LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

PRC GOVERNMENT REGULATIONS
This section sets forth a summary of the most significant regulations and requirements that affect our
business activities in China or our shareholders' right to receive dividends and other distributions from us.
Renewable Energy Law and Government Directives
In February 2005, China enacted its Renewable Energy Law, which became effective on January 1, 2006.
The Renewable Energy Law sets forth national policies to encourage and support the development and use of
solar energy and other non-fossil fuel renewable energy and their on-grid application. It authorizes the relevant
government authorities to set favorable prices for the purchase of electricity generated by solar and other
renewable power generation systems.
The law also encourages the installation and use of solar-powered water-heating systems, solar-powered
heating and cooling systems and other solar energy utilization systems. It expressly contemplates and permits
financial incentives, such as national funding, preferential loans and tax preferences for the development of
renewable energy projects. In January 2006, the PRC National Development and Reform Commission
promulgated two implementation directives with respect to the Renewable Energy Law. These directives set
forth specific measures relating to pricing of electricity generated by solar and other renewal power generation
systems and sharing by all utility end-users of certain costs incurred by solar and other renewable power
generation systems. The directives further provide specific allocations of administrative and supervisory
powers and responsibilities among various relevant government agencies at the national and provincial levels
and stipulate relevant responsibilities among electricity grid companies and power generation companies with
a view to the implementation of the renewable energy law.
The PRC Ministry of Construction issued a directive in June 2005 to encourage the use of solar energy in
residential and commercial buildings and the increased application of solar energy in townships in China.
Because China is consuming more and more energy as its economy expands and the related industrial
pollution is threatening the environment and livelihood of the nation, the PRC State Council promulgated a
directive in July 2005 with specific measures to conserve energy resources.
In December 2006, the PRC National Development and Reform Commission issued a notice to
announce the PRC government's support of the development of renewable energy resources in China,
including solar power. The government appropriated an aggregate of $330 million in equivalent Renminbi as a
grant to support various renewable energy projects, including commercialization of wafer and ingot production
at our company.
Environmental Regulations
We are subject to a variety of governmental regulations related to the storage, use and disposal of
hazardous materials. The major environmental regulations applicable to us include the PRC Environmental
Protection Law, the PRC Law on the Prevention and Control of Water Pollution, the PRC Implementation
Rules of the Law on the Prevention and Control of Water Pollution, the PRC Law on the Prevention and
Control of Air Pollution, the PRC Law on the Prevention and Control of Solid Waste Pollution and the PRC
Law on the Prevention and Control of Noise Pollution.
Restriction on Foreign Investments
The principal regulation governing foreign ownership of solar power businesses in China is the Foreign
Investment Industrial Guidance Catalogue, effective as of January 1, 2005. Under this guidance, the solar
power business is listed as an industry with foreign investments permitted.
Tax
The PRC enterprise income tax is calculated based on the taxable income determined under the PRC
accounting standards and regulations. In accordance with the PRC Income Tax Law for Enterprises with
Foreign Investment and Foreign Enterprises and the related implementation rules, foreign-invested enterprises
incorporated in China, such as Jiangxi LDK Solar, are generally subject to a national enterprise income tax at
the rate of 30% on their taxable income and a local enterprise income tax at the rate of 3% of their taxable
income. This foreign invested enterprise income tax law and its implementation rules provide certain favorable
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