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GUO WU YUAN LING [85] 1991.6.30
Chapter 1 General Rules
Article 1 These Rules were 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' in Paragraphs
1 and 2 of Article 1 of the Tax Law, refers to income from production
and business operations in manufacturing, mining, communications
and transport, construction and installation, agriculture, forestry,
animal husbandry, fishing , water conservation, commerce, finance,
service industries, exploration and exploitation, and in other trades.
'Other income' from Paragraphs 1 and 2 of Article 1 of the Tax
law refers to profits (dividends), interest, rental income, income
from the transfer of property, income from the supply or transfer
of patents, special technology, income from trademark rights and
copyrights as well as other non-business income.
Article 3 'Enterprises with foreign investment' in Paragraph
1, Article 2 of the Tax Law, and 'foreign companies, enterprises
and other economic organizations which have established organizations
or sites within the borders of China and engage in production or
business' in Paragraph 2, Article 2 of the Tax Law, are, unless
otherwise particularly specified, all referred to as 'enterprises'
in these Detailed Rules.
'Established organizations or sites' in Paragraph 2, Article 2
of the Tax Law, refers to management organizations, business organizations,
administrative organizations, and sites for factories and the exploitation
of natural resources, sites for undertaking construction, installation,
assembly and exploration work, and sites for supplying labor services,
and business agents.
Article 4 'Business agents' in Paragraph 2, Article 3 of
these Detailed Rules refers to companies, enterprises and other
economic organizations or individuals entrusted by foreign enterprises
to engage as agents in any of the following ways:
A. To represent the principals on a regular basis in arranging
purchases, signing purchase contracts and purchasing commodities
on commission;
B. To enter into agency agreements or contracts with the principals
to store, on a regular basis, products or commodities of the principals,
and to deliver such products or commodities on behalf of principals,
to other parties; and
C. To have authority to represent principals on a regular basis
in signing sales contracts or in accepting purchase orders.
Article 5 'Head office' in Article 3 of the Tax Law refers
to the central organization of an enterprise with foreign investment
which is organized in China as an enterprise legal person, according
to the laws of China, and which is responsible for the management,
operations and control over such enterprise.
For Income Tax payment purposes, the head office of an enterprise
with foreign investment shall consolidate all income form production
and business and other income derived from its branches within or
outside China.
Article 6 'Income derived from sources inside China' in Article
3 of the Tax Law refers to:
A. Income from production and business operations of enterprises
with foreign investment and foreign enterprises which have established
organizations or sites in China, as well as profits (dividends),
interest, rental income, royalties and other income arising within
or outside China which is actually connected with organizations
or sites established in China by enterprises with foreign investment
or foreign enterprises;
B. the following income received by foreign enterprises in China
who have not established organizations or sites;
a. profits(dividends) earned by enterprises in China;
b. interest derived within China such as on deposits or loans, interest
on bonds, interest on other provisional payments and deferred payments;
c. rental income derived from 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. incomes received from the transfer of property within the borders
of China, such as houses, buildings, structures and attached facilities,
and from the assignment of land-use rights, etc.;
f. other income derived from within the borders of on which tax
is levied according to determination of the Ministry of Finance.
Article 7 Where Chinese-foreign contractual joint ventures
do not have legal person status, each partner may separately calculate
and pay Income Tax in accordance with relevant State tax laws and
regulations; where such an enterprise submits an application which
is approved by local tax authorities, Income Tax may be calculated
and paid on a consolidated basis in accordance with the provisions
of the Tax Law.
Article 8 'Tax year' in Article 4 of the Tax Law begins
on January 1 and ends on December 31 of the Gregorian Calendar.
Where foreign enterprises have difficulty calculating taxable income
in accordance with the tax year stipulated in the Tax Law, they
may, after approval of their submitted application to the local
tax authorities, use their own 12-month fiscal year for tax calculations.
Where enterprises commence operations in the middle of a tax year
or actually operate for a period of less than 12 months in any tax
year due to such factors as merger or shut-down, they shall use
the actual period of operation as the tax year.
Enterprises that undergo liquidation shall use the period of liquidation
as the tax year.
Article 9 The responsible authority for taxation affairs
under the State Council referred to in Paragraph 3 of Article 8
and Item(4) in Paragraph 3 of Article 19 of the Tax Law and in Article
72 of these Rules, is the Ministry of Finance and the State Administration
of Taxation
Chapter 2 Calculation of Taxable Income
Article 10 The formula for the calculation of taxable income
referred to in Article 4 of the Tax Law is as follows:
A. Manufacturing:
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) + (financial
expenses)];
c. net sales = (gross sales) - [(sales returns) +(sales discounts
and allowances) ];
d. cost of products sold = (cost of products manufactured in 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 in the period =(manufacturing costs
for the period) + (inventory of semi-finished 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 = (materials directly consumed
in production for the period) + (direct labor costs) + (manufacturing
expenses).
B. 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 goods sold) - (taxes
on sales) - [(selling expenses) + (administrative expenses) +(financial
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).
C. Service Trades:
a. taxable income =(net business income) + (non-operating income)
- (non-operating expenses);
b. net business income = (gross business income) -[(taxes on business
income ) + (operating expenses) + (administrative expenses) + (financial
expenses)].
D. Other Types of Business: Calculations shall be made by referring
to the above formulas.
Article 11 The calculation of taxable income of an enterprise
shall, in principle, be on an accrual basis.
The income from the following business operations of an enterprise
may be determined by period, and used as the basis for the calculation
of taxable income:
A. where products are sold by installment payments, income from
sales may be itemized according to the invoice date when the products
are delivered ; income from such sales may also be determined according
to the date on which payment is made by the buyer, as agreed on
in the contract;
B. where construction, installation and assembly projects, and
provision of labor services extends beyond one year, income may
be determined according to the progress of the project or the amount
of work completed;
C. where the processing or manufacturing of heavy machinery, equipment
and ships for other enterprises extends beyond one year, income
may be determined according to the progress of the project or the
amount of work completed.
