(Yicai Global) June 8 -- Khorgos city in China's Xinjiang Uygur Autonomous Region, home to the world's biggest dry port near the border with Kazakhstan, has started overhauling its practice of "one address with multiple licenses" for firms after tightening the requirements for registered companies' addresses.

The local government in Khorgos has also suspended the policy of VAT refunds and individual income tax credits, The Beijing News found after some field trips to the city on June 3-5. 

In Khorgos, the companies that are registered locally without actually operating and do enjoy tax relief policies are called "registration-type" companies. Khorgos used to allow one address with multiple licenses, which means one address allows registration of multiple companies, earlier media reports said. As a result, nearly 1,000 companies registered on the same address and the proportion of registration-type companies skyrocketed.

Registering a company in Khorgos is aimed at enjoying local tax relief policies. According to relevant policies, newly-registered companies from 2010 to 2020 which operate within the scope of industries the government supports are exempted from corporate income tax for five years from the first taxable year after achieving production and revenue.

Attracted by such tax relief policies, many firms headed to the city, including some renowned businesses and listed companies' subsidiaries. According to a report released by the local government, there were 22,615 market entities in Khorgos as of the end of the last year, up nearly two and a half times year-on-year, with registered capital of just over CNY302 billion (USD47 billion), up three times.

The Khorgos municipal office of the State Administration of Taxation issued a notice on April 3, requiring that enterprises with corporate profits accounting for more than 50 percent of operating income in 2017 can carry out tax self-examination. A total of 2,118 companies in the city were involved, including the subsidiaries of some listed companies.

Space Issues

However, Khorgos faces the problem of lack of sufficient office space if one address for one registered company policy is applied. Both local rent and house prices are on the rise.

Beijing News quoted a local real estate investor as saying that he purchased 10 suites in an office building at a price of CNY3,800 per square meter last June and is now planning to rent those spaces for the current market rate of CNY5,200 per square meter.

The Khorgos Economic Development Zone covers an area of 73 square kilometers, and only enterprises within the development zone can enjoy the exemption of corporate income tax within five years.

If some nearly 30 square kilometers of area in the Khorgos Port and nearly 13 square kilometers of area in the China and Kazakhstan Khorgos International Border Cooperation Center are not taken into account, the developable land area meeting the conditions for tax incentives is set to shrink in the future.

Editor: Mevlut Katik