Representative Christopher H. Smith, Chair
Senator Jeff Merkley, Cochair
PRC Legal Provisions
Additional Laws and Regulations
Circular of the State Administration of Taxation on Printing and Distributing the Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/EnterpriseIncomeTax/ExemptionandReduction/P020060620340453753150.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/qysds/jms/P020060619680076871475.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Circular of the State Administration of Taxation on Printing and Distributing the Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment GuoShuiFa [2000] No.90 May 18,2000 In order to implement the policy of the income tax credit on the investment of enterprises with foreign investment and foreign enterprises by way of purchasing homemade products, and to enhance the regulation and examination in this regard, the State Administration of Taxation has formulated the following Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by way of Purchasing Homemade Products in accordance with the Circular on Several Issues on the Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Products jointly promulgated by the Ministry of Finance and the State Administration of Taxation. You are requested to abide by the following measures, and should there be any questions arising from practice, please inform the State Administration of Taxation. Attachment: Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Products Article 1 In order to implement the policy on the business income tax credit on the investment of enterprises with foreign investment and foreign enterprises by way of purchasing homemade products, and to enhance the regulation and examination in this regard, these Measures have been formulated in accordance with the Income Tax law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises and the Rules for Implementation thereof as well as the Circular on Some Issues on the Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Products (CaiShuiZi [2000] No. 49, hereinafter referred to as the Circular). Article 2 These measures apply to enterprises that pay income tax by way of collection upon verification. Article 3 The equipment in the Circular refers to machines, transportation vehicles, appliances, and tools which fall within the scope stipulated in the Circular and which are maintained as fixed assets for production or business purposes (including testing and verification for production). Tools and appliances which are not maintained as fixed assets are excluded. Article 4 The domestically-made equipment in the Circular refers to any domestically-made equipment which has not been previously used and which was 1/3 purchased using currency after July 1, 1999. Equipment invested as part of the registered capital is excluded. Article 5 The investment made with domestically-made equipment in the Circular refers to the invoice price plus tax for the purchase of the equipment, not including the VAT refunded in accordance with relative provisions or the fees for the transportation, installment, and testing of the equipment. The purchase date shall be the date of the invoice. In case of payment by installment or on credit, the purchase date shall be the date of arrival of the equipment. Article 6 Enterprises requesting income tax credit by purchasing domestically-made equipment shall submit an application to the competent tax authority which shall in turn report to the provincial tax authority for approval. Article 7 The annual income tax credit shall be used by the Enterprise in accordance with the limitation and the time limit stipulated in the Circular. In case that the Enterprise was loss making or in the stipulated tax holidays in the previous year before the purchase of the domestically-made equipment, its income tax for the previous year before the purchase shall be zero and be regarded as the basis to calculate its increased income tax. Article 8 In case that the enterprise was loss making in the previous years running before the purchase of the domestically-made equipment, the income tax credit shall be decided only after the taxable income in the current or following years of the purchase is used to compensate its losses in the previous years. In case that the enterprise is in the stipulated tax holidays in the current or following years of the purchase, its taxable income in the current or following year shall be first exempted from income tax and the income tax credit as a result of purchase of the equipment shall be carried forward to the next year within the time limit stipulated in the Circular. Article 9 The additional taxable income decided after inspection by the tax authority shall be added to the taxable income of that year if it arose in the years before the purchase. It shall not be regarded as tax-credible income if it arises in the current or following years of the purchase. Article 10 Enterprises requesting tax credit shall submit their applications to the competent tax authority within two(2) months after the purchase of the domestically-made equipment. The competent tax authority shall report the applications to the provincial tax authority that shall examine and approve or disapprove the applications within one(1) month upon receiving the applications. The enterprise shall receive a copy of the approval document. When filing the application, the taxpayer shall provide the following documents: 1. application form of tax credit arising from purchase of domestically-made equipment by enterprises with foreign investment or foreign enterprises (See attachment 1). 2. copy of its business license. 3. copy of its tax registration certificate. 4. copy of approval of the project granted by MOFTEC or COFTEC. 5. copy of the contract for the establishment of the enterprise. 6. copies of the purchasing contract of the domestically-made equipment and the invoice. 7. copy of the Tax Payment Document (for exportation). 8. any other documents requested by the tax authority. Article 11 When submitting the annual income declaration form and its final accounts to the competent tax authority within four (4) months after each tax year, the enterprise shall note in the declaration form the tax credit it has 2/3 applied for in the year, together with the General Form for Approval of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign Investment and Foreign Enterprises (See attachment 2), and the Detailed form of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign Investment and Foreign Enterprises (See attachment 3). Article 12 The competent tax authority, upon receiving applications and documents submitted by enterprises, shall carefully examine the items and numbers in the documents and calculate the tax credit and collect income tax. Article 13 The competent tax authority shall enhance the administration of income tax credit arising from the purchase of domestically-made equipment by enterprises. It shall keep separate files and account books on income tax credit for each applicant, and keep detailed records of the creditable income tax, investment already receiving tax credit and not receiving tax credit. Article 14 The request of income tax credit arising from purchase of domesticallymade equipment by the branch offices of the enterprises with foreign investment in China shall be filed by the enterprise at the place where its main office is located. Article 15 These Measures shall enter into force on July 1, 1999. Enterprises with foreign investment or foreign enterprises shall before the end of June 2000 declare to the competent tax authority their purchases of domestically-made equipment executed between July 1, 1999 and December 31, 1999. And the tax authorities at various levels shall examine and approve the applications in accordance with the above-mentioned provisions and refund the concerned tax before the end of September 2000. Article 16 Tax authorities of the provinces, autonomous regions, cities under direct control of the Central Government, and municipalities separately listed on the State plan by the Central government may formulate detailed implementation rules of these Measures, which shall be filed at the State Administration of Taxation. Attachments 1:Application Form of Tax Credit Arising from Purchase of Domestically-made Equipment by Enterprises with Foreign Investment or Foreign Enterprises (Omitted). Attachments 2:General Form for Approval of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign Investment and Foreign Enterprises (Omitted). Attachments 3:Detailed form of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign Investment and Foreign Enterprises (Omitted) 3/3 |
Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/Value-addedTax/GeneralProvisions/P020060620342826560957.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/zzs/ybxgd/P020060619682234532652.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment GuoFa [1997] No.37 December 29, 1997 For purposes of further expanding foreign capital utilization, inducting advanced technologies and equipment from abroad, promoting adjustments in industries structures and technological advancement and maintaining the sustained, rapid and healthy development of the national economy, the State Council has decided that as of January 1, 1998, tariffs and import link valueadded tax shall be exempted within the prescribed scope with respect to import equipment of domestic investment projects and foreign business investment projects the development of which is encouraged by the state. The relevant questions are hereby notified as follows: I. Scope of Tax Exemption for Import Equipment (1) Tariffs and import link value-added tax shall be exempted with respect to import equipment for their own use within the total amount of investment in foreign business investment projects that transfer technology and are consistent with the category of encouragement and the restricted B category under the Catalog of Industries Guidance for Foreign Business Investment, with the exception of commodities listed in the Catalog of Import Commodities for Foreign Business Investment Projects with no Tax Exemption. Reference shall be made to the preceding paragraph in the implementation of the import equipment for their own use by projects utilizing foreign government loans and loans of international financial institutions and import equipment provided by foreign businesses for processing trade without evaluation, that is, tariffs and import link value-added tax shall be exempted with the exception of the commodities listed in the Catalog of Import Commodities for Foreign Business Investment Projects with no Tax Exemption. (2) Tariffs and import link value-added tax shall be exempted with respect to import equipment for their own use within the total amount of investment of domestic investment projects in line with the Current Catalog of Key Industries, Products and Technologies the Development of Which is Encouraged by the State, with the exception of the commodities listed in the Catalog of Import Commodities for Domestic Investment Projects with no Tax Exemption. (3) Tariffs and import link value-added tax shall likewise be exempted with respect to technologies and matching components and parts imported along with the equipment in accordance with the contracts for projects in line with the aforesaid provisions. (4) Tax reduction and exemption for import equipment outside the aforesaid prescribed scope shall be decided upon by the State Council. II. Administration of Tax Exemption for Import Equipment (1) Existing relevant provisions of the state shall still be observed in terms of examination and approval authority and procedures for feasibility study of investment projects. Above-ceiling projects shall be subject to examination and approval by the State Planning Commission or the State Economic and Trade Commission respectively. Below-ceiling projects shall be subject to examination and approval of people's governments at the provincial level, the departments concerned under the State Council, people's governments of municipalities 1/3 separately listed on the State plan and enterprise groups undergoing experiment by the state authorized by the State Council. However, foreign business investment projects shall be subject to examination and approval in pursuance of the Interim Provisions for Direction Guidance for Foreign Business Investment. In making official replies to feasibility studies, the examination and approval authorities shall issue a letter of confirmation in uniform format for projects in line with the encouragement category and the restricted B category of the Catalog for Guidance for Foreign Business Investment Industries, or the Current Catalog of Key Industries, Products and Technologies the development of which is Encouraged by the State, or projects utilizing foreign government loans and loans of international financial institutions. For belowceiling projects, the letter of confirmation shall be submitted along with the feasibility study according to the nature of investment in the project to the State Planning Commission or the State Economic and Trade Commission respectively for the record. Units violating the provisions of examination and approval shall be dealt with seriously. (2) A project unit shall complete the formalities for import duty exemption at the competent custom office on the strength of the letter of confirmation issued by the examination and approval authority of the project feasibility study, among them foreign business investment projects must go through the formalities on the strength of approval documents for the establishment of enterprises of the departments of foreign economic relations and trade and the business licenses issued by the departments of industry and commerce administration. Units of processing trade shall go through the formalities of import duty exemption for the import of equipment provided by foreign businesses without evaluation on the strength of the approved contract for processing trade. The customs office shall carry out examination and verification in accordance with those formalities and with reference to the Catalog of Commodities not Eligible for Tax Exemption. (3) The General Administration of Customs shall make uniform numbers, establish a data bank, strengthen auditing, enforce stringent supervision and control over projects approved for tax exemption and actively cooperate with the departments concerned in conducting successful verification. (4) All units concerned should pay attention to the simplification of operations links and examination and approval procedures, accelerate the speed of examination and approval so as to ensure the implementation of this major policy of tax exemption and render it effective. III. Tax Exemption for Import Equipment for Transfer Projects (1) For import equipment for technological transformation projects approved in accordance with the prescribed procedures of the state prior to March 31, 1996, import duty and import link value-added tax shall be exempted as of January 1, 1998 according to the scope of tax reduction and exemption for equipment previously approved. The project units shall go through the formalities of tax exemption at the competent customs office on the strength of the original approval documents. (2) For import equipment for foreign business investment projects and domestic investment projects the establishment of which was approved in accordance with the prescribed procedures of the state between April 1, 1996 and December 31, 1997, as well as the import equipment for projects utilizing foreign government loans and loans of international financial institutions, the import duty and import link value-added tax shall be exempted as of January 1, 1998 with the exception of the import commodities not eligible for tax exemption expressly defined by this Provision. The project units shall go through the formalities of tax exemption at the competent customs office on the strength of the original 2/3 approval documents. 3/3 |
Circular Concerning Printing and Distributing Detailed Rules on Rewarding and Punishment Concerning Provisional Regulations over Examination of Export Collections of Foreign Exchange (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/ForeignExchangeAdministration/P020060620354882506920.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/whgl/P020060619690393758872.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Circular of the People's Bank of China, the State Administration of Foreign Exchange, the Ministry of Foreign Trade and Economic Cooperation and the State Administration of Taxation Concerning Printing and Distributing Detailed Rules on Rewarding and Punishment Concerning Provisional Regulations over Examination of Export Collections of Foreign Exchange YinFa [2000] No.58 February 17, 2000 All branches and operation administrative departments of the People's Bank of China (hereinafter "PBC"); all Sub-bureaus of the State Administration of Foreign Exchange (hereinafter "SAFE"), the Beijing and Chongqing Foreign Exchange Departments, Dalian, Qingdao, Ningbo, Xiamen and Shenzhen Sub-bureaus; Foreign trade and economic cooperation commissions (departments, bureaus) of the various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, State Administration of Taxation, All foreign trade centers and related parent companies: In order to carry out the spirit of supporting excellent enterprises and restricting enterprises which do not behave well in the document Provisional Regulations over Examination of Export Receipts of Foreign Exchange, the People's Bank of China, the State Administration of Foreign Exchange, the Ministry of Foreign Trade and Economic Cooperation and the State Administration of Taxation draw together the Detailed Rules on Rewarding and Punishment Concerning Provisional Regulations over Examination of Export Collections of Foreign Exchange. It is hereby printed and distributed to you for implementation. On receiving this circular, it shall be transmitted to sub-branches of PBC , subbureaus of SAFE ,all foreign economic and trade departments and state administrations of taxation throughout the country in no time. There is hereby the notification. Attachment: Detailed Rules on Rewarding and Punishment Concerning Provisional Regulations over Examination of Export Collections of Foreign Exchange Article 1 For the purpose of expanding exports, supporting excellent enterprises and restricting enterprises which do not behave well in regard to export receipts of foreign exchange, this Detailed Rules was formulated in accordance with the document Provisional Regulations over Examination of Export Receipts of Foreign Exchange, issued by the State Administration of Foreign Exchange (SAFE) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). Article 2 "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange", "Ordinary Enterprises for Collection of Export Receipts of Foreign 1/3 Exchange", "Risky Enterprises for Collection of Export Receipts of Foreign Exchange", and "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange", as referred to in this Detail Rules, are foreign trade enterprises classified in the light of criteria specified in the Provisional Regulations over Examination of Export Receipts of Foreign Exchange and of their behaviors concerning collection of export receipts of foreign exchange during annual examination. Article 3 In order to encourage large-scaled enterprises to export, enterprises are treated as "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" if their annual export value reach $ 0.2 billion (Positive lists are provided by MOFTEC), ratios of export receipts of foreign exchange are above 85%, and ratios of surrendered verification forms of export receipts are above 80%. Article 4 "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" will be commended by SAFE and MOFTEC by means of publishing in newspaper, and will be notified to customs, tax bureaus and banks. Article 5 "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" will be given top-priority by MOFTEC when competing for Foreign Trade Development Fund, International Economic Cooperation Fund, Fund for Joint Venture or Cooperation Program of Foreign Aid, and etc., or be given preferential treatment when bidding for exportation of goods. Article 6 Lending rates of RMB loans extended by commercial banks to "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" are allowed be lowered up to 10% on the basis of the lending rates fixed by the People's Bank of China (PBC). Article 7 For "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange", the deadlines before which they must repatriate their foreign exchange profits and other foreign exchange receipts gained from overseas investments are extended from 6 months to one year with the approval of the head office or branches of SAFE (hereinafter as the SAFE in Brief). "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" are exempt from guarantee deposits for repatriation of their profits. Article 8 Annual examination over foreign exchange accounts of "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" shall be speeded up and shifted from concentrated examination to examination one by one at real time. Article 9 Deposit ceiling of foreign exchange settlement accounts of "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" is raised from 15% to 30% of their current annual export and import value. Article 10 Facilities are provided to "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" when going through procedures of supervision and verification. 