Article 12 Where Chinese-foreign contractual joint ventures
operate on a product sharing basis, the partners thereto shall be
deemed to have received income at the time of the division of the
products; the amount of income shall be calculated according to
the price at which the products are sold to third parties or with
reference to prevailing market prices.
Where foreign enterprises are engaged in the cooperative exploration
of petroleum resources, the partner thereto shall be deemed to have
received income at the time of the division of the crude oil; the
amount of income shall be calculated according to a price which
is adjusted periodically with reference to the international market
prices of crude oil of similar quality.
Article 13 With respect to an enterprise's income which
is in the form of non-monetary assets or rights and interests, such
income shall be calculated or appraised with reference to prevailing
market prices.
Article 14 'Exchange rate quoted by the State Administration
of Exchange Control' in Article 21 of the Tax Law refers to the
buying rate quoted by the State Administration of Foreign Exchange
Control.
Article 15 For income earned by enterprises in foreign currency,
where payment of Income Tax is made in quarterly installments in
accordance with the provisions of Article 15 of the Tax Law, taxable
income shall be calculated by converting the income into Renminbi
according to the exchange rate quoted by the State Administration
of Foreign Exchange Control on the last day of the quarter. At the
time of final settlement after the end of the year, no recalculation
and reconversion of foreign currency need be made for tax which
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 calculation 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 vouchers and documents for costs and expenses, and
is unable to correctly calculate taxable income, the local tax authorities
shall determine the profit rate and calculate 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.
Where the tax authorities would otherwise appraise and determine
profit rates or revenues in accordance with the provisions of the
preceding paragraphs, but where other stipulations are provided
by laws, regulations and rules, such other stipulations will apply.
Article 17 Where foreign air transportation and ocean shipping
enterprises are engaged in international transport business, they
shall use 5% of the gross revenues from passenger and cargo transport
and shipping services arising within the borders of China as taxable
income.
Article 18 Where an enterprise with foreign investment invests
in another enterprise within China, the profit (dividends ) so obtained
from the enterprise receiving such investment may be excluded from
the taxable income of the enterprise; however, expenses and losses
incurred in such above-mentioned investments shall not be deducted
from the 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 calculation of taxable income.
A. expenses connected with the acquisition or construction of fixed
assets;
B. expenses connected with the transfer or development of intangible
assets;
C. interest on capital;
D. various Income Tax payments;
E. fines for illegal business operations and losses due to the confiscation
of property;
F. surcharges and fines for overdue payment of taxes;
G. that part of losses due to natural disasters or accidents for
which there has been compensation;
H. donations and contributions other than those used in China for
public welfare or relief purposes;
I. royalties paid to the head office;
J. other expenses not related to production or business operations;
Article 20 For foreign enterprises with an establishment
or site in China, reasonable administrative expenses paid to the
head office in connection with production or business operations
of the establishment or site, may be itemized as expenses following
agreement by the local tax authorities after examination and verification
of documents issued by the enterprise's 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 itemized
as expenses following agreement by the local tax authorities after
examination and verification of documents with respect to loans
and expenses, which shall be provided by the enterprises.
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' in Paragraph 1 of this Article refers to
interest calculated 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 itemized
as expenses subject to the following limits:
A. Where annual net sales are 15 million yuan or less, such expenses
may not exceed 0.5% of net sales; for that portion of annual net
sales that exceeds 15 million yuan, such expenses may not exceed
0.3% of that portion of net sales.
B. Where annual gross business income is 5 million yuan or less,
such expenses may not exceed 1% of annual gross business income;
for that portion of annual gross business income that exceeds 5
million yuan, such expenses may not exceed 0.5% of that portion
of annual gross business income.
Article 23 Exchange gains or losses incurred by enterprises
during pre-construction of 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 may be itemized as expenses following
agreement by the local tax authorities after an examination and
verification of the submitted wage scales, supporting documents
and relevant materials.
Foreign social security premiums paid by enterprises for their
employees working in China shall not be itemized as expenses.
Article 25 Where enterprises engaged in such businesses
as credit and leasing operations, if there is actual requirements
and following approval by the local tax authorities of a relevant
submitted report, such enterprise may make yearly provisions for
bad debts, the amount of which shall not exceed 3% of the year-end
loan balances (not including inter-bank loans)or the amount of accounts
receivable, bills receivable and other such receivables, and which
may 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 loss in the current year; if the portion is less
than the bad debt provisions of the previous year, the balance shall
be included in taxable income of the current year.
Bad debt losses referred to in the preceding paragraph shall be
subject to examination and approval by the local tax authorities.
Article 26 "Bad debt losses" in Paragraph 2 of
Article 25 of these Rules refers to the following accounts receivable:
A. due to the bankruptcy of the debtor, collection is still not
possible after the use of the bankruptcy assets for settlement;
B. due to the death of the debtor, collection is still not possible
after use of the estate for repayment;
C. due to the failure of the debtor to fulfill repayment obligations
for over 2 year, collection is still not possible.
Article 27 Accounts receivable already itemized as bad debt
losses, but which are recovered in full or in part by an enterprise
in a subsequent year, shall be included in taxable income for the
year in which they were recovered.
Article 28 Where enterprises have establishments or sites
in China, unless otherwise provided by the State, they may deduct
as expenses, foreign income tax which has been paid on profits (dividends
),interest, rental income, royalties and other income received from
outside China and actually connected with such establishments or
sites .
