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Regulations of Jilin Provincial People¡¯s Government on Encouraging Overseas Investment

(Promulgated by Jilin provincial people' s government on November 27,2002)

Article1. These Regulations are formulated for the purposes of further extending opening to the outside and attracting and using foreign capital with an more active, reasable and efficient way, promoting economy and social development in our province and in accordance with the related laws, regulations and policies of the state and in light of the actual circum stances in our province.

Article2. All overseas investors invest to establish Chinese-foreign joint operating ventures, Chinese-foreign cooperative operating ventures, foreign-owned enterprises (hereinafter uniformly referred to as enterprises with overseas investment) in the administrative divisions of this province shall enjoy (preferential) of these Regulations simultaneously besides enjoying preferential policies stipulated by the state.

Article3. Foreign merchants shall be encouraged to invest in the following fields according to the state related industrial policies on overseas investment and medium-long planning on national economy and social development of this province.

(1)Agriculture, animal husbandry fishery. The emphasis is grain processing, liuestock raising and processing, comprehensive development on agricultural resources and spreading, applying the applied new technology, fine varieties reproducing and water irrigation ect.

(2)Important industries. They are mainly automobile elements and parts making and production of automobile electronics components and devices, extra fine chemical and vinyl backward position deep processing products; and industries industry and the development on the new products and new technology.

(3)Paw material and its processing industries. They are mainly chemical fibre, new construction material, forest building, forest good seed importing, medical plant culture, paper manufacturing, energy-saving metallurgical products development and scaled management.

(4)New and Hi-tech industries. They are mainly new material, biologic medicine, Chinese medicine modernization, information technology, computer software levelpment, advanced manufacturing technology and new energy development.

(5)Basic industries and basic facilities such as energy and transportation. They are mainly construction and operation on wind power station the construction and operation on Highway, independent bridges, tunnels and airport.

(6)The urban public facilities and residence. They are mainly urban water supply, gas supply, heat supply, sewage and gabbage processing facilities and urban transportation facilities and residence construction of medium and low income inhabitants.

(7)Resources development and utilization and environmental protection. They are mainly crude oil, natural gas, nonmetal mineral survey and development, development and comprehensive utilization of resources and regenerated resources, comprehensive treatment of environmental pollution, green environmental protection industry and products' organic food production and process industry and technology, ect.

(8)Technological renovation of present enterprises. They are mainly grafting renovation of state-owned enterprises. Use foreign capital to bring in advanced technology, develop new products, improve products' quality and standard, improve managent level, reduce consumption of energy and raw material.

Article4. Encourage foreign trades to make investments on tertiary industry strive for national support and create conditions for foreign traders to establish enterprises such as finance, insurance, commerce and trade and tourism ect. in our province.

Article5. As for the enterprises income tax of foreign investment enterprises and organs, places which are set up to participate production and management by the foreign enterprises in Chinese terriotery, the rate of tax is 30%; As for local in come tax, the rate of tax is 3%.

Article6. State-level developing areas, province-level developing areas and Hunchun Exporting processing areas, that have been set up in our province, shall respectively enjoy all economic and administrative power limit that has been endowed by the State Council and provincial government, enjoy all preferential rolicies endowed by the state and the province; The foreign trade investment enterprises in Houchun Exporting processing areas shall also enjoy all preferential policies in Hunchun Bording Economic cooperation areas. With the endowment of the related provincial department, the administrative committee in each developing areas and the administrative committee of Hunchun exporting processing areas may examine and approve the foreign trade investment programme whose capital is less than 30 million dollars and may substituably delieve the approval certificate.

Article7. The production foreign investment set up in state-level economic and technological developing areas and departments which have been endowed the qualification to be subscribed as new and high-technological enterprises and the foreign investment enterprises which have been subscribed as new and high-technological enterprises by the administrative committees in the development zones, the enterprises income tax shall be levied at rate that has been reduced 15% of the tax. As for production foreign investment enterprises set up in Changchun city and Hunchun city, the enterprises income tax shall be lavyed at a rate that has been reduced 24% of the tax. As for technical-intensive, or knowledge-intensive programmes, programmes that foreign tradesmen invest more than 30 million dollars and time for the payback investment is long, programmes of energy, traffic, seaport construction, shall be reported to the Financial Department and State General Taxation Bureau for approval ,then the enterprises income tax shall be levyed at a rate that has been reduced 15% of the tax.

Article8. As for production foreign investment enterprises, whose operation term is more than ten years, from the year when profit is made, the first year and the second year, the enterprise income tax shall be reduced half from the third year to the fifth year.