1. Projected date for collection of export receipts of foreign exchange is the same as the date specified in the corresponding export contract. 2. Supervision and verification forms for export receipts of foreign exchange are provided according to the real needs of export enterprises. 3. Special windows will be set up by the SAFE to provide supervision and verification forms and to carry out supervision and verification procedures for "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange". Article 11 For "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" which are not included into the list of enterprises whose imports must be examined by the SAFE to ensure their authenticity, banks are allowed to release foreign exchange to them before rechecking the relevant 2/3 declaration forms, provided that the import date showed in the declaration forms was before September 1, 1998, payments was made before imported goods were delivered, and declared import value was lower than $500,000. For importation conducted after September 1, 1998, foreign exchange shall be released after the authenticity of the declaration forms is examined through the Network of Import and Export Declaration Form Verification System. Article 12 For "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" which are grouped under "Category B Enterprises" in accordance with the document GuoShuiFa [1998] No. 95, Notification of the State Administration of Taxation (SAT) on Classifying Enterprises into Different Categories to Conducting Export Tax Rebate or Exemption, export tax shall be rebated in the same way as "Category B Enterprises" ("Honorable Enterprises for Collection of Export Receipts of Foreign Exchange" which are grouped under "Category A Enterprises" are excluded from this provision). Article 13 SAFE and MOFTEC will notify "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" to news media, and to customs, tax bureaus and banks. Article 14 "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" will be examined rigidly by MOFTEC when competing for Foreign Trade Development Fund, International Economic Cooperation Fund, Fund for Joint Venture or Cooperation Program of Foreign Aid, and etc.. Article 15 SAFE will intensify its management of issuance of supervision and verification forms and of supervision and verification procedures to "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange". Article 16 "Risky Enterprises for Collection of Export Receipts of Foreign Exchange" and "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" are treated as "Category C Enterprises" when conducting export tax rebate ("Risky Enterprises for Collection of Export Receipts of Foreign Exchange" and "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" which are grouped under "Category D Enterprises" are treated as "Category D Enterprises" when conducting export tax rebate). Article 17 Lending rates of RMB loans extended by commercial banks to "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" are allowed to be raised up to 30% on the basis of the lending rates fixed by PBC. Article 18 Titles of "Honorable Enterprises for Collection of Export Receipts of Foreign Exchange", "Ordinary Enterprises for Collection of Export Receipts of Foreign Exchange", "Risky Enterprises for Collection of Export Receipts of Foreign Exchange", and "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" will be null and void one year after being given to enterprises. Article 19 If one enterprise is evaluated as "High-risky Enterprises for Collection of Export Receipts of Foreign Exchange" for one year or as "Risky Enterprises for Collection of Export Receipts of Foreign Exchange" for two consecutive years, its rights to undertaking import and export business will be suspended by MOFTEC or by any institution in charge of foreign trade and economy authorized by MOFTEC. Article 20 PBOC, SAFE, SAT and MOFTEC are responsible for the interpretation of this Detailed Rules. Article 21 These Detailed Rules will enter into force as of April 1, 2000. 3/3 |
Implementing Measures on Management of Automobile Brand Marketing (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/MinisterialRulings/P020060620324152502280.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/zh/zmgz/P020060619561228430871.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Order of the Ministry of Commerce, State Development and Reform Commission, State Administration for Industry and Commerce No. 10 Implementing Measures on Management of Automobile Brand Marketing examined and adopted at the 17th executive meeting of the Ministry of Commerce on December 8, 2004, are hereby promulgated and shall come into force as of the day of April 1, 2005. Minister, Bo Xilai Director, Ma Kai Director General, Wang Zhongfu February 21, 2005 Implementing Measures on Management of Automobile Brand Marketing Chapter I General Provisions Article 1 For the purposes of regulating the behavior of automobile brand marketing, promoting the healthy development of automobile market, protecting consumer's legitimate rights and interests, these measures are formulated in accordance with relevant national laws and administrative regulations. Article 2 These measures apply to the activities in the automobile brand marketing within the territory of the People's Republic of China. Article 3 Automobile brand marketing in term of these measures means the activities that the automobile supplier or its authorized automobile brand distributor use uniform shop name, identification, trade mark to be engaged in automobile business. Automobile supplier refers to the enterprises that supply automobile resources to automobile brand distributors, including automobile production enterprises, general automobile distributors. Automobile brand distributor means the enterprises that are authorized by the automobile supplier and engaged in automobile sales and service in form of automobile brand marketing. General automobile distributor means the enterprises that are authorized by domestic or external automobile production enterprises, have its own network for automobile brand marketing and service and engaged in distributing of automobiles. Article 4 The domestic or external automobile production enterprises that sell the automobiles produced by their own should establish perfect automobile brand marketing and service system in order to improve their marketing and service level. Article 5 Automobile supplier should make network plans on automobile brand marketing and service (hereinafter referred to as "network plan"). Network plan includes: business prediction, site overall arrangement plan, the progress rate of network development and the standard of shop building, software and hardware, after-sale service and etc.. Article 6 The network plan of the same automobile brand is generally made and implemented by a domestic enterprise. Domestic automobile production enterprises 1/6 may either make and implement network plan directly or authorize domestic general distributor to make and implement the network plan. If an external automobile production enterprise sells automobiles in the territory of China, it should authorize a domestic enterprise to do it or establish an enterprise in accordance with relevant national rules as its general automobile distributor to make and implement network plan. Article 7 The competent commercial administration of the State Council is responsible for the management of automobile brand marketing all over the country. The industrial and commercial administration of the State Council is responsible for the supervision and management of automobile marketing within the range of its duty. The competent commercial administrations of the provinces, autonomous regions, the municipalities directly under the Central Government, cities specifically designated in the state plan (hereinafter referred to as "provincial competent commercial administrations), local industrial and commercial administrations are responsible for the supervision and management of automobile marketing under their jurisdiction within the scope of their own official duty. Chapter II Establishment of Automobile General Distributor and Brand Distributor Article 8 General automobile distributor should meet with following requirements: 1. Have the qualification of enterprise's legal personality; 2. Have obtained the written authorization of automobile production enterprises, have the right to distribute specific brand automobile independently; 3. Have the ability of specialized automobile marketing, mainly including market survey, marketing plan, advertisement promotion, network development and guidance, products service and technical training and consultation, fitting supply and logistics management. Besides above requirements, if foreign businessmen invest general automobile distributor, they should also accord with relevant rules of investment management of foreign businessmen. Article 9 Automobile brand distributor should meet with following requirements: 1. Have the qualification of enterprise's legal personality; 2. Have obtained the rights of selling automobile brand of automobile supplier; 3. The used name, identification and trade mark should be as the same as the ones authorized by automobile supplier; 4. Have the places, facilities and professionals that correspond with business scope and scale; 5. Newly opened shop should accord with relevant regulations of the development of the city where it is and the commercial development of the city. Besides above requirements, if foreign businessmen invest in general automobile distributor, they should also accord with relevant provisions of investment management of foreign businessmen. Article 10 The application for setting up general automobile distributor and brand distributor should be handled in accordance with following procedures: 1. The applicant for general automobile distributor should submit relevant materials that accord with the provisions of Article 8 to the industrial and commercial administration of the State Council for the record; 2. Automobile supplier should submit relevant materials of the applicant for automobile brand distributor that meet with the requirements of Article 9 to 2/6 industrial and commercial administration of the State Council for record; 3. The applicant for establishing general automobile distributor or brand distributor invested by foreign businessmen should submit relevant materials that accord separately with article 8 or 9 and related regulations of foreign investment management to the provincial competent commercial administration where the general automobile distributor or brand distributor plan to establish. The provincial competent commercial administration should submit all the materials after preliminary examination to the competent commercial administration of the State Council within one month at the receipt of them. If the Chinese part of the joint venture has the groups specifically designated in the state plan, it may submit the application materials directly to the competent commercial administration of the State Council. The competent commercial administration should make a decision together with industrial and commercial administration of the State Council whether the application is approved or not within three months at the receipt of it. To the application that has been approved, the Approval Certificate of Foreign-Investment Enterprise should be issued or changed for the applicant. Otherwise, reasons should be given. If any foreign businessman merges general automobile distributor, brand distributor and the established foreign-investment enterprise broadens the business scope of automobile brand marketing, it should handle it in accordance with the preceding paragraph. Article 11 The competent commercial administration or industrial and commercial administration of the State Council may entrust Automobile Trade Association to organize the Expert Committee to assess qualifications of the applicant that apply for establishing general automobile distributor or brand distributor. The comments of the assessment should serve as the reference for the approval and the putting on record. Article 12 The industrial and commercial administration of the State Council should put relevant proofs on record after receipt and examination of them if they accord with the requirements. Article 13 The applicant for general automobile distributor or brand distributor should go to the local industrial and commercial administration to go through registration formalities by the record documents or Approval Certificate of Foreign Invested Enterprise. The industrial and commercial administration should check ad ratify the business scope of the general automobile distributor or brand distributor as "brand automobile marketing". Article 14 General automobile distributor or brand distributor involving in brand changes should go through the change registration formalities according to the procedures of Article 10 or 13. Article 15 Automobile brand distributor should obtain the authorization entrusted by automobile supplier for linkage business and handle it in accordance with the procedures of Article 13. General automobile distributor and brand distributor who establish non legal person's branch that is engaged in automobile brand marketing should go through registration formalities in local industrial and commercial administration by the written materials that the automobile supplies agree it to establish the branch. A foreign invested general automobile distributor or brand distributor that will establish non legal person's branch should go through the formalities in accordance with the procedures of Article 10. Article 16 If the same external investor is engaged in the automobile brand marketing within the territory of China and opens shops more than 30 accumulatively before December 11, 2006, the proportion of investment can't 3/6 exceed 49%. Chapter III Automobile supplier's Code of Conduct Article 17 Automobile supplier should provide authorized automobile brand distributor with automobile resources and automobile enterprise's own service mark, and implement network plan. Article 18 The automobile supplier should strengthen the management of brand sales and service network, regulate sale and after-sale service, and announce to the society in time the name list of authorized and cancelled automobile brand marketing and service enterprises. It should not provide automobile resources to the enterprise that has not been authorized by automobile distributor or does not meet with the requirements of the business. Article 19 The automobile supplier should provide quality assurance and make the service promise to the consumers, publish in time to the society the types that stop production, and take positive measures to ensure the supply of the fittings within proper time limit. The automobile supplier should not supply and sell the automobile that does not accord with national technical standard of automobile safety and is not listed in the Announcement of Production Enterprises and the Products of Road Automobile. Article 20 Automobile supplier should make reasonable overall arrangement of automobile brand sales and service sites. The distance between the site of automobile brand marketing and the site of the supply of its complete set of the fittings and after-sale service network should not exceed 150 kilometers. Article 21 Automobile supplier should sign the authorization business contract with automobile brand distributors. Authorization business contract should be fair, just and should not have discriminative provisions to automobile brand distributor. Article 22 Automobile supplier should not sell automobiles directly to the consumers within the sale area authorized by automobile brand distributor unless there are other agreements in the authorization contract. Article 23 The automobile supplier should offer corresponding business training of marketing, propaganda, after-sale service, technical service and necessary technical support according to the service functions of automobile brand distributor. Article 24 The automobile supplier should not intervene automobile brand distributor's construction, equipment purchase and business activities beyond the authorization contract, should not stipulate distributing quantity and brand package sale by force. Chapter IV Automobile Brand Distributor's Code of Conduct Article 25 Automobile brand distributor should be engaged in the activities of automobile brand sale, after-sale service, fitting supplying etc. within the scope authorized by automobile supplier. Article 26 Automobile brand distributor should strictly observe the authorization management contract with the automobile supplier, use the service mark of automobile production enterprise provided by automobile supplier, safeguard the images of the enterprise and brand of automobile supplier, improve marketing and service level relating to the automobiles brand. Article 27 Automobile brand distributor must place the shop's name, identification 4/6 and trade mark authorized by automobile supplier on a conspicuous position, and must not do the business about un-authorized automobile brand in any form. Article 28 Automobile brand distributor should not sell the authorized brand automobile directly to the final consumers unless the authorized automobile supplier allows it to do so; Article 29 Automobile brand distributor should show clearly to the consumers the quality assurance of the automobile and after sale service in its business place, provide corresponding after-sale service in accordance with the agreement and the requirements of the service standard of business contract authorized by automobile supplier. Article 30 Automobile brand distributor should show clearly the price and the standard of collecting fees of the brand automobile it deals with in the business place, observe the laws and regulations of the price and mark the price clearly. Article 31 Automobile brand distributor must not sell the automobile that does not accord with national safety technical standard of motor vehicle, the automobile that is not listed in the Announcement of the Production Enterprises and the Products of the Road Automobile. Article 32 The automobile brand distributor should set up information management system of marketing and files of the consumers, reflecting in time the marketing trends, user's demand and other relevant information in this area Chapter V Supervision Management