Chapter 1 Taxation and Finance

Article 1

For all domestic enterprises of different ownership and foreign-invested enterprise established in Chongqing,which cover the state encouraged industries,the Corporate Income Tax shall be levied at 15% from 2001 to 2010.

Article 2

From 2001,the Corporate Income Tax of newly established domestic enterprises in chongqing covering areas of traffic,communication,electric power,water conservancy,post service and brodcasting shall be exempted for the first 2 years starting from the profitable year,followed by a levy at half of the rate for another 3 years.Among them those who have a rather low profit margin but have made significant social contributions may be given a further 5 years¡¯levy at half of the rate,subject to the approval of local taxation authorities or the state taxation authorities if required.Same shall apply to the foreign-invested enterprises who comply with the Item 1 of Article 8 of the Chinese Law on the
Corporate Income Tax of Foreign-Invested Enterprises and Foreign Enterprises.

Aricle 3

The corporate Income Tax of domestic enterprises and foreign-invested enterprises established in the 5 minority areas including Qianjiang District, Shizhu County, Xiushan County, Youyang County and Pengshui County may be Levied or exempted flexibly on a regular basis from 2001 to 2010 subject to the approval of Chongqing Municipal Government. Industries or enterprises which are banned, restricted or to be closed down by the state are excluded.

In the event of local enterprises who are not located in the minority areas making an investment in the above 5 places in manners of setting up a new plant,shares contribution, take-over and technical transfer, the Profit After Tax obtained from the investment shall be free of Corporate Income Tax from 2001 to 2010.

Article 4

The Agricultural Specialty Tax on income out of ecologic environmental protection and forestation of cultivated sloping-land shall be exempted from 2001 to 2010. For the road construction approved by Municipal Planning Department according to government programming, Tax on Occupation of Cultivated Land shall be exempted.

Article 5

In the event of domestic and foreign-invested enterprises (inclusive of natural person) investing in the projects covering the state encouraged industries; in the event of foreign-invested enterprises investing in the projects covering Grade 2 Restrictive Industries as defined in A Guided Catalogue of Sectors for Foreign Investment, inport duty and import linkage VAT on equipment imported within their total investment for their own use shall be exempted,except for those which are declared to be not duty free by the state.

For imported equipment by domestic enterprises operating inhabitant resettlement project for their own use in the Three-Gorges area before 2003, a policy of return of full amount of import duty and import linkage VAT shall apply with the exception of the imports which are declared to be not favored by the state.

Article 6

The municipal key projects and the projects which comply with the state industrial policy or should be supported according to the states regulation shall enjoy priorities in utilization of government financing, foreing government financing, international funds, foreign commercial loan, insurance of local bond,bank loan and discount.Local administrative fees on programming,fire fighting and construction assessment of municipal key projects shall be reduced or exempted(flat cost excluded)while fees under government guidance shall be charged at a minimum level.

Article 7

The cost of an enterprise on development of new product,new technology and new process can be listed according to actual expenditure.In the event of such cost growing by 10% or above,50% of actual expenditure can be used again to offset due amount subjected to taxation,expenditure of an enterprise on purchase of special of important testing equipment and instruments required to support R & D can be apportioned to cost for once or several times,subject to the verification of financial and taxation departments concerned.

Article 8

During the 10th National 5-year Plan period,municipal government shall continue to provide high & new technology investment financing and risk grarantee of certain amount in forms of subsidy to share contribution,loan discount and financing guarantee to support projects pertaining to development and industrialization of high & new technologies.

Article 9

For enterprises located within the New Northern Zone of Chongqing, Chongqing Economic & Technological Development Zone,Chongqing Higy & New Technology Industrial Zone,Chongqing University Science & technology Park and Chongqing Modern Agricultural Develpment Zone,the Corporate Income Tax shall be reduced to 10% in case that and annual production value of high & new techonlogy-oriented product plus technical earnings or annual export value reaches over 60% of the total annual output,subject to the approval of taxation authorities in charge.

Aritcle 10

The Risk Compensation of high & new technology enteprises retgistered within the New Northern Zone whose investment in high & new technology makes up over 60% of total project investment can be drawn before tax at 3-5% against an annual profit for 3 years starting from the profitable year.

Article 11

For a recognized project with commercialization of high and technical achievement within the New Northern Zone,the full amount of accreted part of Business Tax and the accreted part of VAT (Accreted part of a newly estabilshed enterprise is to be calculated according to the average enterprise is to be calculated according to the average accreted rate of the area) retained by local government paid within 2 years can be arranged by the New Northern Zone Administration in manners of capital contributions starting from 2001,to be followed by another 3 years during which such arrangement shall be made for half of the amount in support of an enterprise's further development.