Article 29 'Net assets or remaining property' in Article
18 of the Tax Law refers to the amount remaining after various liabilities
and losses have been deducted from all assets or property , when
an enterprise is liquidated.
Chapter 3 Tax Treatment for Assets
Article 30 'Fixed assets' of enterprises refers to 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 which are used for production or business operations
but do not have the nature of major equipment , have a unit value
of 2,000 yuan or less, or have a useful life of 2 years or less,
may be itemized as expenses according to 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,
after considering the degree of wear and tear of the fixed assets,
be such a 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 of the assets.
Article 32 An enterprise shall calculate the depreciation
of its fixed assets commencing with the month following the month
in which they are first put into use. The calculation of depreciation
shall cease in the month following the month in which the fixed
assets cease to be used.
Where enterprises are engaged in the exploitation of oil resources,
all investment made during the development stage shall be aggregated
and treated as capital expenditure, taking the oil(gas) field as
a unit; the calculation 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 calculation of depreciation
of fixed assets, the salvage value shall first be estimated and
deducted from the original cost of the asset, The salvage value
shall not be less than 10% of the original value; any request for
retaining a lower salvage value or no salvage value must be approved
by the local tax authorities.
Article 34 Depreciation of fixed assets shall be calculated
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, shall
be reported level-by-level to the State Administration of Taxation
for approval.
Article 35 The calculation of the minimum useful life of
fixed assets foe purpose of the depreciation is as follows:
A. for houses and buildings-20 years;
B. for railway rolling stock, boats and ships, machinery and other
production equipment-10 years;
C. for electronic equipment and means of transport , other than
railway rolling stock and boats and s hips, as well as such fixtures,
tools and furnishings related to production and business operations
-5 years.
Article 36 During the development stage and subsequent stages
of an enterprise engaged in the exploitation of oil resources, depreciation
of fixed assets in the nature of investments may be calculated on
a consolidated basis without retaining salvage value; the period
of depreciation shall not be less than 6 years.
Article 37 'Houses and buildings' in Article 35, Item (1)
of these Rules refers to 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, smokes tacks,
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 calculated, 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 and
vessels, machines, machinery and other production equipment referred
to in Item(2 ) in Paragraph 1 of Article 35 of these Rules is as
follows:
'railway rolling stock' includes various of locomotives, passenger
coaches, freight cars, as well as auxiliary facilities on rolling
stock for which no separate value is calculated;
'ships and vessels' includes various types of motor ships as well
as auxiliary facilities on ships and vessels for which no separate
value is calculated;
'machines, machinery and other production equipment' includes various
types of machines, machinery, machinery units, production lines,
as well as auxiliary equipment such as various types of power, transport
and conduction equipment.
Article 39 The scope of transport equipment other than electronic
equipment and railway rolling stock, ships and vessels' in Item(3)
of Article 35 of these Rules is as follows:
'electronic equipment' refers to equipment of mainly integrated
circuits, transistors, electron tubes, and other electronic components
whose primary function is to bring into use the application o f
electronic technology (including software) , including computers,
computer-controlled robots, and digitally controlled or program-control
systems;
'means of transport, other than railway rolling stock and ships
and vessels' includes airplanes, automobiles, trains, tractors,
motorcycles( motor boats), motorized sailboats, sailboats, and other
means of transportation.
Article 40 When it is necessary, for special reasons, to
shorten the useful life of fixed assets, an enterprise may submit
an application to the local tax authorities who, following examination
and verification, shall report level-by-level to the State Administration
of Taxation for approval.
Fixed assets which for special reasons referred to in the preceding
paragraph require the useful life to be shortened include:
A. machinery and equipment subject to strong corrosion by acid
or alkali and factory buildings and structures subject to constant
shaking and vibration;
B. machinery and equipment operated continually year-round for
the purpose of raising the utilization rate or increasing the intensity
of use;
C. 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 submitted, calculate depreciation according to the remaining
useful life.
Article 42 Where the value of fixed assets increases during
the course of use of the fixed assets, due to expenditures on expansion,
reconstruction and technical innovation, the value of the fixed
assets shall be increased; where the period of use of t he fixed
assets can be extended, the useful life shall be appropriately extended
and the calculation of depreciation adjusted accordingly.
Article 43 Fixed assets which continue to be used after
having been fully depreciated may not be further depreciated.
Article 44 The balance of proceeds received by an enterprise
on the transfer or disposal of fixed assets shall be entered into
the profit and loss account for the year, after deduction of the
undepreciated amount, or the salvage value and handing fees.
Article 45 The depreciation of fixed assets received as
gifts by enterprises may be calculated on the basis of a 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 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 stipulated in the agreement or contract.
Article 47 The amortization of intangible assets shall be
calculated 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 of intangible assets for which no useful life has been stipulated
or which have been developed internally shall not be less than 10
years.
Article 48 Where enterprises are engaged in the exploitation
of petroleum resources, reasonable exploration expenses incurred
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 filed 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 for the terminated contract field shall,
upon examination and confirmation and the issuance of certification
by the tax authorities, 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 10 years from
the date of the termination of the old contract.
Article 49 Expenses incurred by enterprises during the organization
period 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 5 years.
The period of organization mentioned in the preceding paragraph
refers to the period from the date of approval of the organization
of the enterprises to the enterprises to the date of commencement
of production and business operations(including trial production
and trial business operations).
Article 50 An enterprise's inventories of merchandise, finished
products, goods in process, semi-finished products, raw materials
, and other such materials shall be valued at cost.
Article 51 When inventory goods are delivered or used, enterprises
may choose one of the following such methods for valuing actual
costs: first-in, first-out; moving average; weighted average; or
last-in, first-out.
