Provisional Regulations of the People's Republic of China on Business Tax

GUO WU YUAN LING [136] 1993.12.13

Article 1 Within the borders of the People's Republic of China, individuals and organizations who supply services subject to stipulations of the present regulations (hereinafter referred to simply as 'taxable services'), who transfer intangible assets, or who sell immovable properties, shall be taxpayers liable to Business Tax (hereinafter referred to simply as 'taxpayers'), and shall pay Business Tax in accordance with these Regulations.

Article 2 The items and tax rates subject to Business Tax are implemented in accordance with the "Business Tax Taxable Items and Tax Rates Table" attached to these Regulations.

Any adjustments to the taxable items and tax rates shall be determined by the State Council.

The tax rates applicable to enterprises operating entertainment businesses shall be determined within the scope of the stipulations of these Regulations, by the People's Governments of the provinces, autonomous regions and municipalities directly under the Central Government.

Article 3 For taxpayers engaged in taxable activities which fall into different tax items, the turnover, transfer and sales amounts (hereinafter referred to simply as 'turnover') within different taxable items shall be calculated separately. If it is not calculated separately, then the higher tax rate is applicable to all.

Article 4 Where a taxpayer provides taxable services, transfers intangible assets or sells immovable properties, the tax payable shall be calculated according to the amount of turnover and the following prescribed tax rates. The formula for calculating the tax payable is as follows:

Tax Payable = Turnover x Tax Rate

The tax payable shall be calculated in Renminbi, The amount of the taxpayer's turnover settled in foreign currency shall be converted into Renminbi according to the exchange rate prevailing in the foreign exchange market.

Article 5 The taxpayer's turnover shall be the total price and other charges received from the parties for the supply of taxable services, transfer of intangible assets or sales of immovable properties . However, the situations listed below are excluded:

A. The turnover of transport enterprises which carry passengers or goods from within the borders of the People's Republic of China to locations overseas and carry passengers or goods to other transport enterprises outside the borders, shall be determined by subtracting the transport charges paid to the sub-contracting enterprises from the transport charges for the whole journey.

B. Travel enterprises which organize tourist groups to travel outside the borders of the People's Republic of China and sub-contract the group care to other travel enterprises overseas, the turnover shall be determined by subtracting the payments made to the sub-contracting travel enterprise from the total tourist charges for the whole journey.

C. The turnover of the main contractors in the construction business who sub-contract work to other parties shall be determined by subtracting the payments made to sub-contractors from the total contract sum.

D. For re-lending businesses, the turnover shall be determined by subtracting the interest cost of borrowing from the interest received from lending.

E. The turnover of businesses buying and selling foreign currencies, negotiable securities and futures shall be determined by subtracting the buying prices from the selling prices.

F. The Ministry of Finance shall make stipulations about other situations.

Article 6 The following items shall be exempt from Business Tax:

A. Nursing services provided by nurseries, kindergartens, homes for the aged, welfare institutions for the handicapped, matchmaking and funeral services.

B. Services provided on individual basis by the disabled.

C. Medical services provided by hospitals, clinics and other medical institutions.

D. Educational services provided by schools and other educational institutions; and services provided by students participating in work-study programs.

E. Agricultural mechanical ploughing, irrigation and drainage, prevention and treatment of plant diseases and insect pests, plant protection, insurance for farming and animal husbandry, and related technical training services; breeding and the prevention and treatment of diseases of poultry, livestock and aquatic animals.

F. Admission fees for cultural activities conducted by memorial hall, museum, cultural centre, art gallery, exhibition hall, academy of painting and calligraphy, libraries and cultural protective units; admission fees for cultural and religious activities conducted at places of religious worship. Unless stipulated otherwise in the above paragraph, items liable to Business Tax exemption and reduction shall be determined by the State Council. No local governments or departments may regulate tax exemption or reduction on any items.

Article 7 Where a taxpayer concurrently has both tax exempt or tax reduced items, he shall make an appropriate independent calculation of the business amount of the exempt and reduced tax items; if no independent calculation of the business amount is made, he shall not receive exemption or reduction of tax.

Article 8 If the amount of the taxpayer's turnover does not reach the minimum threshold level for Business Tax as stipulated by the Ministry of Finance, it will be exempt from Business Tax.

Article 9 The time at which tax liability occurs for Business Tax is the day on which the taxpayer receives the turnover income or the day on which he receives a promissory note for receipt of the turnover income.

Article 10 Business Tax shall be collected by the tax authorities.

Article 11 Business Tax withholding agents are as follows:

A. Where financial organizations are authorized to extend loans, the financial organizations given authorization to extend loans shall be the withholding agents.

B. Where construction and installation business sub-contract out work, the main contractors shall be the withholding agents.

C. Other withholding agents as stipulated by the Ministry of Finance.

Article 12 Locations for payment of Business Tax are as follows:

A. Taxpayers providing taxable services shall report and pay tax to the local responsible tax authorities where the taxable services are provided. Taxpayers engaged in the transportation business shall report and pay tax to the local responsible tax authorities where the business establishment is located.

B. Taxpayers transferring land use rights shall report and pay tax to the local responsible tax authorities where the land is located. Taxpayers transferring other intangible assets shall report and pay tax to the local responsible tax authorities where the establishment is located.

C. Taxpayers selling immovable properties shall report and pay tax to the local responsible tax authorities where the immovable properties are located.

Article 13 The Business Tax assessable period shall be five days, ten days, fifteen days or one month. The actual assessable period of taxpayers shall be determined by the responsible tax authorities according to the amount of the tax payable; tax that cannot be assessed in fixed periods can be assessed on a transaction-by-transaction basis.

Where a taxpayer uses one month as an assessable period, he shall report and pay tax within ten days following the end of the assessment period. If an assessable period of five days, ten days or fifteen days is used, the taxpayer shall report and pay tax within five days after the end of the assessment period and a monthly tax return shall be filed with any balance of tax due settled within ten days from the first day of the following month.

The tax payment deadlines for withholding agents shall be implemented according to the above two stipulations.

Article 14 The collection and administration of Business Tax shall be conducted in accordance with "the Law of the People's Republic of China on Tax Collection and Administration" and relevant stipulations of these Regulations.

Article 15 Business Tax levied on enterprises with foreign investment and foreign enterprises shall be carried out in accordance with the relevant decisions of the Standing Committee of the National People's Congress.

Article 16 Interpretation of these Regulations is the responsibility of the Ministry of Finance; Detailed Rules for their Implementation will be determined by the Ministry of Finance.

Article 17 These Regulations come into effect as of January 1, 1994. The "Draft Regulations of the People's Republic of China on Business Tax" issued by the State Council on September 18, 1984 shall be cancelled at the same time.

Table of Business Taxable Items and Business Tax Rates

Editor's note: The Business Tax rate for the finance and insurance industry was adjusted to 8% as of January 1, 1997.