Article 12

A Special Industrial Fund shall be set up within the New Northern Zone,which shall be used by ways of share contribution,norm subsidy,discount of bond and loan to support high and new technology-oriented industries with in the New Northern Zone,including software,photoelectronics,bio-pharmaceutical new medicine,agricultural,forestry and husbandry application,as well as export-oriented processing.

Article 13

In the event of the investment of fixed assets of an enterprise established in the New Northern Zone reaching RMB 50 million Yuan or its registered capital reaching RMB 100 million Yuan,or its annual sales volume reaching RMB 500 Million Yuan,full value of its paid amount of income tax which actually arrived on the account of the New Northern Zone can be arranged by the Financial Authority of the New Northern Zone Adminsistration as a special fund within 2 years starting from the profitable year,to be followed by another 3 years during which such arrangement shall be made for half of its paid amount in support of the tax-paying enterprise's production operation,subject to the approval of the New Northern Zone Administration.

Article 14

During the 10th National 5-Year Plan period,full amount of the municipal revenues which are newly generated by the New Northern Zone shall be returned to the New Northern Zone while full amount of various administrative charges on land let-out,urban construction and road maintenance shall be retained by the New Northern Zone.At early stages of the 10th National 5-Year Plan period,municipal government shall input RMB 50 million Yuan to the New northern Zone as a kickoff,which will be used for infrastructure construction of the New Northern Zone.

Article 15

During the 10th National 5-Year Plan period,government financing shall continue to be provided for education with priorities to the 9 years¡¯compulsory education and reworks of endangered teaching uildings of middle and primary schools in remote areas,as well as to key courses and laboratories.

Article 16

Proportion of government expenditure at various levels shall be adjusted to raise gradually the portion of expenditure on social security,and to unify the municipal primary pension management system.The Subsistence Level of urban citizen shall be further secured,subsides shall be increased properly to cover the Subsistence Level of urban citizens of some districts.

Article 17

The Transfer System from municipality to districts and counties shall be further improved,With the increased financing ability of the municipality,volume of ordinary transfer to poverty-stricken areas shall be gradually extended,and special cares shall be given to minority areas.The annual growth rate of transfer to minority areas shall not be lower than 15% from 2001 to 2003.

Chapter 2 Credit & Financing

Article 18

Credit support to municipal key projects and the state bonded projects shall be extended,collaboration between government and financial firms shall be strengthened to make full preparations for the prophase work of a project,Financial firms are encouraged to participate in the prophase work of key projects for evaluation of the projects and recommend actively to their offices for loan support.

Article 19

A Mortgage System based on the Right of Charge or the Right of Proceeds shall be formulated for implementation of infrastructure projects which comply with necessary requirement.

Article 20

New credit methods shall be explored,including Storage Bill Credit, Tax Drawback Credit,Factoring Credit and Combined Credit Agreement.

Article 21

Investment fund based on pubilc shares(inclusive of sinoforeign joint ventures)shall be estabilshed and standardized,they are encouraged to invest in infrastructure and high & new technology-oriented projects.Encouragement shall be given to establishment of a corporation with strong financial status,who will be a subject of loan and repayment covering infrastructure and high&new technology-oriented projects.Credit guarantee fund for mid technology-oriented projects.Credit guarantee fund for mid and small-sized enterprises shall also be established and standardized.

Article 22

Qualified enterprises are encouraged to carry out restructuring based on public shares and to raise fund from stock market according to relevant regulations.Support is given to a public limited company to issue Stork A,StockB,Stock H and overseas bond,as well as to qualified enterprises who may seek financing by Assets Backed Securitization at both home and abroad.

Article 23

The bond-issue of local enterprises shall be further extened.priorities in bond-issue shall be given to qualified enterprises covering infrastructure,high&new technology industrialization,important industry restructuring and reworks of endangered houses as programmed by government.

Chapter 3 Land &Resource Exploration

Article 24

The policy referred to as ? Subsidies,2 Exemptions and 2 Fulfillments?shall be carried out.I.E,To subsidize the Planned Recovery of Cultivated Land with grain,cash and seeding.To exempt or reduce the Agricultural Tax on recovery of cultivated land and on grain purchase;To fulfill the Individual Contracting and Forestry Certification.

