J. Special Economic Zones (SEZS)

There are 5 SEZs in the PRC: Hainan, Shantou, Shenzhen, Xiamen and Zhuhai. Foreign invested enterprises in the SEZs are entitled to the following benefits :

1 . In general, enterprises are eligible for a reduced corporate income tax rate of 15% and lower land usage fees. Certain types of enterprises may be exempt from the VAT and Commercial Taxes.

2. Enterprises with long term (1 0-year or more) operation period may be tax-free for the first two profitable years and the corporate income tax may be reduced in half for the next three years. High-tech enterprises may be entitled to this reduced income tax for three more years.

3. Export-oriented enterprise with annual export value greater than 70% of its yearly production output in any year is eligible for a flat income tax rate of 1 0% for that year.

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