meet the requirements in the Opinions on Accelerating Development of Modern Logistics Industry (Ref: Zhong Fu [2003] No. 20 Decree) and the Circular on Provisional Measures to Further Encourage the Development of Tourist Industry (Ref: Zhong Fu [2003] No. 21 Decree).

Preferential policies are as follows:

(1) Land usage charge shall enjoy a deduction of RMB 5,000 per mu for a logistics or tourism project recognized as the encouraged project by the Office of Tertiary Industries of Zhongshan City;

(2) 50% of the proceeds of transferring the use right of land turned in to the city revenue shall be used as subsidy to the logistics or tourism projects which utilize the rural collective land for the use of industrial purpose; the maximum subsidy limit is 5,000 yuan per mu.

3.In order to reduce burdens on enterprises and encourage the establishment of industrial enterprises in the industrial zones, the setting up fees, planning and management of 10 kilovolt transformer stations and wiring projects approved by local government to be established in the industrial zones are to be borne by Office of Electric Power in the city valid from 1st May, 2001.

4. According to the regulations of Provincial Government, investors whose actual investment has reached the following terms can apply for a car plate, making the car enter Hong Kong SAR & Macao SAR freely.

Mega investors may enjoy more trans-Hong Kong-Macao cars plates should they satisfy the following conditions:

5.Overseas-invested enterprises belonging to the national encouraged category may decide on their own their domestic and overseas sales ratio according to the actual market demands.

6.One of the investor's relatives, managers or key technicians may become a permanent Zhongshan citizen if the actual utilization of investment is over USD 500 thousand or RMB 4 million. When the amount exceeds USD 1 .5 million or RMB 12 million, the number of citizenship can be 2-3 without charging city capacity increment fees.

7.As for those who return from overseas with master or doctorate degrees found or work with hi-tech enterprises or projects in the city, they are entitled to enter and leave China as they like, and duty-free treatment on personal items brought in. Their legal earnings after income tax may be remitted abroad. The local security, customs, foreign affairs and foreign exchange authorities shall all assist with this process.

8.Foreign people with investment in Zhongshan enjoy the national treatment. Foreign invested enterprises are treated as the same as the domestic enterprises in purchasing equipment, raw materials, and accessory goods.

9. Usually an enterprise engaged in processing and compensation trades shall export fully its finished products made from/of tax-free imported materials. But domestic sales of the said products may be permitted should a permission be obtained from the provincial foreign economic and trade authority and go through relevant import and tax procedures according to the law.

10.Examination and approval procedures are simplified, and efficiency improved. For an investment project under the jurisdictional authority of the city, a reply shall be made to its proposal, feasibility report and infrastructure construction project within five workdays, and to its contract and corporate chapter, within seven workdays. For an application for the establishment of an enterprise engaged in processing and compensation trades under the jurisdictional authority of the city, a reply shall be made within three workdays. Reasons shall be given to all failed applications.

11.Administrative and business service charges on all items in regard to foreign-invested enterprises must be ratified by the Municipal Bureau of Pricing. And for those items with a charge scale, the minimum charge level shall be applied. Any investor has the right to refuse random levies that are against relevant regulations, and to report the case to the municipal price regulatory department.

 

3)Investment Procedures

Zhongshan Bureau of Foreign Trade and Economic Cooperation  is authorized to examine and approve the projects with foreign investment under USD 30 million (unless otherwise stipulated by the State). Materials needed for preliminary examination are as follows: (Submitted to Zhongshan Foreign Trade and Economic Cooperation Bureau)

1.Materials for Joint Ventures

1)contract (2 copies)

2)corporate charter (2 copies)

3)report for examination and approval (2 copies)

4)name list of the board (1 copy)

5)business license of each party (1 from each)

6)letter of credit of each party (1 from each)

7)letter of authorization of each party (1 from each)

8)other documents as necessary by the bureau

2.Materials for Wholly Foreign-owned Enterprises

1)corporate charter (2 copies)

2)report for examination and approval (2 copies)

3)application forms (2 copies)

4)name list of the board (1 copy)

5)investor's business registration (1 copy)

6)investor's letter of credit (1 copy)

7)letter of authorization (1 copy)

8)other documents as necessary by the bureau