Article 25

Encouragement shall be given to planting in state-owned barren land,whoever makes planting shall own the planting and enjoy the Right of operation,as well as to enjoy the Land-Use,In case that the Right of Land-Use of the state-owned barren land being let out to an economic organization or an individual for forestation and planting,the charge on the let-out of right of land-use is exempted,and the Right of Land-Use shall remain unchanged for a term of 50 years.The Right of Land-Use can be legally let out,leased,and mortgaged should the contracted investment be actually received and ecologic protection requirement be met.A further extension may be applied for upon expiration of the Right of the Land-Use.A 50-year Right Of Land-Use can be obtained by way of contracting,leasing and auction for projects which utilize collectively owned unused barren land for the purpose of forestation and planting.Similarly the Right of Land-Use can be legally let out,leased,mortgaged and inherited should the contracted investment be actually received and ecologic protection requirement be met.

Article 26

Financing shall be extended to land treatment An effort shall be made to receive back the full amount of the charges collected from new constructions which are handed over by municipal government to central government Via implementation of land treatement program while some handed over to municipal government by district or county government shall be sent back for the special purpose of land treatment.

Article 27

Cultivated land shall be strictly protected and a balance system of "ccupation and Make-up" hall govern.In the event of unused land being developed into grassland or garden land and if municipal land administration departments and other departments concerned would confirm that such land can be turned into cultivated land.such land can be accepted as a make-up for occupied cultivated land,In the event of cultivated land being occupied by a key infrastructure project at above municipal level with a failure to cultivate a land or the cultivated land fails to meet the required standard.Its Cultivation Fee shall be collected at the minimum charges of the area where the project is located.

Article 28

The efficiency at examination and approval of application for construction-associated land-use shall be raised,such land shall be made available in a timely manner.In the event of key infrastructure projects such as railway and backbone road construction requiring land-use which needs to be approved by the State Council,the project owner can apply for an advanced use of the land of a single part of construction which will affect the general construction schedule,which is to be reported by municipal departments concerned to the State Council for approval,and the final official procedure for land-use shall be completed within a stipulated time limit.As regards and application for land which is witch is within the authorities of municipal departments concerned,the procedure and the required docu-mentation shall be simplified as musch as possibe which shall be completed within 15 working days after the required documentation is received and accepted.

Article 29

A principle of "and-Use on a Payable Basis?shall be carried out and supply of land-use in forms of auction or bid is encouraged,unless otherwise stipulated by law.The Right of Land-Use can be provided to foreign-invested enterprises in forms of shares pricing or shares contribution can be adopted.subject to the approval of a government department at above county level.

Article 30

The Ownership Variation Registration and associated charges shall apply to an investor investing in high &new technology development and restructuring of state-owned enterprises in forms of land and housing.

Article 31

A flexible and preferential policy on land let out and lease of house shall be implemented whitchin the New Northern Zone.Land shall be provided at a favored rate to key high & new technology enterprises,foreign-invested enterprises and export-oriented enterprises.An enterprise,a research institute or a university who wishes to lease workshop buildings for technical development may apply to the New Northern Zone administrative departments for subsidy or rents.

Article 32

Foreign-invested enterprises are encouraged to explore or exploit non-oil gas minerals in forms of wholly foreign operation,sino-foreign joint venture operation or co-operative operation according to Law on Mineral Resources and A Gurded Catalogue of Sectors for Foreign Investment.
Foreign-invested enterprises are allowed to make geologic survey in an authorized area,and shall enjoy priorities in acquistion of the Right of Mineral Exploration for the minerals which they discovered or to which they have found a clue,if no Mineral Right is granted yet.Foreign-invested enterprises also enjoy a priority in acquisition of the Right of Mineral Exploitation for minerals which they have invested in exploration and have ascertained.
Foreign-invested enterprises are allowed to purchase the Right of Mineral Exploration(non-oil/gas) and the Right of Mineral Exploitation(non-oil/gas)of the large and mid sized state-owned enterprises,the Right of Mineral exploration(non-oil/gas)and the Right of Mineral Exploitation(non-oil/gas)obtained by foreign-invested enterprises can be let out legally.

Article 33

For the foreign-invested enterprises investing in exploiging the non-oil/gas minerals in Chongqing as encouraged under A Guided Catalogue of Sectors for Foreign Investment,the Mineral Resource Compensation Fee shall be exempted for 5 years and the Mineral-Right-Fee for 3 years starting from the date of operation.Ground-Use Fee of land required for mineral exploration and exploitation shall be exempted.Depreciation of fixed assets can be accelerated from exploitation stage of mineral deposit.

