Description of the Issues Involving the Land Use Fees by a Foreign-capital Enterprise

With the speeding up of inviting business and attracting foreign investment throughout the country, a growing number of foreign investors invest and build factories in China. How to use lands legally has become the focus when foreign investors invest in China. Now, this paper will discuss the ways of obtaining land for enterprise and land use fees on foreign-capital enterprise in Beijing area.
A foreign-capital enterprise shall, within 30 days from the day the business license is issued, go through the procedure for the use of land and obtain the land certificate by presenting the certificate of approval and the business license to the land administration department under the local People's government at or above the county level in the place where the enterprise is to be located. With expect to the land to be used by a foreign-capital enterprise, the local People's government at or above the county level in the place where the enterprise is to be located, shall make arrangements after examination and verification in the light of the local conditions. The term for the use of land by a foreign-capital enterprise shall be the same as the approved operation period of the said enterprise. The foreign-capital enterprise within its term of operations, may not assign its land-use right without permission.
A foreign-capital enterprise shall, when obtaining the land certificate, pay its land use fee to the land administrative department in the place where the enterprise is located. Land use fee, is the site use fee paid by foreign-capital enterprises to the local government within its term of investments and operations, excluding land acquisition, demolition costs and infrastructure construction costs. In case that a foreign-capital enterprise uses land that has already been developed, it shall pay the land development fee. The land development fee includes the expense for the requisition of land, the expense for the pulling down of houses and the settlement allowance, and the expense for the construction of basic installations that match the foreign-capital enterprise. In case that a foreign-capital uses land that has not been developed, it may develop the land by itself, or it may entrust a department concerned in China to develop the land. The infrastructure construction shall be carried out under the unified arrangement of the local People's government at or above the county level in the place where the enterprise is to be located.
1. Relevant provisions on the cost of obtaining the right to the use of the land by assignment and transfer
The contract for assigning the right to the use of the land shall be signed by and between the land administration departments and the land users in accordance with the principle of equality, voluntariness and compensation for use. The land users shall pay 15% to 20% of the total amount of the assignment fee to the assigning party as the deposit when signing contract. The land user shall, within 2 months of the signing of the contract for the assignment of the right to the use of the land, pay the total amount of the assignment fee. In the case that the land users really have a genuine reason for failing to pay within above mentioned time limit, with the approval of the financial department by the land administration departments, the time of payment can be appropriately prolonged. The detailed time and way of payment shall be stipulated in the assignment contract. During the period of prolonging payment time, the land users shall pay capital takes up fees monthly as the ratio of 1‰ to 2‰ of unpaid amount. The land users still fail to pay the total amount of the assignment fee exceeding two months or the time the contract stipulates and do not to return deposit; the assigning party shall have the right to terminate the contract and may claim compensation for breaching of contract.
On the condition that the land users pay off the total amount of the assignment fee, obtain the land certificate and have developed and utilized the land in according with the period of time specified in the contract and the conditions therein, of which the developing investment is not less than 25%of the total investment in the project, can the right to the use of the land be transferred. The term of use is the remainder of the term specified in the contract for assigning the right to the use of the land minus the number of the years in which the original land user has used the land. The right to the use of the land shall be transferred as the market price. When the transfer of the right to the use of the land is priced at a level obviously lower than the prevailing market price, the people's governments at the municipal and county levels shall have the priority of the purchase thereof. When the market price for the transfer of the right to the use of the land rises to an unreasonable extent, the People's governments at the municipal and county levels may take necessary measures to cope with it.
2. Relevant provisions on the cost of obtaining the right to the use of the land by other ways
In accordance with the relevant regulations of Beijing municipal government, except those who obtain the right to the use of the land by assignment and transfer legally, foreign-capital enterprise, with the approval to use the land legally, shall sign the contract for use of land with municipal Land Resources and Housing Administration Bureau. Land tax departments are in charge of collecting land use fees and the supervision and inspection for a foreign-capital enterprise. The land use fees of a foreign-capital enterprise are levied in accordance with the area to the use of the land and land grades which stipulated in the contract for use of land.
A foreign-capital enterprise shall, from the date of approval to its formation, pay the land use fees as the Gregorian calendar year. The land use fee is levied once per year and shall become due before October 20th of each year. The time to the use of the land is more than six months but less than a year in the first calendar year, it is levied as six months; in the case that is less than six months, the land use fee is exempt. During the construction period stipulated in the contract, a foreign-capital enterprise shall pay 20% land use fee according to the checked and ratified standard. A foreign-capital enterprise, which really has special difficulties to pay the land use fee, can extend the term of levy with the approval by municipal land tax departments.