Free trade zone Non-free trade zone Corporation registration Allowing overseas and domestic (including Hong Kong, Macao and Taiwan)enterprises and other economic organizations or overseas individuals to invest and establish trading, warehousing, export processing and exhibition enterprises within the free trade zones, as well as other enterprises and organizations approved for incorporation There are more restrictions for foreign investors' investing in trading. Generally, only offices, which possesses no status of legal representative can be set up. Customs administration Bonded system is adopted in free trade zones. The goods transported into the free trade zone from abroad, or vice versa, shall be exempted from the import duties, and import and export licence. The goods transported into domestic non-free trade zone from the free trade zone are regarded as imported goods; and vice versa, exported goods. EDI systems are applied in free trade zones with computer network linking between customs and enterprises. Bonded system is only carried out in bonded warehouse or bonded factories. For goods shipped into China from abroad, the import customs clearance shall be proceeded; and vice versa, the export customs clearance shall be proceeded. Only a few large-scale enterprises are approved to employ EDI for customs declaration. Foreign exchange administration Free settlement of exchanges is carried out for companies' foreign exchange income. Foreign exchange can be either deposited in the financial institutions in the zone, or be sold to the appointed foreign exchange banks in the zone. Both Chinese-funded and foreign-funded enterprises in the zone can open their foreign accounts in accordance wih regulations. No need to handle the verification and cancellation procedure which is requested by the Foreign Exchange Administration of China for exchange collection of export and payment of import. Chinese-funded and foreign-funded enterprises share a unified exchange administration over their current accounts. Compulsory exchange settlement policy is carried out for the foreign exchange of the current accounts. Foreign exchange shall be sold to the appointed foreign exchange banks only. Chinese-funded enterprises can't keep their foreign exchange accounts without approvals of the People's bank of China. Verification and cancellation procedure for exchange collection of export and payment of import is required. There are differences between Chinese-funded and foreign-funded enterprises in foreign exchange settlement and transaction. Category of tax Taxable ltems Tax rate Remarks Enterprise income tax Income derived from manufacturing, business operation and other resources 15% Manufacturing enterprises with an operation period of over 10 years are, upon their profiting year, free of taxation for the first 2 years, and levied by half for the following 3 years (8years for hi-tech enterprises).Those enterprises with over 70%of their products exported will be levied by 10%from the 6th year(11th year for hitech enterprises) on. Business tax Income deriving from providing taxable services, transferring intangible assets, or selling real estate 3-10%   Individual income tax individual taxable income 5-45% Individual monthly taxable income is the remaining sum of monthly income deducted 800 yuan Value-added tax Commodities imported from the free trade zone and sold in domestic market 17% Product exports and transactions within the free trade zone are free of value-added faxes Consumption tax Taxable consumption commodities imported via the free trade zone 3-45%

Investment Workflows

Documents Needed for Application for Establishing Enterprises in the Shenzhen Free Trade Zone

[To incorporate a new enterprise] To apply for establishing exclusively foreign-owned enterprise, Chinese-foreign joint venture enterprise, Chinese and foreign equity joint venture enterprise or domestically funded enterprise, investors shall present the following documents (For those concerning land purchasing, project setup application form must be filled in first. After approval, the project setup notice shall be presented together with the following documents):

1 Application document of investor(sealed by the investing party) Original 1 2 Name verification notice(issued by the Industrial l& Commercial Administration)concerning the name of the enterprise to be established Copy 1 3 Investor's valid legal documents of commercial registration (note: Chinese party provides business license, foreign party provides commercial registration certification, and registration certificate, etc.; if the foreign investor is a natural person, s/he shall provide ID certification documents as well as original certification of bank credibility) Copy 1 4 Contract of the enterprise to be established (signed and sealed by the investing parties) (note: exclusively foreign-owned enterprises and domestically-funded enterprises are not requited to present the contract) Originals 6 5 Constitution of the enterprise to be established (signed and sealed by the investing party) Originals 6 6 Authorization letter (signed and sealed by the investing party) Original 1 7 Lease contract of business place, or certifying documents of real estate (Note: The contract should be sealed by leasing verification department) Copy 1 8 Appointment letter of the members of the board of directors for the enterprise to be established Original 1 9 Certifying documents for the ID of the members of the board of directors Copy 1 10 Counterfoil of the approving certificate (available from the Economic Development Department or the Free Trade Zones Service Centers) Original 1

[To establish branch of enterprise from Shenzhen or inland]

1 Enterprise application document(sealed by the enterprise) Original 1 2 Decision by the board of directors(signed by the members of the board) Original 1 3 Copy of business license Copy 1 4 Capital verification report of the corporation Copy 1 5 Appointment letter of the branch head (sealed by the enterprise) Original 1 6 ID certifying document of the branch head Copy 1 7 Lease contract of business place, or certifying documents of real estate (Note: The contract should be sealed by leasing verification department) Copy 1