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Regulations of the People's Republic of China on Business Tax
CAI FA ZI [40] 1993.12.25
Article 1 These Detailed Rules were formulated on the basis
of regulations in Article 26 of ''Provisional Regulations of the
People's Republic of China on Business Tax" (hereinafter referred
to simply as 'Regulations').
Article 2 'Taxable Services' in Article 1 of the Regulations
refers to services within the scope of taxable items in the following
industries: communication and transportation; construction; finance
and insurance; post and telecommunications; culture and sport; entertainment;
and services.
Processing, repair and replacement do not belong to the taxable
services mentioned in the Regulations (hereinafter referred to simply
as 'non-taxable services').
Article 3 'Foreign currency, negotiable securities and futures
trade activity' in Item 5, Article 5 of these Regulations refers
to the buying and selling of foreign currency, negotiable securities
and futures by financial organizations (including bank and non-bank
financial organizations). Non-financial organizations and individuals
who buy and sell foreign currency, negotiable securities or futures
do not pay the Business Tax levy.
"Futures" in Item 5, Article 5 refers to non-commodity
futures; commodity futures are not subject to Business Tax levy.
Article 4 'Provision of taxable services transfer of intangible
assets or the sale of immovable property' in Article> 1 of the Regulations
refers to the activities of providing taxable services and the transferring,
with compensation , of intangible assets or ownership of immovable
property (hereinafter referred to simply as 'taxable activity').
However, 'taxable activity' does not include taxable services provided
by the staff of units or individual employers to their own units
or employers.
'With compensation' in the preceding paragraph includes receipt
of money, goods and other economic benefits.
Units and individuals who sell new buildings they have constructed
for themselves (hereinafter referred to simply as 'self-construction')
will be treated as having provided taxable services.
The transfer to other parties of limited rights or permanent use
rights on immovable property or the transfer of immovable property
to others without compensation, shall be treated as sales of immovable
property.
Article 5 A sales activity that includes both goods and
taxable, services is considered a mixed sales activity. Mixed sales
activity of enterprises, enterprise units of individual business
operators engaged in the production, wholesaling or retailing of
goods, shall be deemed to be sales of goods, and are not liable
to Business Tax; the mixed sales of other units and individual shall
be deemed to be provision of taxable services and will be subject
to Business Tax. Whether or not a taxpayers sales activity belongs
in the category of mixed sales will be determined by tax organizations
authorized by the State Administration of Taxation.
'Goods' in paragraph 1 refers to tangible moveable goods including
electricity, heat and gas.
'Enterprises, enterprise units or individual business operators
engaged in the production, wholesaling or retailing of goods' in
paragraph 1 includes enterprises, units of an enterprise nature
and individual business operators engaged principally in the production,
wholesaling and retailing of goods, and are also engaged in the
provision of taxable services.
Article 6 Taxpayers whose business includes both taxable
labour service and commodity trade or non-taxable labour service
shall account separately the taxable labour service and the non-labour
service or commodity trade. Where separate accounting is not done
or cannot be done accurately, then both the taxable labour service
and the non-taxable labour service or commodity trade will together
be subject to Value-Added Tax, but not to Business Tax.
Whether or not a taxpayer's mixed sales activity which includes
taxable labour service shall all be levied Value-Added Tax, shall
be determined by Tax Collection Authorities under the jurisdiction
of the State Administration of Taxation.
Article 7 If there is one of the following circumstances,
then there has been the supply of taxable services, transfer of
intangible property or sale of immovable property within the borders
of the People's Republic of China (hereinafter referred to simply
as 'within the borders') , as mentioned in Article 1 of the Regulations:
A. supply of services took place within the borders;
B. transportation of goods or people from within the borders to
outside the borders;
C. organization of tourists within the borders to travel outside
the borders;
D. use within the borders of transferred intangible property;
E. all immovable property sold is located within the borders.
Article 8 A person in any of the following circumstances
is supplying insurance services within the borders of China:
A. is an insurance organization in China which supplies insurance
services, but not an insurance organization in China which supplies
insurance services for export goods.
B. is an insurance organization outside China which uses domestic
goods to value insurance services.
Article 9 The 'organizations' referred to in Article 1 of
these Regulations are State- owned enterprises, collective enterprises,
private enterprises, joint-stock enterprises, other enterprises
and administrative organizations, institutions, military organizations,
social groups and other organizations.
The 'individuals' referred to in Article 1 of these Regulations
are individual households engaged in industrial or commercial activity
and other individuals engaged in business activity.
Article 10 When enterprises lease or contract out their
operations to others, the lessees or sub-contractors shall be the
taxpayers.
Article 11 Unless stipulated otherwise in Article 12 of
these Detailed Rules, organizations liable to Business Tax are those
organizations engaged in taxable activities and who receive money,
goods or other economic benefits from other parties; such organizations
are included, whether they have independent business accounting
or not.