Article 33 A domestic automobile production enterprise that transfers the rights and interests of selling link to other bodies of legal persons should report to the Ministry of Commerce for approval in accordance with the provisions, and it should also report to the original project approval authority for the examination and approval. Article 34 File on record rules of general automobile distributor or brand distributor shall be established. The general automobile distributor that meet with the requirements of the establishment and has obtained business license should be put on record to the competent commercial administration of the State Council within 2 months from the day of obtaining business license. The automobile brand distributor that meet with the requirement of the establishment and has obtained business license should be put on record to the provincial competent commercial administration where it locates within 2 months from the day of obtaining business license. The provincial competent commercial administration should report the record information of automobile brand regularly to the competent commercial department of the State Council. Article 35 Automobile supplier should report the shop's name, identification and trade mark used by authorized automobile brand distributor to the competent commercial administration and industrial and commercial administration of the State Council for the record. The name in Chinese used by import automobile brand should accord with the one that is put on record by national quality and technical supervision administration. Article 36 Before October 1, 2005, automobile supplier should make confirmation to the automobile marketing enterprises established before the implementation of these measures, and report the name list of confirmed general automobile distributors, brand distributors and brand authorization, enterprise registration and etc. to the competent commercial administration and industrial and commercial administration of the State Council for record. The confirmed general automobile distributor and brand distributor should go through change formalities in local industrial and commercial administration. The industrial and commercial 5/6 administration should verify their business scope as "brand automobile marketing". Unconfirmed automobile marketing enterprises that apply for automobile brand marketing should go through the formalities in accordance with the procedures of Article 10 and 13 of these Measures. Article 37 Whoever violates the provisions of Article 18 and 28 should be instructed by industrial and commercial administration to correct and stop the verification of brand marketing sites newly established by automobile supplier. To those violating other provisions of these measures, the industrial and commercial administration should check and deal with it in accordance with relevant laws and regulations Article 38 The industrial and commercial administration of the State Council should handle and publish to the society in time the name list of general automobile distributors and brand distributors in accordance with the provisions of Article 10, 13 and 36 of these measures. Article 39 The competent commercial administration and industrial and commercial administration should take effective measures, strengthen the supervision management of automobile marketing and automobile market within the scope of their own functions and responsibilities, investigate and deal with illegal business activities in accordance with laws, safeguarding the order of the market, protect the lawful rights and interests of the consumers, automobile suppliers and brand distributors. Article 40 The industrial and commercial administration of the State Council should establish credit files of automobile suppliers and brand distributors and publish in time the name list of the enterprises that violate the regulations together with the competent commercial administration. Article 41 The Automobile Trade Association should make trade norm, strengthen the guidance and supervision, and do well in trade self discipline. Article 42 The competent commercial administration of the State Council should strengthen the supervision and management of the assessment of the expert committee organized by Automobile Trade Association, investigate and deal with the illegal activities in the assessment of the expert committee. Chapter VI Supplementary Provisions Article 43 These measures apply to passenger cars as of the implementation of them and apply to all automobiles except for special-purpose vehicles as of December 1, 2006. Article 44 The "automobile", "passenger car" and "special-purpose vehicle" in term of these measures" refer to the automobiles defined in Technical Terms and Definition of the Types of Automobiles and Trailers (GB/T 3730.1－2001) of national standard of the People's Republic of China. Article 45 The composition of the expert committee organized by Automobile Trade Association and the implementation measures of qualification assessment of general automobile distributor and brand distributor are made by automobile trade association and come into effect after the approval of the competent commercial administration of the State Council. Article 46 These measures will go into effect on April 1, 2005. 6/6 |
Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/EnterpriseIncomeTax/GeneralProvisions/P020060620339892961282.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/qysds/ybxgd/P020060619679703120598.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Order of the President of the People's Republic of China No.45 "Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises" is adopted at the Fourth Session of the Seventh National People's congress on April 9, 1991, and is promulgated.This law will be effective as of July 1, 1991. President of the People's Republic of China: Yang Shangkun April 9,1999 Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises Article 1 Income tax shall be paid in accordance with the provisions of this Law by enterprises with foreign investment within the territory of the People's Republic of China on their income derived from production, business operations and other sources. Income tax shall be paid in accordance with the provisions of this Law by foreign enterprises on their income derived from production, business operations and other sources within the territory of the People's Republic of China. Article 2 "Enterprises with foreign investment" referred to in this Law mean Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and foreign-capital enterprises that are established in China. "Foreign enterprises" referred to in this Law mean foreign companies, enterprises and other economic organizations which have establishments or places in China and engage in production or business operations, and which, though without establishments or places in China, have income from sources within China. Article 3 Any enterprise with foreign investment which establishes its head office in China shall pay its income tax on its income derived from sources inside and outside China. Any foreign enterprise shall pay its income tax on its income derived from sources within China. Article 4 The taxable income of an enterprise with foreign investment and an establishment or a place set up in China to engage in production or business operations by a foreign enterprise, shall be the amount remaining from its gross income in a tax year after the costs, expenses and losses have been deducted. Article 5 The income tax on enterprises with foreign investment and the income tax which shall be paid by foreign enterprises on the income of their establishments or places set up in China to engage in production or business operations shall be computed on the taxable income at the rate of thirty percent, and local income tax shall be computed on the taxable income at the rate of three percent. Article 6 The State shall, in accordance with the industrial policies, guide the orientation of foreign investment and encourage the establishment of enterprises with foreign investment which adopt advanced technology and equipment and export all or greater part of their products. Article 7 The income tax on enterprises with foreign investment established in Special Economic Zones, foreign enterprises which have establishments or places in Special Economic Zones engaged in production or business operations, and on enterprises with foreign investment of a production nature in Economic and 1/6 Technological Development Zones, shall be levied at the reduced rate of fifteen percent. The income tax on enterprises with foreign investment of a production nature established in coastal economic open zones or in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located, shall be levied at the reduced rate of twenty-four percent. The income tax on enterprises with foreign investment in coastal economic open zones, in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located or in other regions defined by the State Council, within the scope of energy, communications, harbour, wharf or other projects encouraged by the State, may be levied at the reduced rate of fifteen percent. The specific measures shall be drawn up by the State Council. Article 8 Any enterprise with foreign investment of a production nature scheduled to operate for a period of not less than ten years shall, from the year beginning to make profit, be exempted from income tax in the first and second years and allowed a fifty percent reduction in the third to fifth years. However, the exemption from or reduction of income tax on enterprises with foreign investment engaged in the exploitation of resources such as petroleum, natural gas, rare metals, and precious metals shall be regulated separately by the State Council. Enterprises with foreign investment which have actually operated for a period of less than ten years shall repay the amount of income tax exempted or reduced already. The relevant regulations, promulgated by the State Council before the entry into force of this Law, which provide preferential treatment of exemption from or reduction of income tax on enterprises engaged in energy, communications, harbour, wharf and other major projects of a production nature for a period longer than that specified in the preceding paragraph, or which provide preferential treatment of exemption from or reduction of income tax on enterprises engaged in major projects of a nonproduction nature, shall remain applicable after this Law enters into force. Any enterprise with foreign investment which is engaged in agriculture, forestry or animal husbandry and any other enterprise with foreign investment which is established in remote underdeveloped areas may, upon approval by the competent department for tax affairs under the State Council of an application filed by the enterprise, be allowed a fifteen to thirty percent reduction of the amount of income tax payable for a period of another ten years following the expiration of the period for tax exemption or reduction as provided for in the preceding two paragraphs. After this Law enters into force, any modification to the provisions of the preceding three paragraphs of this Article on the exemption from or reduction of income tax on enterprises shall be submitted by the State Council to the Standing Committee of the National People's Congress for decision. Article 9 The exemption from or reduction of local income tax on any enterprise with foreign investment which operates in an industry or undertakes a project encouraged by the State shall, in accordance with the actual situation, be at the discretion of the people's government of the relevant province, autonomous region or municipality directly under the Central Government. Article 10 Any foreign investor of an enterprise with foreign investment which reinvests its share of profit obtained from the enterprise directly into that enterprise by increasing its registered capital, or uses the profit as capital investment to establish other enterprises with foreign investment to operate for 2/6 a period of not less than five years shall, upon approval by the tax authorities of an application filed by the investor, be refunded forty percent of the income tax already paid on the reinvested amount. Where regulations of the State Council provide otherwise in respect of preferential treatment, such provisions shall apply. If the investor withdraws its reinvestment before the expiration of a period of five years, it shall repay the refunded tax. Article 11 Losses incurred in a tax year by any enterprise with foreign investment and by an establishment or a place set up in China by a foreign enterprise to engage in production or business operations may be made up by the income of the following tax year. Should the income of the following tax year be insufficient to make up for the said losses, the balance may be made up by its income of the further subsequent year, and so on, over a period not exceeding five years. Article 12 Any enterprise with foreign investment shall be allowed, when filing a consolidated income tax return, to deduct from the amount of tax payable the foreign income tax already paid abroad in respect of the income derived from sources outside China. The deductible amount shall, however, not exceed the amount of income tax otherwise payable under this Law in respect of the income derived from sources outside China. Article 13 The payment or receipt of charges or fees in business transactions between an enterprise with foreign investment or an establishment or a place set up in China by a foreign enterprise to engage in production or business operations, and its associated enterprises, shall be made in the same manner as the payment or receipt of charges or fees in business transactions between independent enterprises. Where the payment or receipt of charges or fees is not made in the same manner as in business transactions between independent enterprises and results in a reduction of the taxable income, the tax authorities shall have the right to make reasonable adjustment. Article 14 Where an enterprise with foreign investment or an establishment or a place set up in China by a foreign enterprise to engage in production or business operations is established, moves to a new site, merges with another enterprise, breaks up, winds up or makes a change in any of the main entries of registration, it shall present the relevant documents to and go through tax registration or a change or cancellation in registration with the local tax authorities after the relevant event is registered, or a change or cancellation in registration is made with the administrative agency for industry and commerce. Article 15 Income tax on enterprises and local income tax shall be computed on an annual basis and paid in advance in quarterly instalments. Such payments shall be made within fifteen days from the end of each quarter and the final settlement shall be made within five months from the end of each tax year. Any excess payment shall be refunded and any deficiency shall be repaid. Article 16 Any enterprise with foreign investment and any establishment or place set up in China by a foreign enterprise to engage in production or business operations shall file its quarterly provisional income tax return in respect of advance payments with the local tax authorities within the period for each advance payment of tax, and it shall file an annual income tax return together with the final accounting statements within four months from the end of the tax year. Article 17 Any enterprise with foreign investment and any establishment or place set up in China by a foreign enterprise to engage in production or business operations shall report its financial and accounting systems to the local tax authorities for reference. All accounting records must be complete and accurate, with legitimate vouchers as the basis for entries. If the financial and accounting bases adopted by an enterprise with foreign 3/6 investment and an establishment or a place set up in China by a foreign enterprise to engage in production or business operations contradict the relevant regulations on tax of the State Council, tax payment shall be computed in accordance with the relevant regulations on tax of the State Council. Article 18 When any enterprise with foreign investment goes into liquidation, and if the balance of its net assets or the balance of its remaining property after deduction of the enterprise's undistributed profit, various funds and liquidation expenses exceeds the enterprise's paidin capital, the excess portion shall be liquidation income on which income tax shall be paid in accordance with the provisions of this Law. Article 19 Any foreign enterprise which has no establishment or place in China but derives profit, interest, rental, royalty and other income from sources in China, or though it has an establishment or a place in China, the said income is not effectively connected with such establishment or place, shall pay an income tax of twenty percent on such income. For the payment of income tax in accordance with the provisions of the preceding paragraph, the income beneficiary shall be the taxpayer and the payer shall be the withholding agent. The tax shall be withheld from the amount of each payment by the payer. The withholding agent shall, within five days, turn the amount of taxes withheld on each payment over to the State Treasury and submit a withholding income tax return to the local tax authorities. Income tax shall be exempted or reduced on the following income: (1) the profit derived by a foreign investor from an enterprise with foreign investment shall be exempted from income tax; (2) income from interest on loans made to the Chinese government or Chinese State banks by international financial organizations shall be exempted from income tax; (3) income from interest on loans made at a preferential interest rate to Chinese State banks by foreign banks shall be exempted from income tax; and (4) income tax of the royalty received for the supply of technical know-how in scientific research, exploitation of energy resources, development of the communications industries, agricultural, forestry and animal husbandry production, and the development of important technologies may, upon approval by the competent department for tax affairs under the State Council, be levied at the reduced rate of ten percent. Where the technology supplied is advanced or the terms are preferential, exemption from income tax may be allowed. Apart from the aforesaid provisions of this Article, if preferential treatment in respect of reduction of or exemption from income tax on profit, interest, rental, royalty and other income is required, it shall be regulated by the State Council. Article 20 The tax authorities shall have the right to inspect the financial, accounting and tax affairs of enterprises with foreign investment and establishments or places set up in China by foreign enterprises to engage in production or business operations, and have the right to inspect tax withholding of the withholding agent and its payment of the withheld tax into the State Treasury. The entities and the withholding agents being so inspected must report the facts and provide relevant information. They may not refuse to report or conceal any facts. When making an inspection, the tax officials shall produce their identity documents and be responsible for confidentiality. Article 21 Income tax payable according to this Law shall be computed in terms of Renminbi (RMB). Income in foreign currency shall be converted into Renminbi according to the exchange rate quoted by the State exchange control authorities 4/6 for purposes of tax payment. Article 22 If any taxpayer fails to pay tax within the prescribed time limit, or if the withholding agent fails to turn over the tax withheld within the prescribed time limit, the tax authorities shall, in addition to setting a new time limit for tax payment, impose a surcharge for overdue payment, equal