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With a view to confirming and verifying export enterprises and technologically advanced enterprises with foreign investment (hereinafter referred to as two kinds of enterprises), these Measures are hereby formulated in light of the Regulations of the State Council on the Encouragement of Foreign Investment (hereinafter referred to as State Council Regulations).
Article 1 A Sino-foreign equity joint venture, a Sino-foreign cooperative joint venture and a wholly foreign-owned enterprise (hereinafter referred to as foreign-investment enterprise) which have satisfied State Council Regulations and the conditions set forth in these Measures and which have obtained certificates of qualification after confirmation and verification are entitled to enjoy relevant preferential treatment provided for in the State Council Regulations.
Article 2 A foreign-investment enterprise satisfying the following conditions may be confirmed as an export enterprise:
1. An enterprise producing export products;
2. An enterprise with its annual export value (including export realized by itself or through a foreign trade company as an agent) exceeding 50% of its total sales volume of the said year;
3. An enterprise which enjoys certain surplus in the balance of foreign exchange turnover in the said year (with the foreign exchange income realized from the turnover exceeding the foreign exchange expenditure of the same year, excluding the balance carried over from the previous year);
4. An enterprise which realizes certain profits in the said year.
Article 3 An export enterprise satisfying the provisions in Article 2 with its export value exceeding 70% of its total sales volume of the same year is entitled to enjoy preferential treatment stipulated in Article 8 of the State Council Regulations after passing the annual examination.
Article 4 An enterprise satisfying the following conditions may be confirmed as a technologically advanced enterprise:
a. A production project encouraged by the state for foreign investment;
b. An enterprise using suitable and internationally advanced process, technologies and equipment;
c. An enterprise with its product quality and technical performance in the country¡¯s leading position.
Article 6 The verifying and confirming body of the ¡°two kinds of enterprises¡± shall be the foreign economic relations and trade departments of various provinces, autonomous regions, municipalities, cities independently listed on state plans and special economic zones (hereinafter referred to as verifying and confirming body).
Article 7 An enterprise satisfying Article 2 of these Measures may submit the following documents to the verifying and confirming body to apply for the confirmation as an export enterprise after one-year operation:
1. An application form for the confirmation as an export enterprise (See Annex 1 for the format);
2. (Copies of) certificate of approval, business license, contract, articles of association and approving documents of the enterprise;
3. A report of capital verification issued by a certified accountant on the input of registered capital made by various investors;
4. An application filed by the enterprise for the confirmation of the statement of export performance of the previous year (See Annex 2 for the format);
5. An application filed by the enterprise for the confirmation of the foreign exchange balance sheet of the previous year (See Annex 3 for the format);
6. An auditing report applying for confirmation, which is issued by a certified accountant on the export and foreign exchange balance sheet of the previous year;
7. Other documents required by the verifying and confirming body.
Article 8 A foreign-investment enterprise confirmed as an export enterprise shall, within the first four (4) months of a calendar year, apply to the verifying and confirming body for examination. And the following documents shall be submitted in the application:
1. Statement of export performance of the previous year;
2. Foreign exchange balance sheet of the enterprise in the previous year;
3. Financial statement of the previous year as audited by a certified accountant and an auditing report issued by a certified accountant on the export performance and foreign exchange balance of the previous year;
4. Other documents required by the verifying and confirming body.
Article 9 Examination of the export enterprises by a verifying and confirming body shall be conducted on an annual basis. An enterprise which fails to apply for examination at due time shall be regarded as unqualified.
Article 10 An enterprise satisfying conditions set forth in Article 4 of these Measures may submit the following documents to the verifying and confirming body to apply for confirmation as a technologically advanced enterprise after 6-month operation:
1. An application form for confirmation as a technologically enterprise (See Annex 1 for the format);
2. Feasibility study report of the project and approving documents;
3. (Copies of) certificate of approval, business license, contract, articles of association and approving documents of the enterprise;
4. A report of capital verification issued by a certified accountant on the input of registered capital made by various investors;
5. Agreement of technology transfer of the enterprise (The agreement shall include detailed content and steps of the technology transfer, technology and product standards, time limit for the meeting of the standards and localization process of parts and components, etc.) and approving documents;
6. Acceptance report of the production lines of the enterprise;
7. Evaluation and assessment of the technologies made by competent administrative authority and scientific and technological management department;
8. Other documents required by the verifying and confirming body.
Processing projects of general nature with only the performance and efficiency of the imported machinery and equipment better than domestic equipment and projects mainly engaged in the assembling of supplied materials shall not be confirmed as technologically advanced enterprises.
An enterprise engaged in new and high-tech development without production of any tangible products may also apply for the confirmation as a technologically advanced enterprise.
Article 11 In carrying out confirmation and examination of a technologically advanced enterprise, a verifying and confirming body shall work together with the sectoral administrative authority and scientific and technological administrative department at the same level or entrust sectoral competent authority to organize experts to conduct the evaluation when necessary.
Article 12 A technologically advanced enterprise may not undergo annual examination unless re-verification is deemed necessary by the verifying and confirming body.
Article 13 Where it is necessary to examine a technologically advanced enterprise already confirmed, the verifying and confirming body shall issue a notification of examination one month prior to the examination. And an enterprise shall prepare the following documents after the receipt of the notification:
1. A report on the progress of technology transfer;
2. A report on the production and operation of the enterprise;
3. Other documents required by the verifying and confirming body.
An enterprise which fails to pass the examination shall apply for another examination the next year. An enterprise which does not apply for another examination or which again fails in the examination shall be rescinded the title of technologically advanced enterprise.
Article 14 Apart from the confirming examination of a technologically advanced enterprise which requires evaluation by experts, a verifying and confirming body shall complete the confirming examination within 45 days starting from the receipt of the application for confirming examination.
Article 15 Certificates of confirmation for the ¡°two kinds of enterprises¡± shall be printed by the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as MOFTEC) on a uniform basis and shall be put on serial numbers and issued by various verifying and confirming bodies.
Article 16 A verifying and confirming body shall notify, in time, the financial, taxation, customs, banking, foreign exchange and land administration authorities of the lists of the ¡°two kinds of enterprises¡± which have been confirmed and which have passed or failed the annual examination, and shall submit, prior to June 30 of each year, the lists of the ¡°two kinds of enterprises¡± which have been confirmed and examined in the previous year to MOFTEC for recordation.
Article 17 A foreign-investment enterprise shall be entitled to enjoy relevant preferential treatment starting from the date of being confirmed as one of the ¡°two kinds of enterprises¡±. An enterprise which fails the examination shall pay the exempted or reduced tax or shall be deprived of the preferential treatment such as tax reduction and exemption as enjoyed by ¡°two kinds of enterprises¡± in the year of examination.
Article 18 An enterprise with an investment made by Hong Kong, Macao or Taiwan business people shall act with reference drawn to these Measures.
Article 19 The right of interpretation of these Measures rests with MOFTEC.
Article 20 These Measures shall enter into force on January 1, 1997. Measures for Implementation of the Ministry of Foreign Trade and Economic Cooperation for the Confirmation and Examination of Export Enterprises and Technologically Advanced Enterprises with Foreign-Investment promulgated in 1987 and in 1992 and their ¡°supplementary regulations¡± shall be annulled simultaneously.
This translation, together with any explanatory material, is provided courtesy of Lehman Tax & Accounting.
