National Preferential Policies:
1. Preferential offer on income tax
For productive enterprises running over 10 years, from the first profitable year, the enterprise income tax is exempted for two years, and from the third to the fifth year, half the enterprise income tax levied.

If the export volume of an enterprise accounts for over 70% of its total output value, the enterprise income tax is halved even after the preferential period prescribed above. And income tax for high-tech enterprises is halved for another three years after the preferential period prescribed by the law.
Foreign enterprises engaged in agriculture, forestry, and livestock farming, as well as enterprises in undeveloped areas, can have their income tax reduced by 15% to 30% for another 10 years after the preferential period prescribed by law, provided that their applications got approved by the tax divisions of the State Department.

2. Preferential policies on reinvestment
If foreign investors reinvest their profits on normal enterprises (not export or high-tech enterprises), and running for over 5 years, 40% of paid income tax on the reinvestment will be returned.

Tax paid for income that is latterly used for reinvestment on the above two types of enterprises (namely export and high-tech enterprises) will be fully returned.

3. Tariff, Value-added Tax and Consumption Tax
The Chinese Government offers tariff and import-related value-added tax waivers on self-use equipment imports for foreign invested projects within their total investment on condition that the projects belong to the encouraged categories in the Catalogue for the Guidance of Forign Investment Industries and the imports are not listed in the Catalogue of Non-Tariff-Free Imports for Foreign Investment Projects. Self-use equipment imports for projects utilizing foreign gobernmental loans and loans provided by international financial organizations, and charge-free equipment imports provided by foreign companies for processing-trade projects, apart from the items in the Catalogue of Non-Tariff-Free Imports for Foreign Investment Projects, shall be exempted for the tariffs and import-related value-added tax in reference to related provisions governing the waivers on equipment imports for foreign invested projects. The aforesaid waivers are also applicable for techniques, necessary accessories and spare parts imported together with the equipment for the projects in conformity with related requirements.

For technological innovation of the existing foreign invested ventures of the encouraged category, R&D centers, technologically advanced ventures and export-oriented ventures, the self-use equipment and the related techniques, within the originally ratified business scope for the reason that these products cannot be domestically produced or the domestically made ones are not qualified to meet the demand, shall be exempted from tariff and import-related tax in accordance with concerning stipulations of the Circular of the State Council on Adjusting the Policies on Taxation of Equipment Imports.

The value-added tax on domestically manufactured equipment shall be fully refunded for foreign invested enterprises of the encouraged category purchasing the domestically made equipment within their total investment on the premise that the imported equipment of the same type is in the categories enjoying the import-related tax waivers. If foreign invested enterprises purchase domestically made equipment for conducting technological innovation in conformity with state Industrial policies or producing new-and-high tech products, the portion of taxable income equivalent to the equipment price shall be deducted for paying enterprise income tax.

In accordance with concerning stipulations of the Circular of the State Council on Adjusting the Policies on Taxation of Equipment Imports, the foreign invested R&D centers shall be exempted from tariff and import-related tax for importing the self-use equipment and the related techniques, necessary accessories and spare parts within their total investment for the reason that these products cannot be domestically produced or the domestically made ones are not qualified to meet the demand.

On the premise that the technological development fees of foreign invested enterprises increase by 10% or more compared with the previous year, the portion of taxable income of that year equivalent to 50% of the actually input technological development fees shall be deducted subject to the approval of tax authorities.

Foreign enterprises shall be exempted from business tax for transferring technology to Chinese partners, and those transferring advanced technology or transferring at a favorable price be exempted from enterprise income tax at the approval of the tax authority of the State Council. Foreign invested enterprises (including foreign invested R&D centers) shall also be exempted from business tax for their income in transferring technology.

The foreign invested enterprises in the fields of poultry raising, farming, forestry, animal husbandry and aquiculture shall be exempted from value added tax and consumption tax.

For exports produced by compensation trade projects, if the value-added tax has been levied in the stage of production, the tax shall be refunded after customs declaration for exportation in accordance with related stipulations, and the refunding formalities can be gone through without submitting receipt for collecting export proceeds.

The preferential policies of the EDZ’s management committee
Preferential land-use policy: The land-use in the EDZ is based on the three principles of plan as a whole, match as a whole, and use as a whole. The land-use right can be get by means of purchasing, stock shares evaluation, and rent. Once obtained, the land-use right can be put to sale, lease, or pledge. For those large-scale investment projects and high-tech projects, the enterprise can pay only for compulsory charges imposed by the state, and the EDZ management committee can pay the land-use price.

Finance awards: For the newly established industrial enterprises, there is policy ‘pay tax by the rules, while finance awards return’. During the first two years, the income tax that goes to the EDZ’s fiscal will be fully returned, and for the next three years the return percentage remains at 50%.