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 4 Business Dealings Between Associate d Enterprises
Article 52 'Associated enterprises' in Article 13 o f the
Tax Law refers to companies, enterprises and other economic units
that have any of the following relationships with other enterprises.
A. relationships of existing direct or indirect ownership of, or
control over, such matters as finance, business operations, or purchases
and sales;
B. direct or indirect ownership of, or control over, such enterprises
and another, by a third party;
C. any other relationship involving association for reciprocal
interests.
Article 53 'Business transactions between independent enterprises'
in Article 13 of the Tax Law refers to 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 for business
dealings between associated enterprises.
Article 54 Where prices of purchases 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 sequence
of methods of determination:
A. based on prices of the same or similar business activities between
independent enterprises.
B. based on the level of profits obtained from resale at unassociated
and unrelated third party prices;
C. based on costs plus reasonable expenses and a reasonable profit
margin;
D. based on any other reasonable method.
Article 55 Where interest paid or received for financing
between an enterprise and an associated enterprise exceeds or is
lower than the amount that which 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 similar business, adjustments
may be made thereto by the local tax authorities with reference
to normal rates of interest.
Article 56 Where labor service fees are paid or received
by an enterprise for provision of labor services 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 labor 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 itemized as expenses.
Chapter 5 Withholding at Source
Article 59 'profits, interest, rents, royalties and other
income' in Paragraph 1, Article 19 of the Tax Law shall, except
as otherwise stipulated by the State, be calculated on the basis
of gross income.
Gross royalties obtained from the provision of patents and proprietary
technology include the drawing and information fees, technical service
fees, personnel training fees and other related fees in relation
to the provision of patents and proprietary technology.
Article 60 'Profit' mentioned in Article 19 of the Tax Law
refers to income calculated according to the proportion of investment,
equity rights, stockholding, or other non-debt profit-sharing rights.
Article 61 'Other income' referred to 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
or from the assignment of right to land use.
'Gains' mentioned in the preceding paragraph means the balance
of the transfer proceeds after deduction of the original value of
the said 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 Paragraph
2, Article 19 of the Tax Law refers to payments in cash, by remittances,
or through transfer accounts, as well as payment made in the form
of non-monetary assets or rights and interests for an equivalent
amount of money.
Article 63 'Profits derived by an enterprise with foreign
investment' referred to in Paragraph 3 Item (1), Article 19 of the
Tax Law refers to the profit made by an enterprise with foreign
investment after the deduction of payment of Income Tax or reduced
Income Tax, or the profit which is exempted from income tax in accordance
with the provisions of the Tax Law.
Article 64 'International financial organizations' mentioned
in Paragraph 3, Item (2), Article 19 of the Tax Law refer to 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,
etc..
Article 65 'Chinese State banks' mentioned in Item (2) and
Item (3), Paragraph 3, Article 19 of the Tax Law refer to 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 reduction of or exemption from income tax
on royalties as provided for in Item (4), Paragraph 3,Article 19
of the Tax Law is applicable to the following:
A. royalties obtained from the provision of the following 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 to nurture new varieties of fauna and flora
and to produce high efficiency but low toxic agricultural chemicals;
c. technology to provide farming, forestry, fisheries and animal
husbandry with scientific production and management, to preserve
the ecological balance, and to increase the capability of fighting
to natural calamities;
B. royalties obtained from the provision of proprietary technology
to academies of science, colleges and universities, and other institutions
of high learning, scientific research or scientific experimentation;
C. royalties obtained from the provision of proprietary technology
for the exploitation of energy resources and the development of
communications and transportation;
D. royalties obtained from the provision of proprietary technology
for energy conservation and the prevention and control of environmental
pollution;
E. royalties obtained for the provision of the proprietary technology
for the development of the following important fields of science
and technology:
a. important advanced technology for the production of mechanical
and electrical equipment:
b. nuclear power technology;
c. technology for production of large-scale integrated circuits;
d. technology for production of photoelectric integrated circuits,
microwave semi-conductors and microwave integrated circuits, and
microwave electron tubes;
e. technology for manufacturing of high speed electronic 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 For incomes earned by foreign enterprises engaged
in projects in China, such as construction, installation, assembly
and exploration, and through provision of services such as consultation,
management and training and other labour services, the tax authorities
may appoint the payers of the contracted amounts and service fees
to act as Income Tax withholding agents.
Chapter 6 Tax Preferences
Article 68 Pursuant to the provisions of Article 6 of the
Tax Law, foreign investment enterprises encouraged by the State
which request preferential treatment in relation to Enterprise Income
Tax shall be implemented in accordance with the provisions of the
relevant laws and administrative rules and regulations promulgated
by the State.
Article 69 'Special Economic Zones' mentioned in Paragraph
1, Article 7 of the Tax Law refers to the Special Economic Zones
in Shenzhen, Zhuhai, Shantou and Xiamen and the Hainan Special Economic
Zone, specified by the relevant legislation or upon approval of
the State Council; 'Economic and Technological Development Zones'
mentioned therein refers to the economic and technological development
zones in the coastal port cities, designated by the State Council.
Article 70 'Coastal Economic Open Zones' in Paragraph 2,
Article 7 of the Tax Law refers to those cities, counties and districts
designated as Coastal Economic Open Zones by the State Council.
Article 71 'Assessment of Enterprise Income Tax at the reduced
rate of 15%' in Paragraph 1, Article 7 of the Tax Law shall be limited
to income obtained by enterprises from production and business operations
in the respective areas as specified in Paragraph 1,Article 7 of
the Tax Law.
'Assessment of Enterprise Income Tax at the reduced rate of 24%'
in Paragraph 2, Article 7 of the Tax Law shall be limited to income
obtained by enterprises from production and business operations
in the respective areas as specified in Paragraph 2, Article 7 of
the Tax Law.