to 0.2 percent of the overdue tax for each day in arrears, starting from the first day the payment becomes overdue. Article 23 The tax authorities shall set a new time limit for registration or submission of documents and may impose a fine of five thousand yuan or less on any taxpayer or withholding agent which fails to go through tax registration or make a change or cancellation in registration with the tax authorities within the prescribed time limit, or fails to submit income tax return, final accounting statements or withholding income tax return to the tax authorities within the prescribed time limit, or fails to report its financial and accounting systems to the tax authorities for reference. Where the tax authorities have set a new time limit for registration or submission of documents, they shall impose a fine of ten thousand yuan or less on the taxpayer or withholding agent which again fails to meet the time limit for going through registration or making a change in registration with the tax authorities, or for submitting income tax return, final accounting statements or withholding income tax return to the tax authorities. Where the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility by applying mutatis mutandis the provisions of Article 121 of the Criminal Law. Article 24 Where the withholding agent fails to fulfil its obligation to withhold tax as provided in this Law, and does not withhold or withholds an amount less than that should have been withheld, the tax authorities shall set a time limit for the payment of the amount of tax that should have been withheld, and may impose a fine up to but not exceeding one hundred percent of the amount of tax that should have been withheld. Where the withholding agent fails to turn the tax withheld over to the State Treasury within the prescribed time limit, the tax authorities shall set a time limit for turning over the taxes and may impose a fine of five thousand yuan or less on the withholding agent; if the withholding agent fails to meet the time limit again, the tax authorities shall pursue the taxes according to law and may impose a fine of ten thousand yuan or less on the withholding agent. If the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility by applying mutatis mutandis the provisions of Article 121 of the Criminal Law. Article 25 Where any person evades tax by deception or concealment or fails to pay tax within the time limit prescribed by this Law and, after the tax authorities pursued the payment of tax, fails again to pay it within the prescribed time limit, the tax authorities shall, in addition to recovering the tax which should have been paid, impose a fine up to but not exceeding five hundred percent of the amount of tax which should have been paid. Where the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility in accordance with the provisions of Article 121 of the Criminal Law. Article 26 Any enterprise with foreign investment, foreign enterprise or withholding agent, in case of a dispute with the tax authorities on payment of tax, must pay tax according to the relevant regulations first. Thereafter, the taxpayer or withholding agent may, within sixty days from the date of receipt of the tax payment certificate issued by the tax authorities, apply to the tax 5/6 authorities at the next higher level for reconsideration. The higher tax authorities shall make a decision within sixty days after receipt of the application for reconsideration. If the taxpayer or withholding agent is not satisfied with the decision, it may institute legal proceedings in the people's court within fifteen days from the date of receipt of the notification on decision made after reconsideration. If the party concerned is not satisfied with the decision on punishment by the tax authorities, it may, within fifteen days from the date of receipt of the notification on punishment, apply for reconsideration to the tax authorities at the next higher level than that which made the decision on punishment. Where the party is not satisfied with the decision made after reconsideration, it may institute legal proceedings in the people's court within fifteen days from the date of receipt of the decision made after reconsideration. The party concerned may, however, directly institute legal proceedings in the people's court within fifteen days from the date of receipt of the notification on punishment. If the party concerned neither applies for reconsideration to the higher tax authorities, nor institutes legal proceedings in the people's court within the time limit, nor complies with the decision on punishment, the tax authorities which made the decision on punishment may apply to the people's court for compulsory execution. Article 27 Where any enterprise with foreign investment which was established before the promulgation of this Law would, in accordance with the provisions of this Law, otherwise be subject to higher tax rates or enjoy less preferential treatment of tax exemption or reduction than before the entry into force of this Law, in respect to such enterprise, within its approved period of operation, the law and relevant regulations of the State Council in effect before the entry into force of this Law shall apply. If any such enterprise has no approved period of operation, the law and relevant regulations of the State Council in effect before the entry into force of this Law shall apply within the period prescribed by the State Council. Specific measures shall be drawn up by the State Council. Article 28 Where the provisions of a tax agreement concluded between the government of the People's Republic of China and a foreign government are different from the provisions of this Law, the provisions of the agreement shall prevail. Article 29 Rules for implementation shall be formulated by the State Council in accordance with this Law. Article 30 This Law shall enter into force on July 1, 1991. The Income Tax Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures and the Income Tax Law of the People's Republic of China on Foreign Enterprises shall be annulled as of the same date. 6/6 |
Provisions on the Encouragement of Foreign Investment (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/GeneralLawsandRegulations/AdministrativeRegulations/P020060620321670620345.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/zh/xzfg/P020060619553421710392.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Provisions of the State Council on the Encouragement of Foreign Investment GuoFa [1986] No.95 October 11,1986 Article 1 These Provisions are formulated to improve the investment environment, to better facilitate the absorption of foreign investment, to introduce advanced technology, to improve product quality, to expand in order to generate foreign exchange and to develop the national economy. Article 2 The State encourages foreign companies, enterprises and other economic entities or individuals (hereinafter referred to as "Foreign Investors") to establish Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and foreign-capital enterprises (hereinafter referred to as "Enterprises with Foreign Investment") within the territory of China. The State grants special preferences to the enterprises with foreign investment listed below: (1) Production-type enterprises whose products are mainly export, which have a foreign exchange surplus after deducting from their total annual foreign exchange revenues the annual foreign expenditures incurred in production and operation and the foreign exchange needed for the remittance abroad of the profits earned by foreign investors (hereinafter referred to as" Products Export Enterprises") (2) Production-type enterprises possessing advanced technology supplied by foreign investors which are engaged in developing new products, and upgrading and replacing products in order to increase foreign exchange generated by exports or for import substitution (hereinafter referred to as "Technologically Advanced Enterprises"). Article 3 Products Export Enterprises and Technologically Advanced Enterprises shall be exempt from payment to the State of all subsidies to staff and workers, except for the payment or allocation of funds for labor insurance, welfare expenses and housing subsidies for Chinese staff and workers in accordance with the provisions of the State. Article 4 The site use fees for Products Export Enterprises and Technologically Advanced Enterprises, except for those located in busy urban sectors of large cities, shall be computed and charged according to the following standards: (1) Five to twenty RMB yuan per square meter per year in areas where the development fee and the site use fee are computed and charged together; (2) Not more than three RMB yuan per square meter per year in site areas where the development fee is computed and charged on a one-time basis or areas which are developed by above-mentioned enterprises themselves. Exemptions for specified periods of time from the fees provided in the foregoing provision may be granted at the discretion of local people's governments. Article 5 Products Export Enterprises and technologically Advanced Enterprises shall be given priority in obtaining water, electricity and transportation services and communication facilities needed for their production and operation. These fees shall be computed and charged in accordance with the standards for local enterprises. Article 6 Products Export Enterprises and Technologically Advanced Enterprises, after examination by the Bank of China, shall be given priority in receiving loans for short-term working funds needed for production and distribution, as well as for other needed credit. Article 7 When Foreign Investors in Products Export Enterprises and 1/3 Technologically Advanced Enterprises remit abroad profits distributed to them by such enterprises, the amount remitted shall be exempt from income tax. Article 8 After the expiration of the period for the reduction or exemption of enterprise income tax in accordance with the provisions of the State, Products Export Enterprises whose value of export products in that year amounts to 70% or more of the value of their products for that year, may pay enterprise income tax at one-half the rate of the present tax. Products Export Enterprises in the special economic zones and in the economic and technological development zones and other Products Export Enterprises that have already paid enterprise income tax at a tax rate of 15% and that comply with the foregoing conditions, shall pay enterprise income tax at a rate of 10%. Article 9 After the expiration of the period of reduction or exemption of enterprise income tax in accordance with the provisions of the State, Technologically Advanced Enterprises may extend for three years the payment of enterprise income tax at a rate reduced by one half. Article 10 Foreign investors who reinvest the profits distributed to them by their enterprises in order to establish or expand Products Export Enterprises or Technologically Advanced Enterprises for a period of operation of not less than five years, after application to and approval by the tax authorities, shall be refunded the total amount of enterprise income tax already paid on the reinvested portion. If the investment is withdrawn before the period of operation reaches five years, the amount of enterprise income tax refunded shall be repaid. Article 11 Export products of enterprises with foreign investment, except crude oil, oil products and other products subject to special State provisions, shall be exempt from the consolidated industrial and commercial tax. Article 12 Enterprises with foreign investment may arrange the export of their products by themselves or may also export by consignment to agents in accordance with the State provisions. For products that require export licences, an application for export licences may be made every six months in accordance with the annual export plan of the enterprise. Article 13 Machinery and equipment, vehicles used in production, raw materials, fuel, bulk parts, spare parts and components, machine component parts and fittings (including imports restricted by the State), which enterprises with foreign investment need to import in order to carry out their export contracts, are not required to apply for examination and approval and are exempt from the requirement for import licenses. The Customs shall exercise supervision and control, and shall inspect and release such imports on the strength of the enterprise contract or the import and export contract. The imported materials and items mentioned above are restricted to be used by the enterprise itself only and may not be sold on the domestic market. If they are used in products to be sold domestically, then they are required to go through the import procedures retroactively in accordance with the provisions and the taxes shall be made up according to the governing stipulations. Article 14 Under the supervision of the foreign exchange control departments, enterprises with foreign investment may mutually adjust their foreign exchange surpluses and deficiencies among themselves. The Bank of China and other banks designated by the People's Bank of China may provide cash security services and may grant loans in Renminbi to Enterprises with Foreign Investment. Article 15 The people's governments at all levels and relevant departments in charge shall guarantee the autonomy of Enterprises with Foreign Investment and shall support enterprises with foreign investment in managing their enterprises in accordance with international advanced scientific methods. Within the scope of their approved contracts, enterprises with foreign investment have the right by 2/3 themselves to determine production and operation plans, to raise funds, to use funds, to determine by themselves the wage levels, the forms of wages and bonuses and the allowance system. Enterprises with foreign investment may, in accordance with their production and operation requirements, determine by themselves their organizational structure and personnel system, employ or dismiss senior management personnel, increase or dismiss staff and workers. They may recruit and employ technical personnel, managerial personnel and workers in their locality. The unit to which such employed personnel belong shall provide its support and shall permit their transfer. Staff and workers who violate the rules and regulations, and thereby cause certain bad consequences may, in accordance with the seriousness of the case, be given differing sanctions, up to that of discharge. Enterprises with foreign investment that recruit, employ, dismiss or discharge staff and workers, shall file a report with the local labor and personnel department. Article 16 All districts and departments must implement the "Circular of the State Council Concerning Firmly Curbing the Indiscriminate Levy of Charges on Enterprises". The people's governments at the provincial level shall formulate specific methods and strengthen supervision and administration. Enterprises with Foreign Investment that encounter unreasonable charges may refuse to pay and may also appeal to the local economic committees up to the State Economic Commission. Article 17 The people's governments at all levels and relevant departments in charge shall strengthen the coordination of their work, improve efficiency in handling matters and shall promptly examine and approve matters reported by enterprises with foreign investment that require response and resolution. The agreement, contract and articles of association of an Enterprise with Foreign Investment shall be examined and approved by the departments in charge under the State Council. The examination and approval authority must, within three months from the date of receipt of all the documents, decide to approve or not to approve. Article 18 Products Export Enterprises and Technologically Advanced Enterprises mentioned in these Provisions shall be confirmed jointly as such by the foreign economic relations and trade departments where such enterprises are located and the relevant departments in accordance with the enterprise contract, and certification shall be issued. If the actual results of the annual exports of a products export enterprise are unable to realize the goal of surplus in the foreign exchange balance that is stipulated in the enterprise contract, the taxes and fees which have already been reduced or exempted in the previous year shall be made up in the following year. Article 19 Except where these Provisions expressly provide that they are to be applicable to Products Export Enterprises or Technologically Advanced Enterprises, other articles shall be applicable to all Enterprises with Foreign Investment. These Provisions apply from the date of implementation to all those Enterprises with Foreign Investment that have obtained approval for establishment before the date of the implementation of these Provisions and conform to the preferential terms of these Provisions. Article 20 For enterprises invested in and established by companies, enterprises and other economic organizations or individuals from Hongkong. Macao, or Taiwan, matters shall be handled by reference to these Provisions. Article 21 The Ministry of Foreign Economic Relations and Trade shall be responsible for interpreting these Provisions. Article 22 These Provisions shall enter into force as of the date of promulgation. 3/3 |
Rules for the Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises (Chinese and English Text)