As for foreign investment enterprises encouraged by the state, with three years after the present tax preferential policies have been expire, the enterprise income tax may be collected at a rate that has been reduced 15% of the tax.

As for foreign investment enterprises that participate agriculture, forestry and animal husbandary after the time for exemption policies on tax is expire, with the application of enterprises and aproval of the State General Taxation Bureau, they may continue to pay enterprises income tax at a rate that has been reduced 15% to 30% of the tax in the following ten years.

When the technology development fee of foreign investment enterprises is increased above 10% cincluding 10% than the previous year, with the approval of taxation organs, it I permitted to deduct the tax that should be paid that year according to 50% of real amount of technology development fee. The technology development fee of organs and places set up in our province and participating production and management activities of the foreign enterprises, may be performed in light of it.

The foreign investment enterprises purchase home-made equipment within the amount of investment sum, as for foreign-invested projects which are verified before April 1,2002 and conform to the previous Guiding Catalogue of Foreign Investment Industry (promulgated by the State Planning and Development Commission, the State Economic and Trade Commission and Foreign Economic and Trade Department on December 31,1997) and are specified as Encourage class and restricted B class, and foreign-invested projects which conform to new Guiding Catalogve of Foreign Investment Industry (promulgated by the State Planning and Development Commission, the State Economic and Trade Commission and Foreign Economic and Trade Department on March 21,2002) and are specified as Encourage class, 40% of the investment that is used to purchase home-made equipment may be deducted from the creased enterprise income tax that is newly increased that year of purchasing equipment than the previous year. The foreign enterprises that set up organs and places and participate production and management activities in our province may perform in light of it.

As for the advanced technology enterprise set up by the foreign investment, after the time of exemption from tax and reduction of collecting enterprise income tax is expire according to provisions of taxation law the enterprises are still the advanced technology enterprises. Three years may be prolonged to reduce to collect half of enterprise income tax according to the tax rate stipulated by the taxation law.

Article9. As for product export enterprises set up by the foreign investment, after the time period when enterprises income taxes are free of collection or reduced to collect is expire according to regulations of collection or reduced to collect is expire according to regulations of taxation law, all those whose total export of product that year reached more than 70% of sales volume of all products of enterprises that year, may be reduced to collect half of enterprise income tax according to the regulations of taxation law. The product export enterprises which have pay enterprise income tax at a tax rate of 15%, whichever conform to the above conditions shall be collected enterprise income tax at a tax rate of 10%.

Article10. The foreign investors in foreign investment enterprises shall make a new investment on the very enterprises.

The foreign investors in foreign investment enterprises shall use the profits aquired from the enterprises directly to make a new investment on the very enterprises, to increase registered capital or to invest to establish other foreign investment enterprises as capital. Those enterprises whose operation period is less than 5 years, shall be returned 40% of the paid income tax of the reinvestment.

Article11. As for the foreign investment enterprises and organs and places that have been set up by the foreign investment enterprises to participate production and management, if an annual loss occurs, may be made up by income of next annual tax. If the income of next annual tax is insufficient, it may be made up continually year by year, but the time limit is not more than five years.

Article12. All operation foreign investment enterprises whose operation period is above ten years, their local income tax shall be exempted for ten years since the year when the profit is made. After the time of exempting local income tax is expire, as for those enterprises whose product export sum of that year reaches above 50% of total product sales sum of that year, the local income tax of that year shall be exempted.

As for the foreign investment enterprises which are encouraged to be established by the province, after the time of exempting local income tax is expire and they have difficulty in paying tax, the enterprises local income tax shall be reduced half for five years.

Whichever have been granted the preferential treatment of exemption from the enterprise income tax, shall be exempted from local income tax at the same time.

Article13. Encourage foreign business to graft and reform the present domestic capital enterprises in our province in many forms.

(1)Except for industries whose shares must be held by China, which is prescribed in express provision by state, permit foreign business to hold shares in joint ventures in our province.

(2)All those technical transformation projects that using foreign capital to reform the present domestic capital enterprises.

(3)If the registered capital is insufficient in Chinese enterprises besides material object such as factory building and equipment, the related governmental departments and financial units shall give support on the basis of self-collected 30% to 50%.

(4)The important project that using the foreign capital to graft and reform the domestic capital enterprises, which is confirmed by the related departments of provincial government, the related governmental departments and financial units shall give an important support on aspects of allocation of essentials factors of production and loan of mobile fund, and the related preferential policies on state and provincial technical transformation shall be enjoyed.