For high-tech enterprises, 50% of the value-added tax that goes to the local fiscal will be returned for the first three years, and from the forth year and afterwards, the increased part (compared with the previous year) will be fully returned.

Other enterprises can also be qualified for some other finance awards. For those enterprises with annual export over US$1 million, awards can be given according to the volume and growing speed of export.

Investment Directions:
According to the plan of “Three bases”, i.e. build Heze to be the trade and logistic base on the border of Jiangsu, Shandong, Henan, and Anhui, and to be energy/medicine/chemical base as well as green agricultural production/export base, the key points for investment now include:
1. Infrastructures, e.g. power plants, expressways, and sewage processing.
2. Agricultural products processing projects, e.g. food and by-product processing.
3. High-tech and competitive projects on coal-electricity integration, petrochemical, natural gas, chemicals, and medicines, etc.
4. More exclusively foreign-owned enterprises and Sino-foreign joint ventures, as well as related processing industries.
5. More service sectors like commerce, trade, finance, education, information, and storage, etc, making the tertiary industry meet the need of an export-oriented economy.
6. Emphasis on export-oriented, and large projects that have the potential to be pillars of the industrial base.

Investment Forms:
According to regulations by the state, foreign investment in Heze can take on of the following forms:
A. Sino-foreign joint venture B. Chinese-foreign contractual joint ventures
C. Exclusively foreign-owned D. Cooperative development
E. Compensation trade F. Processing and assembly trade
G. International lease H. Technology transfer
J. Loan K. Deposit in Chinese Bank
1. Sino-foreign joint venture: is the kind of enterprises on which foreign companies, enterprises or other economic organizations and individuals co-invest with their Chinese counterparts, and set up in China according to the Law of the People’s Republic of China on Sino-foreign joint venture. The participated parties share risks and profits according to the ratio of their investment.

2. Chinese-foreign contractual joint ventures: is the kind of enterprises on which foreign companies, enterprises or other economic organizations and individuals co-invest with their Chinese counterparts, and cooperatively set up in China according to the Law of the People’s Republic of China on Chinese-foreign contractual joint ventures. The rights and obligations, share of risks and profits of the participated parties are decided in the cooperative contract.

3. Exclusively foreign-owned enterprises: is the kind of enterprise set up in China according to the Foreign-owned enterprise law of China P.R., exclusively by foreign companies, enterprises, other economic organizations or individuals.

4. Compensation trade: foreign entities provide credit to Chinese enterprises in the form of technology or equipments or raw materials, while contract to purchase certain quantities of products from their Chinese partners, and use these products as the compensation for the credit provided. Compensation can be in two modes, direct or indirect compensation, i.e. use the product of the previously loaned equipments (direct) or other products agreed by both sides (indirect) as compensation for the credit provided.

5. Processing and assembly: raw materials, or parts, or blueprint is provided by foreign partners, while Chinese enterprises responsible for processing or assembly, and finished products return to foreign partners who pay processing fees to Chinese enterprises. Foreign partners, priced or free, may also provide the equipments, and Chinese enterprises can use the processing fee as compensation for the priced equipments.

6. International lease: mainly in forms of finance lease, business lease, or comprehensive lease. Finance lease is that the lease company purchase equipments according to demands of the users, and then put them on lease for the users. The creditor retains ownership of the equipments while the user gets the use-right. The user is responsible of the equipments installation, and the creditor takes back the equipment costs, interests, and handling charge in form of rent during the equipment usage. For business lease, the lease company provides the needed equipments, and is responsible for the maintenance, and the user pays rent, and returns the equipment after lease period. And comprehensive lease is the combination of the above two. Note the lease must be outside the registered capital of the cooperative company.

Investment Procedures:
For exclusively foreign-owned enterprises:
1. Talks on investment intensions.
2. Composition of enterprise application form and feasibility report.
3. Get approved by the Planning Committee and Department of Foreign Trade and Economics, and the approval certificate.
4. Get operation license form the industrial & commercial bureau.
5. Opening accounts in a bank, put records in custom, registering with tax office, and get land use right.

For joint ventures and contractual joint ventures:
1. Contract on cooperation intensions, and compose the project suggestion book.
2. Get filed by the Planning Committee and Department of Foreign Trade and Economics.
3. Compose the feasibility report, sign the formal cooperative contract and establish rules for the enterprise.
4. Get approved by the Department of Foreign Trade and Economics, and the approval certificate.
5. Get operation license form the industrial & commercial bureau.
6. Open accounts in a bank, put records in custom, register with tax office, and get land use right.