February 7, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/EnterpriseIncomeTax/GeneralProvisions/P020060620339813439990.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/qysds/ybxgd/P020060619679764371353.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Rules for the Implementation of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises Decree [1991] No.85 of the State Council June 30, 1991 Chapter I General Provisions Article 1 These Rules are formulated in accordance with the provisions of Article 29 of the Income Tax Law of the People's Republic of China on Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as the "Tax Law"). Article 2 "Income from production and business operations" mentioned in Article 1, paragraph 1 and paragraph 2 of the Tax Law means income from production and business operations in manufacturing, mining, communications and transportation, construction and installation, agriculture, forestry, animal husbandry, fishery, water conservation, commerce, finance, service industries, exploration and exploitation, and in other trades. "Income from other sources" mentioned in Article 1, paragraph 1 and paragraph 2 of the Tax Law means profits (dividends), interest, rents, income from the transfer of property, income from the provision or transfer of patents, proprietary technology, income from trademark rights and copyrights as well as other nonbusiness income. Article 3 "Enterprises with foreign investment" mentioned in Article 2, paragraph 1 of the Tax Law and "foreign companies, enterprises and other economic organizations which have establishments or places in China and engage in production or business operations" mentioned in Article 2, paragraph 2 of the Tax Law are, unless otherwise especially specified, generally all referred to as "enterprises" in these Rules. "Establishments or places" mentioned in Article 2, paragraph 2 of the Tax Law refers to management organizations, business organizations, administrative organizations and places for factories and the exploitation of natural resources, places for contracting of construction, installation, assembly, and exploration work, places for the provision of labor services, and business agents. Article 4 "Business agents" mentioned in Article 3, paragraph 2 of these Rules means companies, enterprises and other economic organizations or individuals entrusted by foreign enterprises to engage as agents in any of the following: (1) representing principals on a regular basis in the arranging of purchases and signing of purchase contracts and the purchasing of commodities on commission; (2) entering into agency agreements or contracts with principals, storing on a regular basis products or commodities owned by principals, and delivering on behalf of principals such products or commodities to other parties; and (3) having authority to represent principals on a regular basis in signing of sales contracts or in accepting of purchase orders. Article 5 "Head office" mentioned in Article 3 of the Tax Law refers to the central organization which is established in China by an enterprise with foreign investment as a legal person pursuant to the laws of China and which is responsible for the management, operations and control over such enterprise. 1/21 Income from production and business operations and other income derived by the branches within or outside China of an enterprise with foreign investment shall be consolidated by the head office for purposes of the payment of income tax. Article 6 "Income derived from sources inside China" mentioned in Article 3 of the Tax Law refers to: (1) income from production and business operations derived by enterprises with foreign investment and foreign enterprises which have establishments or places in China, as well as profits (dividends), interest, rents, royalties and other income arising within or outside China actually connected with establishments or sites established in China by enterprises with foreign investment or foreign enterprises; (2) the following income received by foreign enterprises which have no establishments or sites in China: (a) profits (dividends) earned by enterprises in China; (b) interest derived within China such as on deposits or loans, interest on bonds, interest on payments made provisionally for others, and deferred payments; (c) rentals on property leased to and used by lessees in China; (d) royalties such as those received from the provision of patents, proprietary technology, trademarks and copyrights for use in China; (e) gains from the transfer of property, such as houses, buildings, structures and attached facilities located in China and from the assignment of land use rights within China; (f) other income derived from China and stipulated by the Ministry of Finance to be subject to tax. Article 7 In respect of Chinese-foreign contractual joint ventures that do not constitute legal persons, each partner thereto may separately compute and pay income tax in accordance with the relevant tax laws and regulations of the State; income tax may, upon approval by the local tax authorities of an application submitted by such enterprises, be computed and paid on a consolidated basis in accordance with the provisions of the Tax Law. Article 8 "Tax year" mentioned in Article 4 of the Tax Law begins on January 1 and ends on December 31 under the Gregorian Calendar. Foreign enterprises that have difficulty computing taxable income in accordance with the tax year stipulated in the Tax Law may, upon approval by the local tax authorities of an application submitted by such enterprises, use their own 12month fiscal year as the tax year. Enterprises commencing business operations in the middle of a tax year or actually operating for a period of less than 12 months in any tax year due to such factors as merger or shutdown shall use the actual period of operations as the tax year. Enterprises that undergo liquidation shall use the period of liquidation as the tax year. Article 9 "The competent authority for tax affairs under the State Council" mentioned in Article 8, paragraph 3 and Article 19, paragraph 3, subparagraph (4) of the Tax Law and Article 72 of these Rules refers to the Ministry of Finance and the State Tax Bureau. Chapter II Computation of Taxable Income Article 10 "The formula for the computation of taxable income" mentioned in Article 4 of the Tax Law is as follows: (1) Manufacturing: 2/21 (a) taxable income = (profit on sales) + (profit from other operations) + (non-business income) - (non-business expenses); (b) profit on sales = (net sales) - (cost of products sold) - (taxes on sales) - [ (selling expenses) + (administrative expenses) + (finance expenses) ]; (c) net sales = (gross sales) - [ (sales returns) + (sales discounts and allowances) ]; (d) cost of products sold = (cost of products manufactured for the period) + (inventory of finished products at the beginning of the period) - (inventory of finished products at the end of the period); (e) cost of products manufactured for the period = (manufacturing costs for the period) + (inventory of semifinished products and products in process at the beginning of the period) - (inventory of semi-finished products and products in process at the end of the period); (f) manufacturing costs for the period = (direct materials consumed in production for the period) + (direct labour) + (manufacturing expenses). (2) Commerce: (a) taxable income = (profit on sales) + (profit from other operations) + (non-business income) - (non-business expenses); (b) profit on sales = (net sales) - (cost of sales) - (taxes on sales) - [ (selling expenses) + (administrative expenses) + (finance expenses) ]; (c) net sales = (gross sales) - [ (sales returns) + (sales discounts and allowances) ]; (d) cost of sales = (inventory of merchandise at the beginning of the period) + { (purchase of merchandise during the period) - [ (purchase returns) + (purchase discounts and allowances) ] + (purchasing expenses) } - (inventory of merchandise at the end of the period). (3) Service trades: (a) taxable income = (net business income) + (non-operating income) - (nonoperating expenses); (b) net business income = (gross business income) - [ (taxes on business income) + (operating expenses) + (administrative expenses) + (finance expenses) ]. (4) Other lines of business:Computations shall be made with reference to the above formulas. Article 11 The computation of taxable income of an enterprise shall, in principle, be on an accrual basis. The following income from business operations of an enterprise may be determined by stages and used as the basis for the computation of taxable income: (1) Where products or commodities are sold by instalment payment methods, income from sales may be recognized according to the invoice date of the products or commodities to be delivered; income from sales may also be recognized according to the date of payment to be made by the buyer as agreed upon in the contract; (2) Where construction, installation and assembly projects, and provision of labour services extend beyond one year, income may be recognized according to the progress of the project or the amount of work completed; (3) Where the processing or manufacturing of heavy machinery, equipments and ships for other enterprises extends beyond one year, income may be recognized according to the progress of the project or amount of work completed. Article 12 Where Chinese-foreign contractual joint ventures operate on the basis of product sharing, the partners thereto shall be deemed to receive income at the time of the division of the products; the amount of income shall be computed according to the price sold to third party or with reference to prevailing market 3/21 prices. Where foreign enterprises are engaged in the cooperative exploration of petroleum resources, the partners thereto shall be deemed to receive income at the time of the division of the crude oil; the amount of income shall be computed according to a price which is adjusted periodically with reference to the international market prices of crude oil of similar quality. Article 13 In respect of income obtained by enterprises in the form of nonmonetary assets or rights and interests, such income shall be computed or appraised with reference to prevailing market prices. Article 14 "Exchange rate quoted by the State exchange control authorities" mentioned in Article 21 of the Tax Law refers to the buying rate quoted by the State Administration of Exchange Control. Article 15 In respect of income obtained by enterprises in foreign currency, upon payment of income tax in quarterly instalments in accordance with the provisions of Article 15 of the Tax Law, taxable income shall be computed by converting the income into Renminbi according to the exchange rate quotation on the last day of the quarter. At the time of final settlement following the end of the year, no recomputation and reconversion need be made in respect of income in a foreign currency for which tax has already been paid on a quarterly basis; only that portion of the foreign currency income of the entire year for which tax has not been paid shall, in respect of the computation of taxable income, be converted into Renminbi according to the exchange rate quotation on the last day of the tax year. Article 16 Where an enterprise is unable to provide complete and accurate certificates of costs and expenses and is unable to correctly compute taxable income, the local tax authorities shall determine the rate of profit and compute taxable income with reference to the profit level of other enterprises in the same or similar trade. Where an enterprise is unable to provide complete and accurate certificates of revenues and is unable to report income correctly, the local tax authorities shall appraise and determine taxable income by the use of such methods as cost (expense) plus reasonable profits. When the tax authorities appraise and determine profit rates or revenues in accordance with the provisions of the preceding paragraph, and where other treatment is provided by the laws, regulations and rules, such other treatment shall be applicable. Article 17 Foreign air transportation and ocean shipping enterprises engaged in international transport business shall use 5% of the gross revenues from passenger and cargo transport and shipping services arising within China as taxable income. Article 18 Where an enterprise with foreign investment invests in another enterprise within China, the profits (dividends) so obtained from the enterprise receiving such investment may be excluded from taxable income of the enterprise; however, expenses and losses incurred in such abovementioned investments shall not be deducted from taxable income of the enterprise. Article 19 Unless otherwise stipulated by the State, the following items shall not be itemized as costs, expenses or losses in the computation of taxable income: (1) expenses in connection with the acquisition or construction of fixed assets; (2) expenses in connection with the transfer or development of intangible assets; (3) interest on capital; (4) various income tax payments; (5) fines for illegal business operations and losses due to the confiscation of 4/21 property; (6) surcharges and fines for overdue payment of taxes; (7) the portion of losses due to natural disasters or accidents for which there has been compensation; (8) donations and contributions other than those used in China for public welfare or relief purposes; (9) royalties paid to the head office; (10) other expenses not related to production or business operations. Article 20 Reasonable administrative expenses paid by a foreign enterprise with an establishment or site in China to the head office in connection with production or business operations of the establishment or site shall be permitted to be itemized as expenses following agreement by the local tax authorities after an examination and verification of documents of proof issued by the head office in respect of the scope of the administrative expenses, total amounts, the basis and methods of allocation, which shall be provided together with an accompanying verification report of a certified public accountant. Administrative expenses in connection with production and business operations shall be allocated reasonably between enterprises with foreign investment and their branches. Article 21 Reasonable interest payments incurred on loans in connection with production and business operations shall be permitted to be itemized as expenses following agreement by the local tax authorities after an examination and verification of documents of proof, which shall be provided by the enterprises in respect of the loans and interest payments. Interest paid on loans used by enterprises for the purchase or construction of fixed assets or the transfer or development of intangible assets prior to the assets being put into use shall be included in the original value of the assets. "Reasonable interest" mentioned in the first paragraph of this Article refers to interest computed at a rate not higher than normal commercial lending rates. Article 22 Entertainment expenses incurred by enterprises in connection with production and business operations shall, when supported by authentic records or invoices and vouchers, be permitted to be itemized as expenses subject to the following limits: (1) Where annual net sales are 15 million yuan (RMB) or less, not to exceed 0.5% of net sales; for that portion of annual net sales that exceeds 15 million yuan (RMB), not to exceed 0.3% of that portion of net sales. (2) Where annual gross business income is 5 million yuan (RMB) or less, not to exceed 1% of annual gross business income; for that portion of annual gross business income that exceeds 5 million yuan (RMB), not to exceed 0.5% of that portion of annual gross business income. Article 23 Exchange gains or losses incurred by enterprises during preconstruction or during production and business operations shall, except as otherwise provided by the State, be appropriately itemized as gains or losses for that respective period. Article 24 Salaries and wages, and benefits and allowances paid by enterprises to employees shall be permitted to be itemized as expenses following agreement by the local tax authorities after an examination and verification of the submission of wage scales and supporting documents and relevant materials. Foreign social security premiums paid by enterprises to employees working in China shall not be itemized as expenses. Article 25 Enterprises engaged in such businesses as credit and leasing operations may, on the basis of actual requirements and following approval by the local tax authorities of a report thereon, provide year-by-year bad debt provisions, the 5/21 amount of which shall not exceed 3% of the amount of the year-end loan balances (not including inter-bank loans) or the amount of accounts receivable, bills receivable and other such receivables, to be deducted from taxable income of that year. The portion of the actual bad debt losses incurred by an enterprise which exceeds the bad debt provisions of the preceding year may be itemized as a loss in the current year; the portion less than the bad debt provisions of the previous year shall be included in taxable income of the current year. Bad debt losses mentioned in the preceding paragraph shall be subject to approval after examination and verification by the local tax authorities. Article 26 "Bad debt losses" mentioned in Article 25, paragraph 2 of these Rules refers to the following accounts receivable: (1) due to the bankruptcy of the debtor, collection is still not possible after the use of the bankruptcy assets for settlement; (2) due to the death of the debtor, collection is still not possible after the use of the estate for repayment; (3) due to the failure of the debtor to fulfil repayment obligations for over two years, collection is still not possible. Article 27 Accounts receivable already itemized as bad debt losses which are recovered in full or in part by an enterprise in a subsequent year shall be included in taxable income of the year of recovery. Article 28 Foreign enterprises with establishments or places in China may, except as otherwise provided by the State, deduct as expenses foreign income tax, which has been paid on profits (dividends), interest, rents, royalties and other income received from outside China and actually connected with such establishments or places. Article 29 "Net assets or remaining property" mentioned in Article 18 of the Tax Law means the amount of all assets or property following deduction of various liabilities and losses upon the liquidation of an enterprise. Chapter III Tax Treatment for Assets Article 30 "Fixed assets of enterprises" means houses, buildings and structures, machinery, mechanical apparatus, means of transport and other such equipment, appliances and tools related to production and business operations with a useful life of one year or more. Items not in the nature of major equipment which are used for production or business operations and which have a unit value of 2000 yuan (RMB) or less, or with a useful life of two years or less may be itemized as expenses on the basis of actual consumption. Article 31 The valuation of fixed assets shall be based on original cost. The original cost of purchased fixed assets shall be the purchase price plus transportation expenses, installation expenses and other related expenses incurred prior to the use of the assets. The original cost of fixed assets manufactured or constructed by an enterprise itself shall be the actual expenses incurred in their manufacture or construction. The original cost of fixed assets treated as investments shall, giving consideration to the degree of wear and tear of the fixed assets, be such reasonable price as is specified in the contract, or a price appraised with reference to the relevant market price plus the relevant expenses incurred prior to the use thereof. Article 32 Depreciation of fixed assets of an enterprise shall be computed commencing with the month following the month in which they are first put into 6/21 use. The computation of depreciation shall cease in the month following the month in which the fixed assets cease to be used. All investments made during the development stage by enterprises engaged in the exploitation of oil resources shall, taking the oil (gas) field as a unit, be aggregated and treated as capital expenditures; the computation of depreciation shall begin in the month following the month in which the oil (gas) field commences commercial production. Article 33 In respect of the computation of depreciation of fixed assets, the salvage value shall first be estimated and deducted from the original cost of the assets. The salvage value shall not be less than 10% of the original value; any request for retaining a lower salvage value or not salvage value must be approved by the local tax authorities. Article 34 Depreciation of fixed assets shall be computed using the straight-line method. Where it is necessary to use any other method of depreciation, an application may be filed by an enterprise which, following examination and verification by the local tax authorities, shall be reported level-by-level to the State Tax Bureau for approval. Article 35 The computation of the minimum useful life in respect of the depreciation of fixed assets is as follows: (1) for houses and buildings: 20 years; (2) for railway rolling stock, ships, machinery, mechanical apparatus, and other production equipment: 10 years; (3) for electronic equipment and means of transport other than railway rolling stock and ships, as well as as such fixtures, tools and furnishings related to production and business operations: 5 years. Article 36 Depreciation of fixed assets in the nature of investments during the development stage and subsequent stages of an enterprise engaged in the exploitation of oil resources may be computed on a consolidated basis without retaining salvage value; the period of depreciation shall not be less than six years. Article 37 "Houses and buildings" mentioned in Article 35, subparagraph (1) of these Rules means houses, buildings and attached structures used for production and business operations, and living quarters and welfare facilities for employees, the scope of which is as follows: -- houses, including factory buildings, business premises, office buildings, warehouses, residential buildings, canteens, and other such buildings; -- buildings, including towers, ponds, troughs, wells, racks, sheds (not including temporary, simply constructed structures