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MUNICIPAL DEVELOPMENT AND REFORM COMMISSION, MUNICIPAL FOREIGN ECONOMIC RELATIONS AND TRADE COMMISSION MUNICIPAL COMMISSION OF SCIENCE AND TECHNOLOGY NOTICE REGARDING THE PROMULGATION OF SUGGESTIONS OF SHANGHAI MUNICIPALITY ON ENCOURAGING FOREIGN CAPITAL TO ESTABLISH RESEARCH AND DEVELOPMENT INSTITUTIONS SUGGESTIONS OF SHANGHAI MUNICIPALITY TO ENCOURAGE FOREIGN CAPITAL TO ESTABLISH RESEARCH AND DEVELOPMENT INSTITUTIONS Article 1 Aim and basis The suggestions are specially formulated in accordance with the relevant state regulations in order to encourage the setting up in Shanghai research and development institutions by foreign capital (hereinafter referred to as "R & D institutions with foreign capitals" ), implement and carry out the strategy of "invigorating the city by science and education" , further expand the opening to the outside world, upgrade the quality and level of utilizing foreign capital and expedite a new round of economic growth of Shanghai. Article 2 Implication In accordance with the state regulations, research and development institutions with foreign capital may be R & D institutions of independent legal persons set up by foreign capital according to the law in the form of joint ventures, cooperative ventures or solely foreign owned ventures and they also may be independent departments or branches of non-independent legal persons inside foreign invested enterprises. Research and development institutions refer to those engaged in the research, development and experiment development (including the intermediary experiments un research and development) in natural sciences and its related scientific and technologic fields (especially the hi-tech and social public welfare fields). The contents of their research and development cover basic research, research on application and development of products, but they should not engage in projects of forbidden categories in the "Guideline for Industries with Foreign Capital" or in other technological trade not associated with their own R & D achievements and production activities except mid-experiments. Article 3 Scope for application The suggestions are applicable to research and development institutions set up in Shanghai with foreign capital, including those from Hong Kong and Macao Special Administrative Regions, and Taiwan. Article 4 Administrative departments Shanghai Municipal Foreign Investment Commission together with Shanghai Municipal Development and Reform Commission, Shanghai Municipal Economic Commission, and Shanghai Municipal Commission of Science and Technology is responsible for the examination and verification, examination and approval of the establishment of research and development institutions with foreign capital in Shanghai. Research and development institutions, when applying for the establishment, should submit to the examination and approval authorities relevant material in accordance with the relevant regulations stipulated by the state and the municipality. Research and development institutions with foreign capital should submit to the examination and approval authorities before March 31 of every year the reports on the operation and activities of the previous year. Article 5 Conditions for the establishment The amount of investment for a research and development institution with foreign capital should not be less than $2 million. It should have a permanent site, instruments and equipment, conditions for scientific research, definite research and development fields and projects, and have full-time professional research and development and administrative personnel, of whom those directly engaged in research and development with an academic record of university graduate should occupy no less than 80% of the total staff in the organization. Article 6 Import duties When importing for its own use within the amount of its total investment research equipment which is not available in China or the performance of which cannot meet its requirements, the research and development institution with foreign capital examined and approved in accordance with procedures stipulated by the state is exempt from customs duties and import added value tax, except those commodities listed in the "Catalogue of Import Commodities of Foreign Invested Projects not Exempt from Duties" . When importing for its own use with its own funds scientific research equipment for technology upgrading and technology, accessories, spare parts accompanying the equipment imported in accordance with the contract, the research and development institution with foreign capital is exempt from customs duties and import added value tax, except those commodities listed in the "Catalogue of Import Commodities of Domestically Invested Projects not Exempt from Customs Duties. The research equipment imported by a research and development institution for its own use should not constitute production scale. When a research and development institution with foreign capital pays for the software purchased from overseas according to the contract, it is exempt from customs duties and import value added tax in accordance with [The Notice of the Ministry of Finance and the State Tax Administration on the Implementation of "Decisions of the Central Committee of the Communist Party of China and the State Council on Promoting Technology Innovation, Developing High Technology and Achieving Industrialization" ] (Cai Shui Zi No: [1999] 273). When foreign nationals, oversea Chinese and compatriots from Hong Kong, Macao and Taiwan working as permanent staff in research and development institutions with foreign capital, who are approved to enter and reside in China for over one year, bring in on their first entry household video cameras, cameras, portable recorders, portable laser gramophones and portable computers for their own use, they will be exempt from paying import duties for one unit of each kind upon the checking and verification by the Shanghai Customs. They may be exempt from Customs duties for the books and materials, instruments for scientific research, tools, samples and reagents for research purposes they bring in within a reasonable amount and for their own use, except those commodities ruled by the state not to be exempt from duties. Article 7 Income tax and business tax The revenue of a research and development institution with foreign capital engaged in business of technology transfer and technology development and related technological consultation and technical service may be exempt from business tax in accordance with the [Notice of the Ministry of Finance and the State Tax Administration on the Implementation of the "Decision of the Central Committee of the Communist Party of China and the State Council on Promoting Technological Innovation, Developing Hi-tech and Achieving Industrialization" ](Cai Shui Zi No [1999] 273) after the institution applies to the tax department and gets the approval. A research and development institution with foreign capital whose actual extent of annual