Chapter 4 Opening up to the Outside

Article 34

All sectors of business,except for those in which investment is prohibited by the state stipulations,are open to foreign investment and Chinese non-state-owned investment,who will enjoy the same treatment as offered to state-owned enterprises.
Article 35
Foreign-invested enterprises and non-state-owned enterprises are encour-aged to make investment in forms of independent operation,joint venture operation.co-operative operation.BOT(Build-Operate-Transfer),TOT(Transfer-operate-Transfer),take-over,merge,lease or rest of international practiced investment forms.All preferential policies applied to areas where foreign investment is encouraged shall be also available to foreign invested BOT and TOT projects.Qualified foreign-invested enterprises are allowed,on the basis of independent operation or joint venture operation to set up industrial fund,risk investment fund or guarantee companies,among which full amount of registered capital is required to be transferred by the investor at one time in the case of setting up a guarantee company.

Article 36

Foreign-invested enterprises are encouraged to invest in Chongqing's infrastructure,pillar industries and high & new technology projects,whithout restriction on proportion of investment and term of running,unless otherwise stipulated by the state.In the event of foreign invested enterprises investing in commercial business,term of running is relaxed to 40 years and registered capital to RMB 30 million Yuan.Preferential policies applied to foreign invested enterprises shall also apply to enterprises set up in Chongqing by existing foreign-invested enterprises in China,provided that foreign investment in such enterprises set up in Chongqing exceeding 25% of registered capital.Qualified Chinese Natural Person can be a Chinese partner to sino-foreign joint venture enterprises or co-operative enterprises.

Article 37

If a foreign-invested enterprise investing in Chongqing's infrastructure of encouraged projects is evaluated by banks as qualified for receiving loans,Chinese banks can provide loans in RMB against its fixed assets,the foreign-invested enterprise shall be also allowed to seek finance inclusive of RMB for its projects.Good-famed and qualified foreign-invested enterprises and non-state-owned enterprises,who do not need a government guarantee may apply for foreign government and international financial institutions.loan of foreign government and international financial institutions.

Article 38

An infrastructure investment management system shall be formulated and implemented to encourage foreign and domestic investment in water supply,drainage,road and bridge.Tariff of operations of projects relying on income of charges shall be calculated on the principle of?¡ãReasonable Cost+Tax+Reasonable Profit=Tariff?¡À.For public projects such as water supply,drainage and waste disposal,to which a tariff standard is not covering operations yet,responsible government in charge can take appropriate measures to subsidize the opeations until tariff standard comes into effect.

Article 39

For the infrastructure,ecologic environomental protection and poverty help development projects in Chongqing where foreign soft loans are utilized,the proportion of foreign soft loans in total investment can be raised properly,up to a maximum of 70%,if permitted by the repaying ability(Where condition of purchases is made or where proportion of loan is regulated excluded).

Article 40

Support shall be rendered to an enterprise's application for the Right of Foreign Trade and the Right of Overseas Labor Service.A unified and standardized management system of foreign trade qualifications shall be implemented.I.E,A trading company with a registered capital of not less than RMB 3.00 million Yuan who has operated for above 1 year is entitled to apply for the Right of Foreign Trade of Different Commodities;A production enterprise with a registered capital of not less than RMB 2.00 million Yuan is entitled to apply for the Right of Foreign Trade of Self Made Products;Technical research institutes,high & new technology and electro-mechanical based enterprises with a registered capital of not less than RMB 1.00 million Yuan is entitled to apply for the ight of Foreign Trade of Self-Made Products;A foreign trade enterprise who has achieved a total import & export volume of USD 40 million in the previous year may be granted the Right of Overseas Labor Service after approval.

Article 41

Personnel who are sent by authorized labor service company to abroad for labor servicef (Management personnel excluded)and local citizens going abroad to invest in production plant can apply for a private passport.A visa can be issued upon arrival to foreigners who fly direct to Chongqing for tourism according to the state stipulations.

Article 42

Restrictions on registered capital shall be relaxed to encourage more investment.The registered capital of production and whole-sale based companies is reduced to RMB 300,000 Yuan;Trade marks,brands,technology and technical achievement can be used as registered capital after assessed;The proportion of technical achievement which is used as registered capital can reach as high as 80% total registered capital.