such as work sheds and vehicle sheds), fields, roads, bridges, platforms, piers, docks, culverts, gas stations as well as pipes, smokestacks, and enclosing walls that are detached from buildings, machinery and equipment; Facilities attached to buildings and structures mean auxiliary facilities that are inseparable from buildings and structures and for which no separate value is computed, including, for example, building and structure ventilation and drainage systems, oil pipelines, communication and power lines, elevators and sanitation equipment. Article 38 The scope of railway rolling stock, ships, machinery, mechanical apparatus and other production equipment mentioned in Article 35, subparagraph (2) of these Rules is as follows: -- "railway rolling stock" includes various types of locomotives, passenger coaches, freight cars, as well as auxiliary facilities on rolling stock for which no separate value is computed; -- "ships" includes various types of motor ships as well as auxiliary 7/21 facilities on ships for which no separate value is computed; -- "machinery, mechanical apparatus and other production equipment" includes various types of machinery, mechanical apparatus, machinery units, production lines, as well as auxiliary equipment such as various types of power, transport and conduction equipment. Article 39 The scope of electronic equipment, means of transport other than railway rolling stock and ships mentioned in Article 35, subparagraph (3) of these Rules is as follows: -- "electronic equipment" means equipment comprising mainly integrated circuits, transistors, electron tubes and other electronic components whose primary functions are to bring into use the application of electronic technology (including software), including computers as well as computer controlled robots, and digital control or program control systems. -- "means of transport other than railway rolling stock and ships" includes airplanes, automobiles, trams, tractors, motor bikes (boats), motorized sailboats, sailboats, and other means of transport. Article 40 Where, for special reasons, it is necessary to shorten the useful life of fixed assets, an application may be submitted by an enterprise to the local tax authorities which following examination and verification shall be reported level-by-level to the State Tax Bureau for approval. Fixed assets which for special reasons as mentioned in the preceding paragraph require the useful life to be shortened include: (1) machinery and equipment subject to strong corrosion by acid or alkali and factory buildings and structures subject to constant shaking and vibration; (2) machinery and equipment operated continually year-round for the purpose of raising the utilization rate or increasing the intensity of use; (3) fixed assets of a Chinese-foreign contractual joint venture having a period of cooperation shorter than the useful life specified in Article 35 of these Rules and which will be left with the Chinese party upon termination of the cooperation. Article 41 Enterprises which acquire used fixed assets having a remaining useful life shorter than the useful life specified in Article 35 of these Rules may, following agreement by the local tax authorities after examination and verification of certifying documents so submitted, compute depreciation according to the remaining useful life. Article 42 Where expenditures incur during the course of the use of fixed assets due to increased value caused by expansion, replacement, reconstruction and technical innovation of fixed assets, the original value of fixed assets shall be increased; where the period of use of fixed assets can be extended, the useful life shall be appropriately extended and the computation of depreciation adjusted accordingly. Article 43 No further depreciation shall be allowed in respect of fixed assets which can be continued to be used after having been fully depreciated. Article 44 The balance of proceeds from the transfer or disposal of fixed assets by an enterprise shall, after deduction of the undepreciated amount or the salvage value and handling fees, be entered into the profit and loss account for the current year. Article 45 Depreciation of fixed assets received as gifts by enterprises may be computed on the basis of reasonable valuation. Article 46 Patents, proprietary technology, trademarks, copyrights, land-use rights and other intangible assets of enterprises shall be appraised on the basis of the original value. For alienated intangible assets, the original value shall be the actual 8/21 amount paid based on a reasonable price. For self-developed intangible assets, the original value shall be the actual amount of expenditure incurred in the course of development. For intangible assets used as investment, the original value shall be such reasonable price as is stipulated in the agreement or contract. Article 47 The amortization of intangible assets shall be computed using the straight-line method. Intangible assets transferred or assigned or used as investments, where the useful life is stipulated in the agreement or contract, may be amortized over the period of that useful life; the amortization period in respect of intangible assets for which no useful life has been stipulated or which have been developed internally shall not be less than ten years. Article 48 Reasonable exploration expenses incurred by enterprises engaged in the exploitation of petroleum resources may be amortized against income from oil (gas) fields that have already commenced commercial production. The amortization period shall not be less than one year. Where operation of a contract field owned by a foreign oil company is terminated due to failure to find commercially viable oil (gas), and where ownership of the contract for the exploitation of petroleum (gas) resources is not continued and management organizations or offices for carrying on operations for the exploitation of petroleum (gas) resources are no longer maintained in China, reasonable exploration expenses already incurred in respect of the terminated contract field shall, upon examination and confirmation and the issuance of certification by the tax authorities, be permitted to be amortized against production income of a newly owned contract field when the new contract for cooperative exploitation of oil (gas) resources is signed within ten years from the date of the termination of the old contract. Article 49 Expenses incurred by enterprises during the period of organization shall be amortized beginning with the month following the month in which production and business operations commence; the period of amortization shall not be less than five years. The period of organization mentioned in the preceding paragraph means the period from the date of approval of the organization of the enterprise to the date of commencement of production and business operations (including trial production and trial business operations). Article 50 Inventories of merchandise, finished products, goods in process, semifinished products, raw materials, and other such materials of enterprises shall be valued at cost. Article 51 Enterprises may choose one of the following such methods: first-in, first-out; moving average; weighted average or last-in, first-out as the method of computing actual costs in respect of the delivery or receipt and use of goods in stock. Once a method of valuation has been adopted for use, no change shall be made thereto. Where a change in the method of valuation is indeed necessary, the matter shall be reported to the local tax authorities for approval prior to the commencement of the next tax year. Chapter IV Business Dealings Between Associated Enterprises Article 52 "Associated enterprises" mentioned in Article 13 of the Tax Law refers to companies, enterprises and other economic units that have any of the following relationships with other enterprises: (1) relationships in respect of existing direct or indirect ownership of or 9/21 control over such matters as finances, business operations or purchases and sales; (2) direct or indirect ownership of or control over it and another by a third party; (3) any other relationship in respect of an association of reciprocal interests. Article 53 "Business transactions between independent enterprises" mentioned in Article 13 of the Tax Law means business dealings carried out between unassociated and unrelated enterprises on the basis of arm's length prices and common business practices. Enterprises have a duty to provide to the local tax authorities relevant materials such as standard prices and charges in respect of business dealings with their associated enterprises. Article 54 Where prices in respect of purchase and sales transactions between an enterprise and its associated enterprises are not based on independent business dealings, adjustments may be made thereto by the local tax authorities according to the following arrangements and methods of determination: (1) based on prices of the same or similar business activities between independent enterprises; (2) based on the level of profits obtained from resales in respect of unassociated and unrelated third party prices; (3) based on costs plus reasonable expenses and profit margin; (4) based on any other reasonable method. Article 55 Where interest paid or received in respect of accommodating financing between an enterprise and an associated enterprise exceeds or is lower than the amount that would be agreed upon by unassociated and unrelated parties, or where the rate of interest exceeds or is lower than the normal rate of interest in respect of similar business, adjustments may be made thereto by the local tax authorities with reference to normal rates of interest. Article 56 Where labour service fees paid or received in respect of the provision of labour services by an enterprise to an associated enterprise are not based on business dealings between independent enterprises, adjustments may be made thereto by the local tax authorities with reference to the normal fee standards of similar labour activities. Article 57 Where the valuation or the receipt or payment of usage fees in respect of such business dealings as the transfer of property or the granting of rights to the use of property between an enterprise and an associated enterprise is not based on business dealings between independent enterprises, adjustments may be made thereto by the local tax authorities with reference to amounts that would be agreed to by unassociated and unrelated parties. Article 58 Management fees paid by an enterprise to an associated enterprise shall not be expensed. Chapter V Withholding at Source Article 59 "Taxable income on profits, interest, rents, royalties and other income" mentioned in Article 19, paragraph 1 of the Tax Law shall, except as otherwise stipulated by the State, be computed on the basis of gross income. Gross royalties obtained from the provision of patents and proprietary technology include fees for blueprint materials, technical services and personnel training, as well as other related fees. Article 60 "Profits" mentioned in Article 19 of the Tax Law means income derived from the right to profits according to the proportion of investment, equity 10/21 rights, stockholding, or other non-debt profit sharing rights. Article 61 "Other income" mentioned in Article 19 of the Tax Law includes gains from the transfer of property such as houses, buildings and structures and attached facilities within China and land-use rights. "Gains" mentioned in the preceding paragraph means the amount remaining from the receipt on transfer minus the original value of the property. Where foreign enterprises are unable to provide correct certification of the original value of the property, the original value of the property shall be determined by the local tax authorities according to the specific circumstances thereof. Article 62 "The amount of payment" mentioned in Article 19, paragraph 2 of the Tax Law means cash payments, payment by remittances, and amounts paid by account transfers, as well as amounts in equivalent cash value paid in noncash assets or rights and interests. Article 63 "Profits obtained from an enterprise with foreign investment" mentioned in Article 19, paragraph 3, subparagraph (1) of the Tax Law means income obtained from profits of an enterprise with foreign investment following the payment or the reduction of or exemption from income tax in accordance with the provisions of the Tax Law. Article 64 "International finance organizations" mentioned in Article 19, paragraph 3, subparagraph (2) of the Tax Law means financial institutions such as the International Monetary Fund, the World Bank, the Asian Development Bank, the International Development Association, and the International Fund for Agricultural Development. Article 65 "Chinese State banks" mentioned in Article 19, paragraph 3, subparagraph (2) and subparagraph (3) of the Tax Law means the People's Bank of China, the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, the People's Construction Bank of China, the Bank of Communications of China, the Investment Bank of China, and other financial institutions authorized by the State Council to engage in credit businesses such as foreign exchange deposits and loans. Article 66 The scope of the reduction of or exemption from income tax on royalties provided for in Article 19, paragraph 3, subparagraph (4) of the Tax Law is as follows: (1) royalties received in providing proprietary technology for the development of farming, forestry, animal husbandry and fisheries: (a) technology provided to improve soil and grasslands, develop barren mountainous regions and make full use of natural conditions; (b) technology provided for the supplying of new varieties of animals and plants and for the production of pesticides of high effectiveness and low toxicity; (c) technology provided such as to advance scientific production management in respect of farming, forestry, fisheries and animal husbandry, to preserve the ecological balance, and to strengthen resistance to natural calamities; (2) royalties received in providing proprietary technology for scientific institutions, institutions of higher learning and other scientific research units to conduct or cooperate in carrying out scientific research or scientific experimentation; (3) royalties received in providing proprietary technology for the development of energy resources and expansion of communications and transportation; (4) royalties received in providing proprietary technology in respect of energy conservation and the prevention and control of environmental pollution; (5) royalties received in providing the following proprietary technology in respect of the development of important fields of science and technology: 11/21 (a) production technology for major and advanced mechanical and electrical equipment; (b) nuclear power technology; (c) production technology for large-scale integrated circuits; (d) production technology for photoelectric integrated circuits, microwave semi-conductors and microwave integrated circuits, and manufacturing technology for microwave electron tubes; (e) manufacturing technology for ultra-high speed computers and microprocessors; (f) optical telecommunications technology; (g) technology for long distance, ultra-high voltage direct current power transmission; and (h) technology for the liquefaction, gasification and comprehensive utilization of coal. Article 67 In respect of income of foreign enterprises engaged in China in construction, installation, assembly, and exploration contracting work, and provision of labour activities such as consulting, management and training, the tax authorities may designate the parties paying the contracted amounts and labour service fees as tax withholding agents. Chapter VI Tax Preferences Article 68 Pursuant to the provisions of Article 6 of the Tax Law, the granting of any necessary preferential treatment in respect of enterprise income tax to enterprises with foreign investment that are encouraged by the State shall be implemented in accordance with the provisions of the relevant laws and administrative rules and regulations of the State. Article 69 "Special economic zones" mentioned in Article 7, paragraph 1 of the Tax Law means the special economic zones of Shenzhen, Zhuhai, Shantou and Xiamen and the Hainan Special Economic Zone established by law or established upon approval of the State Council; economic and technological development zones mentioned therein means the economic and technological development zones in the coastal port cities established upon approval of the State Council. Article 70 "Coastal economic open zones" mentioned in Article 7, paragraph 2 of the Tax Law means those cities, counties and districts established as coastal economic open zones upon approval of the State Council. Article 71 "Imposition of enterprise income tax at the reduced rate of 15%" mentioned in Article 7, paragraph 1 of the Tax Law shall be limited to income obtained by enterprises from production and business operations in the respective areas so specified in Article 7, paragraph 1 of the Tax Law. "Imposition of enterprise income tax at the reduced rate of 24%" mentioned in Article 7, paragraph 2 of the Tax Law shall be limited to income obtained by enterprises from production and business operations in the respective areas so specified in Article 7, paragraph 2 of the Tax Law. Article 72 "Enterprises with foreign investment of a production nature" mentioned in Article 7, paragraph 1 and paragraph 2 and Article 8, paragraph 1 of the Tax Law means enterprises with foreign investment engaged in the following industries: (1) machine manufacturing and electronics industries; (2) energy resource industries (not including exploitation of oil and natural gas); (3) metallurgical, chemical and building material industries; (4) light industries, and textiles and packaging industries; 12/21 (5) medical equipment and pharmaceutical industries; (6) agriculture, forestry, animal husbandry, fisheries and water conservation; (7) construction industries; (8) communications and transportation industries (not including passenger transport); (9) development of science and technology, geological survey and industrial information consultancy directly for services in respect of production and services in respect of repair and maintenance of production equipment and precision instruments; (10) other industries as specified by the tax authorities under the State Council. Article 73 "Imposition of enterprise income tax at the reduced rate of 15%" mentioned in Article 7, paragraph 3 of the Tax Law applies to the following: (1) production oriented enterprises with foreign investment established in the coastal economic open zones, special economic zones and in the old urban districts of municipalities where economic and technological development zones are located and which are engaged in the following projects: (a) technology intensive or knowledge intensive projects; (b) projects with foreign investments of over US $30 million and having long periods for return on investment; (c) energy resource, transportation and port construction projects. (2) Chinese-foreign equity joint ventures engaged in port and dock construction; (3) financial institutions such as foreign capital banks and Chinese foreign banks established in the special economic zones and other areas approved by the State Council, where the capital contribution of the foreign investor or the funds for business activities allocated by the head office bank to the branch bank exceeds US $10 million, and where the period of operations is ten years or more; (4) production-oriented enterprises with foreign investment established in the Pudong New Area of Shanghai, as well as enterprises with foreign investment engaged in energy resource and transport construction projects such as airports, ports, railways, highways and power stations; (5) enterprises with foreign investment recognized as high or new technology enterprises established in the State high or new technology