Article 12 The taxpayer for central railway transportation
business shall be the Ministry of Railways. The taxpayer for joint-venture
railway transportation businesses shall be the joint-venture railway
companies. The taxpayers for local railway transportation businesses
shall be the local railway administrative organizations. The taxpayer
for the provisional administration of infrastructure railway transportation
shall be the organization for the provisional administration of
infrastructure railways.
Organizations engaged in the business of waterway, air, pipeline
and other forms of land transportation who are liable to Business
Tax, are those organizations engaged in transportation-business
and accountable for profit and loss.
Article 13 Charges made by legislative, judicial and administrative
authorities which meet the following conditions will not be liable
to Business Tax.
A. Charges permitted by documents of State Council, provincial
People's Governments or their finance or pricing departments, and
when the charges fall within standards prescribed in those documents.
B. Charges which are collected directly by the legislative, judicial
and administrative bodies themselves.
Article 14 'Other charges' in Article 5 of the Regulations
shall include handling fees, expenses, fund raising fees, payments
received and made on behalf of others, and all other charges of
any nature received from other parties.
All other charges shall be included in turnover in calculating
tax payable, regardless of the methods of calculation stipulated
in the accounting policy.
Article 15 Where the prices charged by the taxpayer for
the supply of taxable services, transfer of intangible assets or
sale of immovable property are obviously low and lack proper justification,
the competent taxation authorities have the right to calculate the
turnover using the following sequence of methods:
A. determine by using the average prices charged by the tax payer
in the same month for similar services or immovable properties;
B. determine by using the average prices charged by the tax payer
in the most recent period for similar services or immovable properties;
C. use the following formula to determine the assessable price:
assessable price = operating costs or project costs ¡Á (1+the cost
plus margin ratio)¡Â(l - the Business Tax rate).
The cost-plus margin rate in the above formula shall be determined
by the tax authorities under the People's Governments of the provinces,
autonomous regions and municipalities directly under the Central
Government.
Article 16 In accordance with the stipulation of Article
4 of the Regulations, taxpayers who calculate their turnover in
foreign currency can choose to convert their turnover into Renminbi
using the exchange rate quoted by the State on either the date the
turnover occurs, or on the first day of the month (in principle
the middle rate). However, the Renminbi conversion rate for the
turnover of financial and insurance enterprises shall be the exchange
rate determined in the previous year's financial statements.
Taxpayers decide in advance which conversion rate they choose to
use, and, once selected, it cannot be changed for one year.
Article 17 The turnover of transport enterprises who engage
in through transport activity shall be the actual income received.
'Other situations' in Item 6 of Article 5 of the Regulations includes
tourist enterprises who organize tourist groups to travel within
the borders of China; their turnover shall be calculated by subtracting,
from the tourist fees received, the fees for accommodation, meals,
transport, admission tickets and other expenses paid on the tourists'
behalf to other units.
Article 18 The turnover of taxpayers engaged in construction,
repair and decoration project operations' should include the prices
of all raw materials, other materials and energy used in the project,
regardless of the methods used to settle accounts with other parties.
The turnover of taxpayers engaged in installation project work
shall include the price of all equipment installed that has been
made part of the total installation project cost.
Article 19 The turnover from 'self-construction activities'
in Article 4 of the Detailed Rules shall be determined with reference
to the stipulations of Article 15 of the Detailed Rules.
Article 20 ' Re-lending business' in Item 4 of Article>
5 of the Regulations refers to the business of lending borrowed
fund to other business. The lending to others businesses of funds
taken from deposits of units or individuals or from the lender's
own capital shall not be regarded as re-lending activity.
Article 21 The turnover of an insurance business which reinsures
with other parties shall be determined by subtracting the premiums
paid to the re-insurer from the total insurance premiums received.
Article 22 The turnover of units or individuals providing
entertainment performances shall be determined by subtracting the
payments to units, entertainment companies or brokers who provide
performance venues, from the total box-office or block-booking proceeds.
Article 23 The turnover of the entertainment industry shall
be the various charges collected from customers in the entertainment
operations, including box-office receipts, on-stage fees, song dedication
fees, charges for cigarettes, liquor and drinks and any other items
of income from the entertainment operations.
Article 24 The turnover of tourist businesses shall be determined
by subtracting from the total charges received, payments made, on
behalf of the tourists, to other units for meals, accommodation
and transportation.
Where a tourism enterprise organizes a tour within the borders
for tourists taken from another tourist group, its Business Income
shall be determined according to Article 5, Item 2 of these Detailed
Rules.
Article 25 The turnover of units who give immovable properties
to others as a gift shall be determined in accordance with stipulations
of Article 15 of the Detailed Rules.