increase of expenses of research and development is above 10% (including 10%) may enjoy the deduction of taxable income by 50% of the actual amount in accordance with relevant regulations in the [Notice of the State Tax Administration on the Deduction of Taxable Income on Expenses for Technological Development of Enterprises with Foreign Capitals] (Guo Shui Fa No: [1999] 173). For a research and development institution with foreign capital and with an independent legal person the expenses for research and development, its expenses of research and development may be paid for the actual amount before tax. Article 8 Land cost and planning expenses For projects of hi-tech achievements transformation, a research and development institution with foreign capital may enjoy the relevant policies of technological support in accordance with regulations in the [Notice of Shanghai Municipal People' s Government on the Promulgation of the Revised "Regulations of Shanghai Municipality on the Promotion of Hi-tech Achievements Transformation" ](Hu Fu Fa[2000]No.55). Article 9 Foreign exchange management Research and development institutions with foreign capital set up by foreign-invested enterprises may open special foreign exchange accounts at a designated bank handling foreign exchange with the approval of foreign exchange management department. The receipt and payment of foreign exchange should be handled according to the current regulations of foreign exchange management. Convenient service will be provided for research and development institutions with foreign capital for the settlement of foreign exchange for non-trade items. Article 10 Commodity and customs inspection For research and development institutions with foreign capital when importing equipment, spare parts and samples after verified and approved by the customs, entry-exit inspection and quarantine administration, a customs clearance mode of report in advance for commodity and customs inspections and release of actual commodities will be adopted. They will enjoy priority in commodity inspection and customs clearance, and convenient, fast and efficient service for inspection and customs clearance. Article 11 Entry and exit visas Exit convenience will be given to the Chinese staff in research and development institutions with foreign capital going to Hong Kong, Macao, Taiwan or abroad for business purposes. Foreign nationals in research and development institutions with foreign capital who need multiple temporary entries may apply for multiple visiting entry visas with a validity of no less than 3 years and with each stay not exceeding one year. Long-term resident foreign nationals in research and development institutions with foreign capital may apply for effective resident permits with a validity of no less than 3 years and multiple working entry visas of the same duration and may obtain "Residence Permit of Shanghai" (B permit) in accordance with the regulations. Foreign nationals on temporary visits to Shanghai should apply for entry visas in Chinese embassies and consulates abroad. In case time is pressing they may apply for port visas for entry at the department of public security according to the regulations. Article 12 Introduction of qualified personnel When research and development institutions with foreign capital employ for business needs from other provinces or cities scientific and technical personnel or managerial and administrative personnel with a schooling record of university graduates and corresponding academic degrees, who have lawful and permanent residence in Shanghai and have signed labor contracts for 3 years and above, they may transfer their work and move their household registration to Shanghai with the approval of relevant departments. Their spouses and minor children may also move to Shanghai anytime. When research and development institutions with foreign capital employ other personnel for business needs, they may go through the formalities of obtaining the "Residence permits of Shanghai Municipality, A Permit and B Permit" according to the regulations. Article 13 Protection of intellectual property rights The law-enforcing department for protecting intellectual property rights should strengthen their law-enforcement to ensure the full protection of intellectual property rights in research and development institutions with foreign capital. The research and development institutions with foreign capital when applying for patents in China may enjoy the relevant policy of financial aid in the city. The research and development institutions and individuals who have made outstanding contributions to the work of intellectual property rights will be rewarded. Article 14 Support and guidance from the government The relevant government departments in-charge at various levels should regularly publish to the research and development institutions with foreign capital information on major scientific research items in the city and encourage them to participate in major scientific and research projects and major engineering projects of the municipal government. Research and development institutions with foreign capital may obtain scientific and research projects of governments at all levels and projects entrusted by social organizations, enterprises and individuals through competitive bidding and tendering. With their inventions, findings and other scientific and technological achievements, research and development institutions with foreign capital may take part in the assessment and examination for awards of different categories organized by relevant departments. Personnel in research and development institutions with foreign capital who makes outstanding contributions to the city' s scientific and technological progress and economic and social development should be commended according to "Regulations of Shanghai Municipality on Science and Technology Award of Shanghai" (Hu Fu Fa No: [2001] 6.) Research and development institutions with foreign capital are encouraged to cooperate in different forms with scientific and research institutions, institutions of higher learning and enterprises in Shanghai. Their laboratories and experiment bases may open and provide service to the public. Districts and county in Shanghai are encouraged to actively work out measures to attract research and development institutions with foreign capital in accordance with relevant policies of the state and the city and in line with their actual conditions. Article 15 Date of execution The "Suggestions" will be put into effect on the date of promulgation. Article 16 Formulation of detailed rules on Implementation Relevant departments in the city may formulate detailed rules on implementation in accordance with the "Suggestions" . Article 17 Policy explanation Shanghai Municipal Foreign Investment Commission and Shanghai Municipal Development and Reform Commission, together with other relevant departments in the city, are responsible for the explanation of the "Suggestions" .
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