Article 43

In case that an investment firm invests in Chongqing?¡¥s industrialization projects of high & new techonlogy and its earnings from the investment have made up over 50% of its total earnings,the preferential treatment to municipal high & new technology-oriented enterprises shall apply,if confirmed by Chongqing High & New Techonlogy Industrialization Workgroup.

Article 44

A?¡ã Record Registration System"hall apply to a project which is fully financed by the owner should the owner wish,this should exclude projects which utilize govemment financing,bank financing or projects which are under the control of the state government .The owner of a project shall,according to the category of project such as capital construction,real estae or technical renovation,send the Project Proposal to a district/county?¡¥s Planning Commission(For capital construction and real estate)and Economic Commission(For technical renovation)for record.The Planning Commission and the Economic Commission in charge shall,if the project complies with industrial policies,within 2 days issue a Certification of Record,which has a same legal effect as the Approval of Project Proposal.In case that a foreign-invested enterprise invests in a project which has a volume of below USD 20 million and does not involve government financing,resources and environmental protection co-ordination,departments concerned at district level are authorized to examine and approve its Project Proposal,Feasibility Study report.Contract Document and Memorandum of Association.

Article 45

For a project which is subjected to an approval by municipal departments,the Project Proposal and the Feasibility Study shall be approved together.The approval of kick off of the project shall be supervised by the Annual Investment Program,instead of being approved separately.
For a project which must undergo an approval by the state authorities,the municipal departments concerned shall forward a submission to the state authorities in charge wichin 15 days after receipt of the acceptable documents handed over by the owner of the project.

Article 46

Based on principle of ?¡ãBe Open,Be fair and Be Impartial?¡À,Foreign invested enterprises and domestic enterprises in Chongqing shall enjoy the same right and opportunity as local enterprises in the aspects of accreditaion,qualification approval, scope of business,public bidding and business undertaking.

Chapter 5 Treatment to Talents & Technical Achievement

Article 47

A Policy of "ixed Household residenec,Steady Employment,Free Come and Free Go"hall apply to personnel with college qualification or above.personnel with Intermediate Technical Specialty Qualification or above and personnel back from overseas study who come to work in Chongqing's state-owned and non-state-owned enterprises or undertake technical and business project in Chongqing.
Employers shall arrange satisfactory laboratories,offices and living conditions as required by their work for personnel with doctor's degree and personnel with master's degree back from overseas study.The above personnel who work in Chongqing and have a legal domicile in Chongqing are allowed to register their household residence,including their wives and children.

Article 48

In the event of recruiting public servant,government at various levels shall make it public to the society and admission in principle depends on examination.The openings of vice director level of government functional departments shall be made public to the society as planned for excellent talents.Institutional organizations who adopt the System of Employment according to Technical Specialty may set up their staffing table within the total controlled number of technical positions on the principle of "ompetitive Employment,Efficient Operation,Reasonable Structure and Optimized People".

Article 49

Technical personnel in universities and technical research institutes are allowed to concurrently undertake technical project or consultancy service on a payable basis on condition that they have fulfilled their own job.In case that technical personnel quit their jobs at universities of technical research institutes and to work for technical enterprises or consultancy services,and if they agree to pay for their deposit of pension and medical insurance on their own,their personal record,pension and medical insurance can stay with their units as they wish until the pension system of institutional organization and enterprises condolence when new system shall prevail.

Article 50

More incentive compensation shall be made to the owner of a technical achievement,who shall be compensated according to its method of commercialization of a technical achievement.In case that the technical achievement is commercialized by share contribution,the owner can hold an amount of not less than 20% of the total share of the technical achievement; In case that the technical achievement is commercialized by technical transfer,the owner can possess an amount of not less than 20% of the net income after tax;In case that the technical achievement is commercialized by the owner itself or by co-operative operations with enterprises,technical research institutes of universities,a proportion of not less than 10% of the net profit after tax out of the commercialization of the technical achievement can be drawn annually as a reward to the owner in a 3 to 5 years'?period after the project operation becomes profitable.
An enterprise in the event of independently developing a technical achievement which is found not to be in its main business line can draw annually a proportion of not less than 10% of the net profit after tax as a reward to the owner in a 3 to 5 years'period after the project operation becomes profitable.
This Document shall come into force on the date of publication ,and the Chongqing Municipal West-Development Leading Group Office or its assigned department are responsible for the interpretation and shall set up a hot line and a mail box on net for taking complaint.The municipal authorities concerned may,if necessary formulate detailed procedures for implementation of the clauses,which shall not contradict the principle of the Document.