industrial development zones designated by the State Council, as well as enterprises with foreign investment recognized as new technology enterprises established in the new technology industrial development experimental zone of the municipality of Beijing; (6) enterprises with foreign investment engaged in projects encouraged by the State and established in other areas stipulated by the State Council. Enterprises with foreign investment in projects listed in subparagraph(1) of the preceding paragraph shall, following approval by the State Tax Bureau of an application submitted by such enterprises, be subject to enterprises income tax at the reduced tax rate of 15%. Article 74 "The period of business operations" mentioned in Article 8, paragraph 1 of the Tax Law means the period commencing on the date an enterprise with foreign investment actually begins production or business operations (including trial production and trial business operations) and ending on the date the enterprise ceases production or business operations. Enterprises with foreign investment that pursuant to the provisions of Article 8, paragraph 1 of the Tax Law may enjoy treatment in respect of reductions of or exemptions from enterprise income tax shall submit to the local 13/21 tax authorities for examination and verification such circumstances as the lines of business in which engaged, names of major products, and the period of operations decided upon. No treatment in respect of reductions of or exemptions from enterprise income tax shall be enjoyed without examination and verification and agreement thereof. Article 75 "The relevant provisions promulgated by the State Council before the entry into force of this Law" mentioned in Article 8, paragraph 2 of the Tax Law means the following provisions in respect of exemptions from or reductions of enterprise income tax promulgated or approved for promulgation by the State Council: (1) Chinese-foreign equity joint ventures engaged in port and dock construction where the period of operations is 15 years or more shall, following application by the enterprise and approval thereof by the tax authorities of provinces, autonomous regions, or municipalities directly under the Central Government of the location and commencing with the first profit-making year, be exempt from enterprise income tax from the first year to the fifth year and subject to enterprise income tax at a rate reduced by one half for the sixth year through the tenth year. (2) Enterprises with foreign investment established in the Hainan Special Economic Zone and engaged in infrastructure facility projects such as airports, harbours, docks, highways, railways, power stations, coal mines and water conservation, and enterprises with foreign investment engaged in the development of and operations in agriculture where the period of operations is 15 years or more shall, following application by the enterprise and approval thereof by the tax authorities of Hainan Province and commencing with the first profit making year, be exempt from enterprise income tax from the first year to the fifth year and subject to enterprise income tax at a rate reduced by one half for the sixth year through the tenth year. (3) Enterprises with foreign investment established in the Pudong New Area of Shanghai and engaged in construction projects such as airports, ports, railways, highways and power stations where the period of operations is 15 years or more shall, following application by the enterprise and approval thereof by the tax authorities of the municipality of Shanghai and commencing with the first profit making year, be exempt from enterprise income tax from the first year to the fifth year and subject to enterprise income tax at a rate reduced by one half for the sixth year through the tenth year. (4) Enterprises with foreign investment established in the special economic zones and engaged in service oriented industries where the amount of the foreign investment exceeds US $5 million and the period of operations is ten years or more shall, following application by the enterprise and approval thereof by the tax authorities of the special economic zone and commencing with the first profit making year, be exempt from enterprise income tax in the first year and subject to enterprise income tax at a rate reduced by one half for the second and third years. (5) Financial institutions such as foreign capital banks and Chinese foreign banks established in the special economic zones and other areas approved by the State Council where the capital contribution of the foreign investor or the funds for business activities allocated by the head office bank to the branch bank exceeds US $10 million and the period of operations is ten years or more shall, following application by the enterprise and approval thereof by the local tax authorities and commencing with the first profit making year, be exempt from enterprise income tax in the first year and subject to enterprise income tax at a rate reduced by one half for the second and third years. 14/21 (6) Chinese-foreign equity joint ventures recognized as high or new technology enterprises and established in the State high or new technology industrial development zones designated by the State Council where the period of operations is ten years or more shall, following application by the enterprise and approval thereof by the local tax authorities and commencing with the first profit making year, be exempt from enterprise income tax in the first year and second year. Enterprises with foreign investment established in the special economic zones and the economic and technological development zones shall be governed by the preferential tax provisions of the special economic zones and the economic and technological development zones. Enterprises with foreign investment established in the new technology industrial development experimental zone of the municipality of Beijing shall be governed by the preferential tax provisions of the new technology industrial development experimental zone of the municipality of Beijing. (7) Export-oriented enterprises invested in and operated by foreign businesses for which in any year the output value of all export products amounts to 70% or more of the output value of the products of the enterprise for that year may pay enterprise income tax at the tax rate specified in the Tax Law reduced by one half after the period of enterprise income tax exemptions or reductions has expired in accordance with the provisions of the Tax Law. However, export oriented enterprises in the special economic zones and economic and technological development zones and other such enterprises subject to enterprise income tax at the tax rate of 15% that qualify under the above-mentioned conditions shall pay enterprise income tax at the tax rate of 10%. (8) Advanced technology enterprises invested in and operated by foreign businesses which remain advanced technology enterprises after the period of enterprise income tax exemptions or reductions has expired in accordance with the provisions of the Tax Law may continue to pay for an additional three years enterprise income tax at the tax rate specified in the Tax Law reduced by one half. (9) Implementation of other provisions in respect of exemptions from or reductions of enterprise income tax promulgated or approved for promulgation by the State Council. Enterprises with foreign investment shall, in applying for exemptions from or reductions of enterprise income tax in accordance with the provisions of subparagraph (6), subparagraph (7), or subparagraph (8) of the preceding paragraph, submit relevant documents of proof issued by departments in respect of the examination, verification and confirmation, the application shall be subjected to approval by the local tax authorities after examination and verification. Article 76 "The first profit-making year" mentioned in Article 8, paragraph 1 of the Tax Law and in Article 75 of these Rules means the first tax year in which profits are obtained by an enterprise following commencement of production or business operations. Where an enterprise suffers losses during the early stages after establishment, such losses may be made up by the income of the following tax year in accordance with the provisions of Article 11 of the Tax Law. The first profit-making year shall be the year in which profits are obtained after such losses are made up. The period for exemptions from or reductions of enterprise income tax specified in the first paragraph of Article 8 of the Tax Law and Article 75 of these Rules shall be computed continuously commencing with the year in which the enterprise begins to make profits. The computation shall not be deferred because of losses incurred in any of the subsequent years. 15/21 Article 77 Enterprises with foreign investment which commence operations in the middle of a year and earn profits may, where the actual period of operations is less than six months, choose to use the following year as the period in which to begin the computation of tax exemptions or tax reductions; however, income tax shall be paid in accordance with the Tax Law on profits earned during the year. Article 78 Unless otherwise provided by the State Council, the preferential tax provisions of Article 8, paragraph 1 of the Tax Law shall not apply to enterprises engaged in the exploitation of such natural resources as petroleum, natural gas, rare metals and precious metals. Article 79 Enterprises with foreign investment that have received exemptions from or reductions of enterprise income tax pursuant to the provisions of Article 8, paragraph 1 of the Tax Law and Article 75 of these Rules shall, where the actual period of operations is less than the period stipulated therein, except in the case of major losses sustained due to natural disasters or unforeseen accidents, make up the amount of the exemptions from or reductions of enterprise income tax. Article 80 "Direct reinvestment" mentioned in Article 10 of the Tax Law refers to profits received from an enterprise with foreign investment by foreign investor of that enterprise which prior to receipt are directly used to increase registered capital, or which following receipt are directly used to organize another enterprise with foreign investment. Foreign investors shall, in computing the amount of tax refundable in accordance with the provisions of Article 10 of the Tax Law, provide certificates confirming the use of the reinvested profits for the year; the local tax authorities shall adopt any reasonable method for the reckoning and determination thereof where certificates cannot be provided. Foreign investors shall, in respect of the application for a refund of tax, submit within one year of the date of the actual investment of the reinvested amount a record of the reinvested amount and a certificate for the investment period of the increased capital or contributed capital to the tax authorities in the place where the taxes were originally paid. Article 81 "Other preferential provisions of the State Council" mentioned in Article 10 of the Tax Law refers to direct reinvestment in China by foreign investors for the organization and expansion of export oriented enterprises or advanced technology enterprises, as well as profits of foreign investors earned from enterprises established in the Hainan Special Economic Zone that are directly reinvested in the Hainan Special Economic Zone in infrastructure projects and agriculture development enterprises and for which the entire portion of enterprise income tax that has already been paid on the reinvested amount may, in accordance with the provisions of the State Council, be refunded. Foreign investors that apply for a refund of tax on reinvestments in accordance with the provisions of the preceding paragraph shall, in addition to completing the requirements pursuant to Article 80, paragraph 2 and paragraph 3 of these Rules, submit certificates issued by the examining, verifying and confirming departments confirming the organization and expansion of exportoriented enterprises or advanced technology enterprises. Enterprises in which foreign investors have reinvested in respect of the organization or expansion thereof which within three years of commencing production or operations have not achieved the standards in respect of exportoriented enterprises or have not continued to be confirmed as advanced technology enterprises shall repay 60% of the amount of tax refunded. Article 82 "Tax refunds on reinvestments" mentioned in Article 10 of the Tax Law and Article 81, paragraph 1 of these Rules shall be computed according to the following formula: 16/21 Amount of tax refund = Reinvestment amount / [ 1-(originally applicable enterprise income tax rate + local income tax rate) ] * originally applicable enterprise income tax rate * tax refund rate Chapter VII Tax Credits Article 83 "Income tax already paid abroad" mentioned in Article 12 of the Tax Law means income tax actually paid abroad by an enterprise with foreign investment on income from sources outside China and does not include taxes paid for which compensation is later received or assumed by other parties. Article 84 "The amount of tax payable computed on income from sources outside China in accordance with the provisions of this Law" mentioned in Article 12 of the Tax Law means the amount of tax payable computed on taxable income arising from income from abroad of enterprises with foreign investment, following the deduction of costs, expenses and losses allowable in accordance with the relevant provisions of the Tax Law and these Rules attributable to that income. The limit of the amount of tax payable that can be deducted shall be computed on a countryby- country basis; the method of computation is as follows: Credit limit for tax on income derived from sources outside China=Total tax sourced inside and outside China computed inaccordance with the Tax Law * Income sourced from a foreign country/Total income sourced inside and outside China Article 85 Where the amount of income tax actually paid abroad on income from sources from abroad by enterprises with foreign investment is less than the deductible limit resulting from computation based on the provisions of Article 84 of these Rules, the actual amount of income tax paid abroad may be deducted from the amount of tax payable; where the deductible limit is exceeded, the portion in excess shall not be deducted from tax and shall not be itemized as an expense, however, the portion not exceeding the limit thereof may be used as a deduction against following year's taxes; the time limit for such supplemental deductions shall not exceed five years. Article 86 The provisions of Article 83 to Article 85 of these Rules shall apply only to enterprises with foreign investment with head offices established within China. Enterprises with foreign investment that deduct taxes in accordance with the p of Article 12 of the Tax Law shall provide the original tax payment certificates signed and issued by the foreign tax authorities in respect of the same year; copies or tax payment certificates of different years shall not be used as tax deduction certificates. Chapter VIII Tax Administration Article 87 Enterprises shall, within 30 days of completing business registration, complete tax registration with the local tax authorities. Enterprises with foreign investment that establish or terminate branch offices outside China shall, within 30 days of the date of establishment or termination thereof, complete with the local tax authorities procedures in respect of tax registration, amendments to the registration, or cancellation of the registration. Enterprises that complete registrations in the preceding paragraph shall, in accordance with the provisions, present relevant documents, licenses and materials. Article 88 Enterprises that undergo important registration changes such as changes of address, restructurings, mergers, spin-offs, terminations, as well as changes 17/21 in the amount of capital and scope of business shall, within 30 days of the completion of the change in business registration or prior to the cancellation of registration, complete the change in registration or cancellation of registration with the local tax authorities with the relevant documents. Article 89 Foreign enterprises which establish two or more business organizations in China may use one of the selected business organizations in respect of the consolidated filing and payment of income tax. However, the business organization so selected shall meet the following conditions: (1) assumption of supervisory and management responsibility over the business operations of the other respective business organizations; (2) maintenance of complete account records and certificates which accurately reflect the income, cost, expense and profit and loss situations of the respective business organizations. Article 90 In respect of foreign enterprises which in accordance with the provisions of Article 89 of these Rules consolidate the filing and payment of income tax, the business organization so selected thereunder shall submit an application for approval according to the following provisions after examination and verification thereof by the local tax authorities: (1) consolidated filing and payment of income tax in respect of business organizations located in the same province, autonomous region, or municipality directly under the Central Government shall be subject to approval by the tax authorities of the province, autonomous region or municipality directly under the Central Government; (2) consolidated filing and payment of income tax in respect of business organizations located in two or more provinces, autonomous regions, or municipalities directly under the Central Government shall be subject to approval by the State Tax Bureau. Following approval for the filing and payment of tax on a consolidated basis by foreign enterprises, such circumstances as the establishment of additional business organizations, mergers, change of address, termination of operations, or shutdowns shall, prior to such event, be reported to the local tax authorities by the business organization responsible for the filing and payment of tax on a consolidated basis. Any change in respect of the business organization filing and paying tax on a consolidated basis shall be dealt with in accordance with the provisions of the preceding paragraph. Article 91 Where business organizations related to foreign enterprises that file and pay income tax on a consolidated basis apply different tax rates in respect of the payment of tax, the amount of taxable income of the respective business organizations shall be separately computed on a reasonable basis and income tax shall be paid on the basis of the different tax rates. Where the respective business organizations mentioned in the preceding paragraph have losses and profits, tax shall be paid on the profit remaining after the offsetting of losses against profits according to the tax rate applicable to the profitmaking business organization. A business organization which incurs losses shall offset losses using profits of the subsequent year of the business organization; tax shall be paid on the profit remaining after the offsetting of such losses according to the tax rate applicable to the business organization; tax paid on the offsetting amounts shall be based on the tax rate applicable to the business organization that offsets the losses incurred by the other business organization. Article 92 Notwithstanding the provisions of Article 91 of these Rules, where a business organization responsible for filings and payment of tax on a consolidated basis is unable to compute separately and reasonably the taxable 18/21 income of the respective business organizations, the local tax authorities may make a reasonable apportionment among the respective business organizations of the gross taxable income based on the proportion of business revenues, the proportion of cost and expenses, the proportion of capital assets, and the proportion of the number of staff or salaries and wages. Article 93 Enterprises with foreign investment which establish branch offices in China shall complete consolidated filings and payment of income tax with reference to the provisions of Article 91 and Article 92 of these Rules. Article 94 Enterprises that pay taxes in advance on a quarterly basis in accordance with the provisions of Article 15 of the Tax Law shall pay in advance on the basis of actual quarterly profits; where difficulty exists in paying in advance on the basis of actual quarterly profits, the advanced quarterly payment of tax may be made according to one fourth of the taxable income of the previous year or any other method approved by the local tax authorities. Article 95 Enterprises, whether realizing profits or losses in a tax years, shall file income tax returns and final statements of account with the local tax authorities within the time limit prescribed in Article 16 of the Tax Law, and unless otherwise provided by the State, shall include when filing the final accounting stateme |