Article 72 'Enterprises with foreign investment of a production
nature' in Paragraphs 1 and 2 of Article 7 and Paragraph 1 of Article
8 of the Tax Law refers to enterprises with foreign investment engaged
in the following industries:
A. machine manufacturing and electronics industries;
B. energy industries (not including exploitation of oil and natural
gas);
C. metallurgical, chemical and building material industries;
D. light, textiles and packaging industries;
E. medical equipment and pharmaceutical industries;
F. agriculture, forestry, animal husbandry, fisheries and water
conservation;
G. construction industries;
H. communications and transportation industries (not including
passenger transport);
I. development of science and technology, geological survey and
industrial information consultancy that directly serve production
and maintenance and repair service for production equipment and
precision instruments;
J. other industries as specified by the responsible department
for taxation affairs under the State Council.
Article 73 'Assessment of Enterprise Income Tax at the reduced
rate of 15%' in Paragraph 3, Article 7 of the Tax Law applies to
the following projects:
A. Enterprises with foreign investment of a production nature 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
more, and with a long payback period;
c. energy, transportation and port construction projects;
B. Chinese-foreign equity joint ventures engaged in port and dock
construction;
C. Foreign banks, branches of foreign banks, banks with Chinese
and foreign joint investment, and other institutions established
in the Special Economic Zones and other areas approved by the State
Council with capital put in by the foreign investor or operating
funds appropriated by the head offices of foreign banks to their
branches, totaling US $10 million or more, and with the period of
operation exceeding ten years or more;
D. Production-oriented enterprises with foreign investment established
in Shanghai Pudong New Area, as well as enterprises with foreign
investment engaged in energy and transport construction projects
such as airports, ports, railways, highways and power stations;
E. Enterprises with foreign investment recognized as new and high
technology enterprises established in New and High Technology Industrial
Development Zones approved by the State Council, as well as enterprises
with foreign investment recognized as new technology enterprises
established in Beijing New Technology Industrial Development Experimental
Zones;
F. 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 engaged in industries that
fall under Item (1) of the preceding paragraph shall, after applying
to the State Administration of Taxation for approval, pay Enterprise
Income Tax at the reduced rate of 15%.
Article 74 'The period of operation' in Paragraph 1, Article
8 of the Tax Law refers to the period starting from the date when
an enterprise with foreign investment actually goes into production
or business operations (including trial production and trial business
operations) to the date the enterprise terminates its production
and operation.
An enterprises with foreign investment applying for exemption from
and reduction in Enterprise Income Tax according to the provisions
of Paragraph 1,Article 8 of the Tax Law shall file with the local
tax authorities its line of business, the names of major products,
and the period of operations. 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' in Paragraph 2,
Article 8 of the Tax Law refers to the following provisions in respect
of exemptions from or reductions of Enterprise Income Tax promulgated
or approved for promulgation by the State Council:
A. Chinese-foreign equity joint ventures engaged in port and dock
construction and with the operation period exceeding 15 years or
more shall, upon the approval of their applications by the tax authorities
at the level of province, autonomous regions, or municipalities
directly under the State Council, in which the enterprises are located,
enjoy the exemption from Enterprise Income Tax from the first profit-making
year to the fifth year, and reduction in Enterprise Income Tax by
50% from the sixth year to the tenth year.
B. Enterprises with foreign investment established in the Hainan
Special Economic Zone and engaged in construction of such infrastructure
projects as airports, harbours, docks, highways, railways, highways,
power stations, coal mines and water conservation, etc., or in the
development and operation of agriculture, and with the operation
period exceeding 15 years or more shall, upon approval of their
applications by Hainan Provincial Tax Authorities, enjoy the exemption
from Enterprise Income Tax from the first profit-making year to
the fifth year, and reduction in Enterprise Income Tax by 50% from
the sixth year to the tenth year.
C. Enterprises with foreign investment established in Shanghai
Pudong New Area and engaged in construction of such energy and transportation
projects as airports, ports, railways, railways, highways and power
stations etc., upon approval of their applications by Shanghai Municipal
Tax Authorities, enjoy the exemption from Enterprise Income Tax
from the first profit-making year to the fifth year, and reduction
in Enterprise Income Tax by 50% from the sixth year to the tenth
year.
D. Enterprises with foreign investment established in the Special
Economic Zones and engaged in service-oriented industries, and the
foreign investment exceeding US $5 million and the operation period
exceeding ten years or more shall, upon approval of their applications
by the relevant Tax Authorities of Special Economic Zones, enjoy
the exemption from Enterprise Income Tax from the first profit-making
year, and reduction in Enterprise Income Tax by 50% from the second
and third year.
E. Foreign banks, branches of foreign banks, banks with Chinese
and foreign joint investment, and other institutions established
in the Special Economic Zones and other areas approved by the State
Council with capital put in by the foreign investor or operating
funds appropriated by the head offices of foreign banks to their
branches, totaling US $10 million or more, and with the period of
operation exceeding ten years or more shall, upon approval of their
applications by the relevant Tax Authorities, enjoy the exemption
from Enterprise Income Tax from the first profit-making year, and
reduction in Enterprise Income Tax by 50% from the second and third
year.
F. Chinese-foreign equity joint ventures recognized as new and
high technology enterprises and established in the new and high
technology industrial development zones approved by the State Council,
with the operation period exceeding ten years or more shall, upon
approval of their applications by the local tax authorities, enjoy
the exemption from Enterprise Income Tax from the first and second
profit-making years. For enterprises with foreign investment established
in the Special Economic Zones and the Economic and Technological
Development Zones, the preferential tax provisions of the Special
Economic Zones and the Economic and Technological Development Zones
shall remain applicable. For enterprises with foreign investment
established in Beijing New Technology Industrial Development Experimental
Zones, the preferential tax provisions of Beijing New Technology
Industrial Development Experimental Zones shall be applicable.