Article14. Encourage the present foreign investment enterprises in other provinces, cities and autonomies in the state to reinvest in our province.

When the proportion of foreign capital has reached above 25% and after the corresponding legal procedure (alternation of industry and commerce business licence, taxation registration ect.) have been transacted, the treatment as foreign investment enterprises may be enjoyed.

Article15. Encourage the foreign businessmen and present foreign investment enterprises in other provinces, cities and autonomies to come to our province to contract, rent operate and manage the present domestic capital domestic capital enterprises and purchase property right and stock equity of the present domestic capital enterprises in our province according to the related policies of the state. Whichever contract, rent, operate and manage the domestic capital enterprises in our province, shall enjoy the related preferential policies on domestic capital enterprieses. Whichever purchase the property right and stock equity of the domestic capital enterprises, the sum of the investment capital has reached above 25% of the registered capital of the enterprises and legal procedure has been transacted, the enterprises may be changed to Chinese-funded enterprises, enjoy the preferential policies on foreign investment enterprises.

Article16. The foreign investment enterprises, foreign corporations, enterprises and other economic organizations, that have set up institutions, places and participated production management, their fixed assets depreciation shall take straight way to calculate; whichever need to take other depreciation ways or because of special causes need to reduce the depreciation time limit, may apply to the enterprises, after the local taxation organs examine and verify the application , it shall be reported to State General Taxation Bureau for approval.

Article17. As for foreign-invested projects such as high ways , railways, seaports and airports which need a large amount of investment and a long recovering period, may extend land development and service, management related with the projects in a certain extent with the approval of the related department; may appropriately increase management charge standard within the extent that state policies permit with the approval of departments of price and finance.

Article18. As for the wholly foreign-owned or sino-foreign joint urban basic facilities and public service, and construction land used for foreign-invested rojects that are encouraged to invest by the state, such as energy, communication and water conservancy, whichever conform to the state legal allocation extent may take allocation way to aquire the right of using the state-owned land with the approval according to law.

Article19. As for foreign-invested projects which belong to fields of ecouraging foreign investment, whichever aquire the right of using state-owned land by way of transfer may defer paying transfer fees of land during the period of "Fifteen" . But before paying transfer fees of land, the land may not be transferred, rented or mortgaged; whichever aquire the right of using state-owned land by way of renting, may defer paying the rent on land during the period of " Fifteen" . As for projects invested by the foreign investment on agriculture, animal husbandary and fishery, whichever may aquire the land for operation by way of renting, the rent on land may be exempted in the first five years. The half of the rent shall be collected from the sixth year to the tenth year. The compensated fees of using land shall be paid regularly from the 11th year.

Article20. The land used for production and construction and supplementary conditions for production and construction including water, electricity, transportation and communication, which are needed in foreign trade investment, shall be examined and approved and be arranged preferentially by the governments at all levels and the related departments.

Article21. Encourage and support the existing foreign trade enterprises which conform to certificate in our province to change the shareholding system, and be listed on A shares and B shares market.

Article22. As for foreign trade investments which are in the fields of encouraging foreign trade investment, the provincial price department may take the preferential policy of decreaing charge standard according to different administrative institution charge items of different professions.

Article23. As for nwely-founded foreign trade investment enterprises and the programmes of increasing investment on the original enterprises, the local government shall give oward to them acocrding to a certain porportion of the distrution number in a certain time limit. The concrete awarding measures shall be performed according to the related regulations of the provincial government.

Article24. Improve market and policy regulation system, regulate investment behaviour, protect legal rights and interests of foreign trade investment enterprises and perfect the service organs such as accountants, auditors, assessors and law offices, provide a good intermediary and law service for the foreign trade investment.

Article25. The competent department of foreign economices and trade of provincial people' s government shall be responsible for the work of utilizing foreign investment of the whole province and be responsible for coordinating and settling down the important problems on utilizing foreign investment of the whole province.

Article26. The provincial financial department together with the provincial foreign trade department and the related departments shall formulated the implementary interims on fulfillment of the related governmental rewarding policy stipulated in these Regulation and be responsible for organizing implementation.

Article27. Overseas chinese compatriots of Hongkong, Maca and Taiwan make investment in this province shall refer to these regulations besides enjoying the related preferential treatments.

Article28. These Regulations shall be implemented as of the date of January 1, 2003. Certain provisions of Jilin provincial people' s government on encouraging overseas investment shall be repealed at the same time. When other related policies and regulations are not consistent with these Regulations these regulations shall be implemented.