Circular Concerning the Issue of Tax Credit for Business Income Tax for Homemade Equipment Purchased by Enterprises with Foreign Investment and Foreign Enterprises (Chinese and English Text)
February 6, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/EnterpriseIncomeTax/ExemptionandReduction/P020060620340553284835.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/qysds/jms/P020060619680156258322.pdf">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Circular of the Ministry of Finance and the State Administration of Taxation Concerning the Issue of Tax Credit for Business Income Tax for Homemade Equipment Purchased by Enterprises with Foreign Investment and Foreign Enterprises CaiShuiZi [2000] No.49 January 14,2000 The finance departments (bureaus), the state taxation bureaus and local taxation bureaus of all the provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan: The Circular of the Ministry of Finance and the State Administration of Taxation concerning the Issue of Tax Credit for Enterprise Income Tax for Homemade Equipment Purchased by Enterprises with Foreign Investment, is issued as follows to carry out the spirit of the relevant regulations stipulated by the Central Committee of the Communist Party of China and the State Council, enlarge the introduction of foreign investment, and encourage enterprises with foreign investment and foreign enterprises to use homemade equipments: 1. With regard to the homemade equipment purchased within investment amount by the enterprises with foreign investment established within the territory boundaries of the PRC, if they fall under the Encouraged Category and Restricted B Category listed in the Directive Category of the Industries of Enterprises with Foreign Investment stipulated in the Circular of the State Council concerning the Adjustment of Taxation Policies for Imported Equipments (GuoFa [1997] No.37), 40 percent of the investment for the homemade equipment purchases shall be refundable from the increased part of their enterprise income taxes of the purchasing year over those of the year before. The methods shall be applicable to the foreign enterprises that have set up organizations or offices for manufacture or business operation within the territory boundaries of China. If the above enterprises' purchases of homemade equipments outside their investment total are for the purpose of improving existing equipments, manufacturing techniques and conditions with advanced and suitable new technologies, craftwork, equipments and materials to increase economic benefit, improve product quality, increase product varieties, designs and colors, promote product upgrading, enlarge export, decrease cost, save energies, enhance comprehensive resource utilizations and waste control and ensure labor protection and safety, 40 percent of their investment for homemade equipment purchases may also be creditable from their increased enterprise income taxes of the purchasing year over those of the year before. 2. The homemade equipments for tax credit refer to those manufactured by homemade enterprises for production (including necessary test and inspection for production), excluding those imported directly from abroad and those manufactured for processing and compensation trades. 3. The allowable tax credit of an enterprise with foreign investment or foreign enterprise shall not exceed its newly increased enterprise income tax of the purchasing year over that of the year before. If the amount of newly increased 1/2 enterprise income tax is not sufficient for tax credit, the remaining part of investment outside tax credit shall be refundable from the newly increased tax of the next year over that of the year before the purchasing year. However, the period for continuous tax credit shall not exceed five years. Enterprises with foreign investment and foreign enterprises eligible for unified enterprise income tax reduction and exemption policies stipulated in tax laws adopted by the Standing Committee of the National People's Congress and laws and regulations promulgated by the National People's Congress and the State Council can moderately extend the duration of continuous deduction. The maximum duration of continuous deduction, however, should not exceed 7 years. 4. When enterprises with foreign investment and foreign enterprises apply for tax credit for their homemade equipment purchases, they shall provide the taxation administration in charge of tax credit with valid certificates and materials including invoices for homemade equipment purchases. 5. The amount of value added tax refunded in accordance with regulations to enterprises with foreign investment and foreign enterprises for their homemade equipment purchases shall not be calculated into the prices of the equipments. 6. The depreciation amount of homemade equipments with tax credit shall be calculated on the basis of the original prices of the equipments, and deducted in accordance with regulations concerned at the calculation of taxable income amount. 7. If enterprises with foreign investment and foreign enterprises rent or transfer their homemade equipments that have enjoyed tax credit within 5 years from the purchase date, they shall repay the enterprise income tax that have enjoyed tax credit at the time of the equipments' rent or transfer. 8. The Methods shall enter into force as of July 1, 1999. The State Administration of Taxation shall formulate detailed operational measures separately. 2/2 |
Circular Concerning Transmiting the Interim Measure for the Administration of Tax Refund to Enterprises with Foreign Investment for Their Domestic Equipment Purchases (Chinese and English Text)
February 6, 2007
The following <a href="https://www.fdi.gov.cn/pub/FDI_EN/Laws/Taxation/Value-addedTax/ExemptionandReduction/P020060620343168751072.pdf">translation</a> and <a href="https://www.fdi.gov.cn/pub/FDI/zcfg/ss/zzs/jms/P020060619682937960386.pdf ">Chinese text</a> were retrieved from the Ministry of Commerce's Invest in China Web site on February 6, 2007. <HR> Circular of the State Administration of Taxation Concerning Transmiting the Interim Measure for the Administration of Tax Refund to Enterprises with Foreign Investment for Their Domestic Equipment Purchases GuoShuiFa [1999] No.171 September 20,1999 Recently, the State Council has decided to refund value added tax to enterprises with foreign investment for their domestic equipment purchases within their investment amount, if the equipments fall under the Tax-free Categories. Therefore, the State Administration of Taxation has formulated the Interim Measure for the Administration of Tax Refund to Enterprises with Foreign Investment for Their Domestic Equipment Purchases, which is now issued to you and shall be abided by and carried out in real earnest. Attachment: Interim Measure for the Administration of Tax Refund to Enterprises with Foreign Investment for their Domestic Equipment Purchases Chapter 1 General Provisions Article 1 This Measure is formulated to encourage enterprises with foreign investment to use domestic equipments, set down responsibilities and handling procedures, and regulate operation in accordance with laws and regulations. Article 2 The State Administration of Taxations at the places where enterprises with foreign investment are located shall be responsible for the registration, tax refund, supervision, verification and cancellation of domestic equipments in accordance with regulations concerned. Chapter 2 Scopes and Conditions for Tax Refund Article 3 The enterprises with foreign investment that can enjoy tax refund are those which have undergone taxation registrations, including Sino-foreign contractual joint ventures, Sino-foreign cooperative joint ventures and exclusively foreign-owned enterprises. The investment of foreign investors of enterprises with foreign investment shall account for more than 25 percent of the total investment of all the investors of the enterprises. Article 4 The equipments for tax refund are: those falling under the Encouraged Category and the Restricted B Category of the Directive Category of Foreignfunded Industries stipulated in the Circular of the State Council concerning the Adjustment of the Taxation Policies of Imported Equipments (GuoShuiFa [1997] No.37); as well as those purchased from domestic markets for the investment projects listed in the Catalogue of Key Industries, Products and Technologies Encouraged for Development by the State. Part of the plastic, rubber, ceramic and porcelain accessories which are listed in the purchase contracts and bought 1/4 together with the equipments for the projects which meet the above requirements, as well as the tube materials for petrochemical projects, shall also enjoy tax refund. The equipments purchased from domestic markets and listed in the Category of the State Council for Imports without Tax Exemption for Foreign-Invested Projects and the Category of the State Council for Imports without Tax Exemption for Domestic-invested Projects, shall not enjoy tax refund. Article 5 The equipments subject to tax refund shall meet both of the following two conditions: (1) They must be unused domestic equipments purchased with currencies, excluding investment in kind and investment in intangible assets. (2) They must be purchased after September 1, 1999, with total amount within the tax refund investment total controlled by taxation administrations. The term "domestic equipments" refers to those manufactured by the enterprises within the territory boundaries of the PRC. Tax refund investment total controlled by taxation administration shall be calculated in accordance with the following formula: Tax Refund Investment Total=Currency Investment Total of All Investors - Total Value of Imported Equipments with Customs Duty Exemption. Chapter 3 Administration of Registration Article 6 The enterprises with foreign investment which have met the requirements for tax refund, shall apply to relevant taxation administration in charge of tax refund for domestic equipment purchase registration before their performance of purchase contracts for their first purchases of domestic equipments. They shall bring forward the Registration Manual for Domestic Equipment Purchase of Enterprises with Foreign Investment (hereinafter called the Registration Manual), which are printed by the taxation administrations of all the provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan. The format of the Registration Manual is attached behind. The following documents shall also be submitted at the same time: (1) Copies of the Licenses of Business of Corporations; (2) Copies of the Tax Registration Certificates of Corporations; (3) Copies of the Drawback Certificates of Corporations; (4) Copies of the Feasibility Research Reports of Corporations and copies of the Articles of Incorporation, contracts and agreements; (5) Copies of the Project Approval Letters of the Ministry of Foreign Economic Cooperation and Trade of the PRC; (6) Lists of Imported Equipments (7) Copies of the Original Certificates of Investment in Kind; (8) Copies of the Purchase Contracts of Domestic Equipments; (9) Certificates on verification of capital. Article 7 After their receipt of applications from enterprises with foreign investment, the administrations in charge of tax refund shall fill in registration manuals faithfully according to the applications, stamp on the registration manuals and then give them back to the enterprises. Article 8 The administrations in charge of tax refund shall establish exclusive accounts for records of investment total, names, quantities and prices of the domestic equipments to be purchased, and input the data concerned into computers. Article 9 If any foreign-funded enterprise fails to perform purchase contracts due to various causes, it shall bring forward the original registration manuals and apply for cancellation registrations to the administrations in charge of tax refund., which shall cancel corresponding records in accounts. 2/4 Chapter 4 Administration of Purchases and Sales Article 10 When enterprises with foreign investment purchase domestic equipments, the Suppliers of domestic equipments shall provide the purchasing enterprises with foreign investment with invoices for the exclusive use of value added tax (VAT invoices) in accordance with the contents of contracts and the copies of the Eleventh Page of the Registration Manual brought forward by the purchasers. Article 11 The taxation administrations responsible for collecting taxes from supplying enterprises shall provide them with Tax Payment Certificates (exclusively used for exported goods), on the basis of the verified copies of contracts, the Eleventh Page of Registration Manuals and other documents concerned. The issuance of VAT invoices shall be conducted in accordance with existing regulations concerned. Article 12 When purchasing enterprises settle their payments for domestic equipment purchases with supplying enterprises, either foreign currencies or RMB may be used for settlement. If settlement is carried out with foreign currencies, regulations of the Foreign Currency Administration shall be observed. Chapter 5 Tax Refund and Supervision Article 13 After their purchases of domestic equipments, enterprises with foreign investment shall fill in the Declaration Forms for Tax Refund (or Exemption) for Exported Goods on the basis of their purchases of domestic equipments in accordance with purchase contracts, submit the following documents, and apply to the responsible taxation administrations for tax refund for their domestic equipment purchases: (1) VAT invoices (2) Tax Payment Certificates (exclusively used for exported goods) (3) Payment Certificates (4) Registration Manuals (5) Copies of Purchase Contracts of Domestic Equipments Article 14 After the tax refund for domestic equipment purchases, the responsible taxation administrations shall keep the registration manuals for review. Article 15 The amount of refunded tax for domestic equipment purchases shall be calculated in accordance with the following formula: The Amount for Tax Refund =the Amount Marked in VAT Invoices * Applicable Value Added Tax Rate Article 16 The responsible taxation administrations shall take charge of supervision over the domestic equipments purchased by enterprises with foreign investment. A supervisory period lasts for 5 years. Any lease or reinvestment or ownership transfer including conveyance and donation of the equipments, shall observe the following formula. Responsible taxation administrations shall collect the refunded tax for tax supplement back to the National Treasury. The Amount for Tax Supplement = the Amount Marked in VAT Invoices * the Remaining Value of Equipments after Depreciation The Original Value of Equipments * the Remaining Value of the depreciated Equipments Applicable for VAT Rate = The Original Value of Equipments-Accumulative Depreciated Value The original and depreciated value of equipments shall be calculated in accordance with the accounting data of the enterprises' accountants Article 17 The equipments purchased by enterprises with foreign investment outside the controlled tax refund investment total shall not enjoy tax refund. As for those that have already enjoyed tax refund, responsible taxation administrations 3/4 shall recollect the refunded tax. Chapter 6 Other Provisions Article 18 Responsible taxation administrations shall supervise over the usage of the purchased domestic equipments of enterprises with foreign investment within the settlement periods of export drawback of every year. Article 19 The enterprises with foreign investment that have got tax refund by fraud including forging or altering registration manuals shall be punished in accordance with Article 40 of the Managerial Law for Tax Collection of the People's Republic of China, and shall be deprived of their qualifications for tax refund for domestic equipment purchases. Article 20 The Measure shall come into force from September 1, 1999. Attachment: The Registration Manual of Domestic Equipment Purchases of Enterprises with Foreign Investment (omitted) 4/4 |
Administrative Protection Measures for Internet Copyright (Chinese Text)
February 6, 2007
The following text was retrieved from the National Copyright Administration Web site on February 6, 2007. |
Results of Audit of Funds for Residents Displaced By Three Gorges Reservoir (Chinese Text)
February 6, 2007
The following <a href="https://www.audit.gov.cn/cysite/docpage/c516/200701/0125_516_18451.htm">text</a> was retrieved from the Web site of the PRC National Audit Office on February 6, 2007. |
Implementing Measures for the Qinghai Province Construction Sector Migrant Worker Wage Payment Deposit System (Trial Measures) (Chinese Text)
January 26, 2007
The following text was retrieved from the China Labour Market <a href="https://www.lm.gov.cn/gb/salary/2007-01/10/content_158105.htm">Web site</a> on January 18, 2006. |
Circular Regarding Increasing the Administration of Analysis of Pricing for Government Procurement Goods and Services (Chinese Text)
January 25, 2007
The following text was retrieved from the China Government Procurement Network Web site on January 24, 2007. |
Circular Regarding Increasing the Work of Accepting and Investigating Complaints Filed by Businesses Engaged in Government Procurement (Chinese Text)
January 25, 2007
The following text was retrieved from the China Government Procurement Network Web site on January 24, 2007. |
Implementation Measures for the Administration of Collective Central Government Procurement (Chinese Text)
January 25, 2007
The following text was retrieved from the China Government Procurement Network Web site on January 24, 2007. |
Opinions Regarding Comprehensively Increasing Intellectual Property Adjudication Work to Build an Innovative Nation and Provide Judicial Safeguards (Chinese Text)
January 25, 2007
The following text was retrieved from the Chongqing Municipal Intermediate People's Court Web site on January 24, 2007. |
Circular Regarding Promulagation of Work Targets for 2007 (Chinese Text)
January 25, 2007
The following text was retrieved from the Fuzhou Province Administration for Work Safety Web site on January 24, 2007. |
Certain Provisions Regarding the Issues of the Specific Laws to be Used in Adjudicating Disputes of Infringement of the Right to New Plant Types (Chinese Text)
January 25, 2007
The following text was retrieved from the Web site on January 24, 2007. |
Principles for the Administration of Internal Newspapers and Magazines (Rescinded) (Chinese Text)
January 25, 2007
The following text was retrieved from the Gansu Provincial Government Legislative Network on January 25, 2007. |
Notice Regarding Increasing the Administration of Broadcast Movie Television Programs Distributed to the Public Via Information Networks (Chinese Text)
January 25, 2007
The following text was retrieved from the Urumqi Municipal Public Security Public Information Network Security Bureau Web site on January 25, 2007. |