G. Export-oriented enterprises with foreign investment may, upon
the expiration of tax exemption and reduction period as provided
for in the Tax Law, enjoy a further 50% reduction in Enterprise
Income Tax based on the rate stipulated by the Tax Law, if the value
of their exported products of the year exceeds 70% of the total
value of their products of the year. But for the Special Economic
Zones and the Economic and Technological Development Zones and other
exported-oriented enterprises where Enterprise Income Tax has already
been reduced to 15% and the above-mentioned requirements are met,
Enterprise Income Tax shall be levied at 10%.
H. Technologically advanced enterprises with foreign investment
may, upon the expiration of the Enterprise Income Tax exemption
and reduction period as stipulated by the Tax Law, enjoy a further
50% reduction in Enterprise Income Tax for three years based on
the rate stipulated by the Tax Law, if they remain technologically
advanced enterprises..
I. Other provisions related to exemptions from or reductions of
Enterprise Income Tax will be promulgated or have been approved
for promulgation by the State Council.
Enterprises with foreign investment shall, in applying for exemptions
from or reductions of Enterprise Income Tax pursuant to the provisions
of Item (6), Item (7), or Item (8) of the preceding paragraph, submit
relevant documents of proof issued by departments responsible for
the examination and confirmation by the local tax authorities.
Article 76 'The first profit-making year' in Paragraph 1,
Article 8 of the Tax Law and in Article 75 of these Rules refers
to the first profit-making tax year after an enterprise goes into
production or business operations. An enterprise sustaining losses
in the initial stage of its operation may carry them over and make
them up in subsequent years in accordance with the provisions of
Article 11 of the Tax Law. The first profit-making year shall be
the year in which the enterprise begins to make profits after the
losses are made up.
The period for exemptions from or reductions of Enterprise Income
Tax, specified in Paragraph 1, Article 8 of the Tax Law and Article
75 of these Rules, shall be calculated continuously from the first
profit making year and shall not be deferred due to losses incurred
during the period.
Article 77 For an enterprise with foreign investment which
goes into operation in the middle of a year, if it makes profits
in the same year while the actual period of operations is less than
six months, it may choose to take the following year as the period
to start enjoying exemption from or reduction in Enterprise Income
Tax. However, Income Tax shall be levied in accordance with the
Tax Law on profits earned by the enterprise in that year.
Article 78 Unless otherwise provided by the State Council,
the preferential tax provisions of Paragraph 1, Article 8 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
enjoyed exemptions from or reductions of enterprise income tax pursuant
to the provisions of Paragraph 1, Article 8 of the Tax Law and Article
75 of these Rules shall, but whose actual operation falls short
of the stipulated period, shall repay the exempted and reduced Enterprise
Income Tax, except for those having sustained huge losses caused
by natural disaters or accidents.
Article 80 'Reinvest its share of profit directly' in Article
10 of the Tax Law refers to the profits earned by a foreign investor
before being drawn from an enterprise with foreign investment shall
be used directly to increase registered capital, or to make direct
capital investment in another Chinese-foreign joint venture after
such profits are appropriated.
In assessing the refundable tax amount in accordance with the provisions
of Article 10 of the Tax Law, the said foreign investor shall provide
supporting documents certifying the attributable year in which the
profits was reinvested; where no supporting documents can be provided,
the local tax authorities shall determine the year using the appropriate
methods.
Foreign investors shall, within one year from the date the funds
are actually invested, apply to the original tax collecting authorities
for tax refund and submit a document certifying the amount and duration
of the added or new capital investment.
Article 81 'Where regulations of the State Council provide
otherwise in respect of preferential treatment, such provisions
shall apply' in Article10 of the Tax Law refers to the case in which
a foreign investor, who make direct reinvestment in establishing
or expanding an export-oriented enterprise or a technologically
advanced enterprise in China or who reinvests profit from an enterprise
in Hainan Special Economic Zone directly into enterprises engaged
in infrastructure and agricultural development in Hainan Special
Economic Zone , may get a full refund of Enterprise Income Tax paid
on the reinvested amount, according to the relevant regulations
of the State Council.
In applying for a tax refund on reinvestment in accordance with
the provisions of the preceding paragraph, the said foreign investor
shall, besides going through the procedures provided in Paragraphs
2 and 3, Article 80 of these Rules, submit documents issued by the
relevant examination and confirmation departments, certifying the
relevant newly established or expanded enterprise as being an export-oriented
enterprises or technologically advanced enterprise.
Where a newly established or expanded enterprise, in which foreign
investors make reinvestment, fails to meet the standards of an export-oriented
enterprise, or is no longer recognized as a technologically advanced
enterprise within three years after it goes into production or operation,
the foreign investor shall pay back 60% of the tax refunded.
Article 82 'Refund of the Income Tax paid on the reinvested
amount' in Article 10 of the Tax Law and Paragraph 1, Article 81
of these Rules shall be calculated according to the following formula:
Tax refundable = Reinvested amount % [1 - (original investment
enterprise income tax rate + local income tax rate applicable to
the enterprise)] X original enterprise income tax rate applicable
to the enterprise X tax refund rate
Chapter 7 Tax Deduction
Article 83 'Income Tax already paid abroad' in Article 12
of the Tax Law means income tax actually paid abroad by an enterprise
with foreign investment on income received from sources outside
China. It does not include taxes paid but later reimbursed, or any
tax borne by others.