Article 26 The scope of tax exempt items as stipulated in
Article 6 of the Regulations is defined as follows:
A. 'services provided individually by the handicapped' in Paragraph
1, Item 2 refers to services provided to the public by a disabled
individual;
B. 'medical services provided by hospital, clinics and other medical
institutions' in Paragraph 1, Item 3 refers to services such as
diagnosis and treatment of patients, prevention of epidemics , child
delivery and family planning, as well as the medicines, medical
apparatus, hospital accommodation and meals provided in relation
to these services;
C. 'schools and other educational institutions' in Paragraph 1,
Item 4 refers to ordinary schools and other schools of various kinds
approved by People's Governments above the prefecture and city level,
and educational administration departments under such Governments
where academic qualifications of their students are recognized by
the State;
D. 'agricultural machine ploughing' in Paragraph 1, Item 5 refers
to the use of agricultural machinery in farming , forestry and husbandry
(including ploughing, planting, harvesting, threshing and plant
protection) ;
'irrigation and drainage' refers to the application of irrigation
and drainage to farmland;
'prevention and treatment of diseases and insect pests' refers
to the forecasting, prevention and treatment of diseases and insect
pests in farming, forestry, husbandry and fishery;
'insurance for farming and husbandry' refers to the provision of
insurance on animals and plants which are grown and raised in the
planting, breeding and husbandry industries;
'related technical training' refers to technical training services
related to agricultural machine ploughing, irrigation and drainage,
prevention and treatment of diseases and pests, and plant protection,
and also refers to services providing farmers with information on
insurance for farming and husbandry;
the scope of the tax exemption for the raising of birds, livestock
and aquatic animals and for disease prevention and treatment services
includes the medicines supplied and the medical treatment services
relevant to the labour services in this Item;
E. 'cultural activities held by memorial halls, museums, cultural
centres, art galleries, exhibition halls, academies of painting
and calligraphy, libraries and cultural protection units' in Paragraph
1, Item 6 refers to cultural activities held by these organizations
in their own area and that fall within the scope of taxable items
in sport and culture activity; the admission fees are the box -office
receipts received at the point of first entry;
'admission fees charged for cultural and religious activities held
at places of religious worship' refers to cultural and religious
activities held by temples, Taoist temples, mosques and churches.
Article 27 The scope of application of the Business Tax
minimum threshold referred to in Article 8 of the Regulations shall
be limited to individuals.
The ranges of the Business Tax minimum thresholds are stipulated
as follows:
where assessment is made by time period, the minimum threshold
shall be a monthly turnover of 200-800 yuan;
where assessment is made by transaction, the minimum threshold
shall be a turnover of 50 yuan per transaction (or per day);
where a taxpayers turnover reaches the minimum threshold Business
Tax shall be based on the total amount of turnover.
Tax authorities under the People's Government in the provinces,
autonomous regions and municipalities shall determine the minimum
threshold in accordance with actual local conditions and within
prescribed ranges, and should report the amounts to the State Administration
of Taxation.
Article 28 Where taxpayers transfer land use rights or sell
immovable property and accept payment in advance, tax liability
occurs on the date on which the advance payments were received.
Where taxpayers carry out self-construction activity as referred
to in Article 4 of the Detailed Rules, tax liability occurs on the
date on which the self-constructed buildings are sold and the turnover
received or on the day when documented evidence of the right to
collect the turnover is received.
Where taxpayers give immovable property to others as a gift, tax
liability occurs on the date on which title to the immovable property
is transferred.
Article 29 'Other withholding agents' referred to in Article
11 are stipulated as follows:
A. When overseas organizations or individuals have taxable activities
within the borders but have not established an administrative organization,
their tax-paying agent shall act as their withholding agent. If
they do not have an agent, then the transferees or the purchasers
shall act as their withholding agent.
B. When units or individuals put on performances for which the
tickets are sold by others, then the ticket sellers shall act as
their withholding agent.
C. When a performance manager is an individual, then the ticket
sellers shall act as withholding agents for his performance management
business.
D. When insurance is sub-contracted, the original insurer shall
act as withholding agent.
E. For the individuals transferring other intangible assets referred
to in Article 12, Item 2 of these Regulations, the transferee shall
act as withholding agent.
Article 30 Where taxpayers have provided taxable services
in another county or city and should report and pay tax to that
county or city taxation authorities, but have not reported or paid
the tax, the taxation authorities where the organization is located
or where the taxpayer resides, shall collect the overdue tax.
Article 31 Where taxpayers have undertaken projects which
straddle provinces, autonomous regions and municipalities directly
under the Central Government, shall report and pay tax to taxation
authorities in the locality where their organization is located.
Article 32 Where taxpayers who have taxable activity within
their own province, autonomous region or municipality directly under
the Central Government, and need to change the location where they
pay their tax, the taxation authorities in the province, autonomous
region or municipality where the taxpayer resides shall determine
the new location for paying tax.
Article 33 The assessment period for the finance industry
(excluding pawn-broking) shall be three months.
The assessment period for the insurance industry shall be one month.
Article 34 "More than" and "Less than"
in these Detailed Rules include both the number or level mentioned.
Article 35 These Detailed Rules shall be interpreted by
the Ministry of Finance or by the State Administration of Taxation.
Article 36 These Detailed Rules are effective as of the
date of their implementation. The "Detailed Rules for the Implementation
of Regulations of the People's Republic of China on Business Tax
(Draft)" issued by the Ministry of Finance on September 28,
1984 , at the same time, is annulled.
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