1. Enterprises must apply for import licenses from the State every six months if importation of machinery and equipment is required by the joint venture.

2. Import licenses may be obtained directly when machinery and equipment are contributed by foreign investor(s) of a joint venture as equity investment. For such machinery and equipment, following conditions must be met:

a. They are indispensable for production purpose;

b. They either can not be manufactured in the PRC or the price/quality factor will prohibit from such manufacturing in the PRC;

c. The price must not be higher than the fair market price of the compatible model(s) in the international market.

3. There is no specific regulations or requirements governing importation of used (second hand) machinery and equipment.

4. The purchase of office equipment and supplies is not subject to

any restrictions.

1. Business and personal taxation

1. Value Added Tax (VAT), Consumption Tax and Commercial Tax:

These three taxes, replacing the previous "Consolidated Industrial and Commercial Tax", were imposed on foreign invested enterprises on January 1, 1994.

a. Value Added Tax (VAT): ranging from 13% to 17%, is imposed on goods, services, and imported items.

b. Consumption Tax-. ranging from 3% to 45%, is imposed on consumer goods such as cigarettes, automobiles.

c. Commercial Tax-. ranging from 3% to 20%, is imposed on service enterprises such as banks and insurance companies.

2. Business Income Tax:

In general, foreign invested enterprises must pay a corporate income tax of 33% of earnings. However, depending on the business type (such as high-tech) and operation span (such as 15-year operation period), enterprises located in the Special Economic Zones (SEZS) and other designated areas may be entitled to reduced tax rates ranging from 1 0% to 24%. In addition, enterprises may be qualified for tax refund if they reinvest the profits into the business.

3. Personal Income Tax:

Foreign nationals working in the PRC must pay individual income tax in accordance with " The Individual Tax Law" (amended on October 31, 1993). it should be noted that personal income tax is based on individual's monthly income, not yearly income, as follows:

Foreigner's Tax Exemption Amount RMB$4,000

Taxable Income Monthly Income - RMB$4,000

Taxable Income           Tax Rate

$500 or Less                   5%

$501 - $2,000                 10%

$2,001 - $5,000               15%

$5,001 - $20,000              20%

$20,001 - $40,000             25%

$40,001 - $60,000             30%

$60,001 - $80,000             35%

$80,001 - $100,000             40%

$1 00, 001 or More             45%

 

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