Article 84 'The Income Tax otherwise payable under this
Law with respect to income derived from sources outside China' in
Article 12 of the Tax Law refers to the tax payable on taxable income
calculated from income derived outside China by the enterprises
with foreign investment, after deducting the costs, expenses and
losses incurred in earning that income and which are allowed under
the relevant provisions of the Tax Law and these Rules. That tax
payable shall be the limit of deductions, and it will be calculated
country by country, but not item by item. The formula for calculation
is as follows:
The deduction limit for tax on income derived from sources outside
China = total tax sourced inside and outside China calculated according
to the Tax Law X income sourced from foreign countries % total income
sourced from inside and outside China.
Article 85 When the income tax actually paid on the income
derived from sources outside China, by enterprises with foreign
investment, is less than the deductible limit calculated according
to the provisions of Article 84 of these Rules, the foreign Income
Tax actually paid outside China may be deducted from the tax payable;
where the deductible limit is exceeded, the excess portion shall
not be allowed as a deduction from the tax payable, nor can it be
itemized as an expense; but the balance of the deduction limit in
subsequent years, with a carry over period not exceeding five years
at a maximum.
Article 86 The provisions of Article 83 to Article 85 of
these Detailed Rules shall apply only to enterprises with foreign
investment with head offices established within China. Enterprises
with foreign investment who apply tax deduction in accordance with
the provisions of Article 12 of the Tax Law shall submit the original
tax payment certificates of the same year issued by the relevant
tax authorities outside China; Duplicates or tax payment certificates
of different tax years are not acceptable as tax deduction certificates.
Chapter 8 Tax Collection and Administration
Article 87 Enterprises shall go to the local tax authorities
for tax registration within 30 days after completing business registration.
When an enterprises with foreign investment establishes or terminates
a branch outside China, it shall make supplementary tax registration,
change of registration or deregistration with the local tax authorities
within 30 days after the establishment or termination.
When going through the registration mentioned in the preceding
paragraph, the enterprise shall submit the relevant documents, licenses
and information in accordance with the provisions.
Article 88 Enterprises that change address, restructure,
merger, divide, dissolve or change in such major registered items
as invested capital, scope of business, etc., shall submit the relevant
approval documents to the local tax authorities for change of registration
or deregistration within 30 days after the completion of the change
in business registration or prior to the deregistration.
Article 89 Foreign enterprises which establish two or more
business establishments in China may select one of the organizations
for consolidated tax filing and payment. However, the establishment
shall meet the following requirements:
A. it shall assume supervisory and management responsibility over
the business operations of the other establishments;
B. it shall keep complete accounting records and vouchers which
accurately reflect the income, costs, expenses, profits and losses
of the other business establishments.
Article 90 A foreign enterprise which chooses to consolidate
its Income Tax filing and payment in accordance with the provisions
of Article 89 of these Rules shall select a business establishment
to make such application to the local tax authorities for examination
and approval according to the following provisions:
A. if all the business establishments involved in the consolidation
are located in the same province, autonomous region, or municipality
directly under the Central Government, the application is subject
to approval by the tax authorities of the province, autonomous region
or municipality;
B. if they are located in two or more provinces, autonomous regions,
or municipalities directly under the Central Government, the application
is subject to approval by the State Administration of Taxation.
Once the consolidated tax filing and payment of a foreign enterprise
is approved, any establishment of additional business organizations,
mergers, change of address, termination of operations, or shutdowns
shall be reported to the local tax authorities by the business establishment
in charge of the consolidated tax filing and payment, in advance
of the occurrence of any of the above situations. Any change in
the business establishments involving in the consolidated tax filing
shall be treated in accordance with the provisions of the preceding
paragraph.
Article 91 When different tax rates are applicable to different
business establishments of a foreign enterprise involved in consolidated
tax filing, the taxable income of different establishments shall
be separately calculated on a reasonable basis and income tax shall
be paid on the basis of the different tax rates.
When both profits and losses occur in the different business establishments
mentioned in the preceding paragraph and there is a net profit after
the profits and losses are offset against each other, Income Tax
shall be levied at a rate applicable to the profit-making enterprises.
For those establishments sustaining losses, Income Tax shall be
levied at a rate applicable to such establishments when they become
profitable after the losses have been made up against the income
in subsequent years; Income Tax on the amount of profits which have
been used to make up the losses shall be levied at a rate applicable
to those establishments which help the losing establishment to make
up losses.
Article 92 Notwithstanding the provisions of Article 91
of these Rules, when a business establishment in charge of consolidated
tax filing and payment can not accurately calculate the taxable
income of different establishments, the local tax authorities may
make a reasonable apportionment of the taxable income among the
business establishments, with reference to the respective proportions
of income, costs, expenses, assets, and the number of staff and
workers or the amount of salaries and wages.
Article 93 Enterprises with foreign investment which establish
branch offices in China shall implement their consolidated tax filing
with reference to the provisions of Article 91 and Article 92 of
these Rules.
Article 94 Income Tax to be paid in advance in quarterly
installments, as stipulated in Article 15 of the Tax Law, shall
be calculated according to the actual profit for that quarter; Enterprises
that have difficulty calculating advance payments based on actual
quarterly profits may pay the tax bases on one-fourth of the taxable
income of the previous year, or by adopting other method approved
by the local tax authorities.
Article 95 Enterprises shall file income tax returns and
final accounting statements with the local tax authorities within
the time limit prescribed in Article 16 of the Tax Law, whether
they make a profit or sustain a loss in that tax year. At the same
time as they submit their final accounting statements, enterprises
shall also submit audit reports signed by a certified public accountant
registered in China, unless otherwise provided by the State.
If an enterprise cannot submit the income tax returns and final
accounting statements within the time limit prescribed in the Tax
Law, due to special reasons, they shall make an application for
an extension to the local tax authorities within the filing time
limit.
Article 96 Branches or business establishments shall submit
the a copy of their final accounting statements to the local tax
authorities at the same time as they submit them to their respective
head offices or to the business establishments in charge of consolidated
tax filing.
Article 97 An enterprises which is merged, divided or dissolved
during the year shall, within 60 days of the termination of production
or business operations, settle the Income Tax liability for that
period with the local tax authorities, when the excess tax payment
or tax payment deficiency shall also be settled.
Article 98 Where an enterprises which converted its foreign
currency income into RMB according to the officially quoted exchange
rate when paying tax, has excess tax refundable, it shall convert
the refundable RMB tax amount into the original foreign currency
according to the exchange rate quoted on the day when the tax was
first paid, and then convert the sum back into RMB, according to
the exchange rate on the day of issue of the tax refund voucher.
Where there is a balance of tax payable, the balance of tax payable
shall be converted into RMB according to the quoted exchange rate
on the date of issue of the tax payment certificate.
Article 99 When an enterprise with foreign investment goes
through liquidation, it shall file its Income Tax returns with he
local tax authorities prior to the completion of the cancellation
of business registration,.
Article 100 Unless otherwise provided by the State, enterprises
shall keep inside China their accounting vouchers, books and statements
that support the correct calculation of taxable income.
Accounting vouchers, books and statements of enterprises shall
be completed in the Chinese language or in both the Chinese language
and foreign languages.
Enterprises using electronic computers for book-keeping shall treat
the accounting records in computer storage or output as account
books. Magnetic tapes and diskettes shall be kept properly before
hard copies are printed.
Accounting vouchers, books and statements, and reports of enterprises
shall be kept for at least 15 years.
Article 101 Invoices and certificates of receipts of enterprises
shall be submitted to the local tax authorities for approval before
they are printed and put into use.
The controlling mechanism over the printing and use of invoices
and certificates of receipts of enterprises shall be formulated
by the State Administration of Taxation.
Article 102 All enterprise Income Tax returns and tax payment
certificates shall be printed by the State Administration of Taxation.
Article 103 When the final due dates for tax filing and
tax payment fall on a Sunday or on an official public holiday, the
day following the public holiday shall be treated as the final due
date.
Article 104 The tax authorities, as specified in Paragraph
2, Article 19 of the Tax Law and Article 67 of these Rules, may
pay to tax withholding agents a withholding fee calculated at a
certain percentage of the tax withheld; Detailed procedures shall
be formulated by the State Administration of Taxation.
Article 105 If any taxpayer or withholding agent fails to
accept the examination of the tax authorities according to the relevant
provisions or fails to pay the surcharge for overdue payment within
the time limit prescribed by the tax authorities, the local tax
authorities may, according to the seriousness of the case, levy
a fine of 5,000 yuan
Article 106 If any enterprise violates the provisions of
Article 87, Paragraph 2 of Article 90, Article 95, Article 96, Article
97, Article 99, Article 100 and Article 101 of these Rules, the
tax authorities may, according to the seriousness of the case, impose
a fine of up to RMB 5,000 yuan.
Article 107 "Tax evasion" in Article 25 of the
Tax Law refers to unlawfully and deliberately carrying out activities
in violation of the provisions of the Tax Law such as altering,
forging or destroying bills, account vouchers or accounting books;
falsifying or overstating costs and expenses; concealing or understating
the amount of taxable income or revenue; or avoiding taxes or fraudulently
recovering taxes already paid.
Article 108 The tax authorities shall serve a Notice of
Penalty on the relevant parties in case involving penalties, in
accordance with the provisions of the Tax Law and these Rules.
Article 109 All units or individuals have the right to provide
information and assistance to report offenders or offenses against
the Tax Law. The tax authorities shall keep confidentiality the
identity of informants and reward them in accordance with the relevant
provisions.
Chapter 9 Supplementary Rules
Article 110 Where an enterprise with foreign investment
which completed business registration prior to the promulgation
of the Tax Law would have a higher tax burden based on the rate
stipulated in the Tax Law than that incurred before the enforcement
of the Tax Law, the original applicable tax rate may be adopted
during the approved operation period. If there is no agreed period
of operation, the original tax rate eilll apply for 5 years from
the date the Tax Law enters into force. However, if the tax liability
of a particular year during the aforesaid period is higher than
that assessed at the rate stipulated in the Tax Law, the tax rate
stipulated in the Tax Law shall be adopted starting from that tax
year.
Article 111 Enterprises with foreign investment which completed
business registration prior to the promulgation of the Tax Law but
have enjoyed preferential treatment of income tax exemption and
reduction pursuant to the laws and regulations before the enforcement
of the Tax Law, may continue to remain in effect until the termination
of the period of exemption and reduction.
Enterprises with foreign investment which completed business registration
before the enforcement of the Tax Law, but have not yet started
to make profits or have become profit-making for less than 5 years,
shall be granted Income Tax exemption and reduction for a due period
pursuant to Paragraph 1,Article 8 of the Tax Law.
Article 112 Enterprises with foreign investment which completed
business registration after the promulgation and before the enforcement
of the Tax Law may refer to the provisions of Article 110 and Article
111 of these Rules for application.
Article 113 The Ministry of Finance and the State Administration
of Taxation shall be responsible for the interpretation of these
Rules.
Article 114 These Rules shall come into force on the date
of enforcement of the Income Tax Law of the People's Republic of
China on Enterprises with Foreign Investment and Foreign Enterprises.
The Detailed Rules and Regulations for the Implementation of the
Income Tax Law of the People's Republic of China on Joint Ventures
with Chinese and Foreign Investment and the Detailed Rules and Regulations
for the Implementation of the Income Tax Law of the People's Republic
of China on Foreign Enterprises shall be annulled at the same time.
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