Notice of Beijing Local Taxation Bureau on Notice of State Administration of Taxation about the Issues Concerning Subsequent Management after Demolishing and Transferring Certain Administrative Examination and Approval (Some Taxes of Foreign-funded Enterprises, Foreign Enterprises and Foreign Individuals) Projects to Lower Levels
Jing Di Shui Fa [2004]No. 446

  
To the local taxation bureau of each district and county and sub-bureau directly under Beijing Local Taxation Bureau:
　　Notice of State Administration of Taxation about the Issues Concerning Subsequent Management after Demolishing and Transferring Certain Administrative Examination and Approval (Some Taxes of Foreign-funded Enterprises, Foreign Enterprises and Foreign Individuals) Projects to Lower Levels (Guo Shui Fa [2004] No. 80) is hereby forwarded to your, and the following requirements are put forward by taking into consideration actual working situation of the local tax system in Beijing, please follow and implement them.
　　1. Each taxation bureau should fully recognize the significance of reform of administrative examination and approval system, take earnest and effective measures, study and implement the relevant requirements of State Administration of Taxation on work, and properly conduct subsequent management work after cancellation of relevant administrative examination and approval of taxation.
　　2. Each taxation bureau should, according to the stipulations of State Administration of Taxation, prepare specific management measures by taking into consideration of the actual requirements of work, and report the problems found during implementation to the competent department of Beijing Local Taxation Bureau in time.
　Sep 6, 2004

Notice of the State Administration of Taxation Concerning the Follow-up Management Issues after Canceling and Delegating the Taxation Administrative Examination and Approval Items of Foreign-funded Enterprises, Foreign Enterprises and Foreign Individuals
Guo Shui Fa [2004] No.80.
　　The taxation bureaus of state taxation and those of local taxation of all provinces, autonomous regions, municipalities directly under the Central Government and cities directly under state planning, Whereas “The Resolution of the State Council on Cancellation and Adjusting the Third Group of Administrative Approval Items” (Guo Fa [2004] No.16.), we hereby issue the Notice of the follow-up management after canceling and delegating the taxation administrative examination and approval items made by foreign-funded enterprises, foreign enterprises (hereinafter referred to as enterprises) and foreign individuals as follows.
　　1. The follow-up management after Canceling the examination and approval of computation and payment of corporate income taxes on consolidated basis applied for by the Sino-foreign contractual joint ventures that do not constitute legal persons.
　　Subject to Article 7 of “The Detailed Rules on the Implementation of the Income Tax Law of the People’s Republic of .China for Foreign-funded Enterprises and Foreign Enterprises” (hereinafter referred to as the Detailed Rules for the Implementation of the Tax Law), the Sino-foreign contractual joint ventures that do not constitute legal persons can apply to the local tax authorities for approval and compute and pay the corporate income tax on consolidated basis according to the tax law , After cancellation of the approval of the said application, the companies that exercise as specified in the articles of incorporation the operation mold of joint operation, unified accounting and share profits, losses and investment risks can decide if they apply to pay the corporate income tax on consolidated basis at their sole discretion. Those that decide to pay the incorporate income tax on consolidated basis shall file the first annual income tax returns to the tax authorities with an attachment of the articles of incorporation and the resolution on application for payment of corporate income tax on consolidated basis passed by both parties of the Sino-foreign contractual joint venture. After receiving the tax reforms, the tax authorities shall confirm if the company suits the requirement for the tax return filed in a unified manner. Those suit the requirements will be accepted and granted relevant preferential treatment based on “The Notice of the State Administration of Taxation on Handling the Problems Arising from Implementation of Regulations on Corporate Income Tax Payment by Foreign Invested Enterprises and 　　Foreign Enterprises ”(Guo Shui Fa [1991]No. 165. ). Those that do no suit the requirement shall be notified to file another tax return with the tax authorities.
　　2. The follow-up management after Canceling the approval on change of depreciation methods by enterprises
　　In compliance with article 34 of the Detailed Rules for the Implementation of the Tax Law, companies shall adopt straight line depreciation for their fixed assets. Those that wish to make other depreciations shall submit their applications to the local tax authorities for examination before sending them through all levels of authorities to the State Administration of Taxation for approval. After cancellation of the said approval, the companies shall principally keep their existing depreciations for the fixed assets in operation. As for the newly purchased fixed assets and those that have been put into operation and made depreciations based on the tax law, if the company feel necessary to use the alternative depreciation, it can decide on whatever it prefers at its sole discretion and file tax returns with the tax authorities with the attachment of the descriptions of the alternative depreciation, the specific period of its application and reasons, etc. in the first year for tax payment after starting this depreciation or taking an alternative one. The tax authorities concerned shall accredit the said information and, when necessary, make an on-the-spot investigation. The tax authorities shall have the right to reject the depreciations when that are not justified by appropriate and approved reasons, and maintain the depreciation method prescribed in theTax Law.
　　3. The follow-up management after Canceling the Approval of Bad Debt Losses
　　Subject to Article 25 of the Detailed Rules for the Implementation of the Tax Law, the company’s bad debts receivable shall be subject to approval by the local tax authorities. After cancellation of the said approval, the company’s receivables, in line with the terms and provisions specified in Article 20 of the Detailed Rules for the Implementation of the Tax Law, can be deducted as the bad debt loss from the income tax payable computed by tax authorities. The companies shall provide statement with valid evidence for the reason of the deduction of the current bad debt losses when they file quarter or annual corporate income tax returns with the tax authorities. The tax authorities concerned shall carefully examine the said information pursuant to the relevant regulations on handling bad debt treatment when they assess the tax returns filed by companies and make on-the–spot investigation of the cases in which the statement is not sufficient or convincing to justify the reasons for the bad debt losses. The deducted bad debt from the income tax payable that is proved to be illegal and lack of evidence shall be otherwise demanded of tax payment by the tax authorities.
　　4. The follow-up management after canceling the approval of a foreign enterprise disbursement of their management fees from their head offices’ accounts
　　Subject to Article 25 of the Detailed Rules for the Implementation of the Tax Law, a foreign enterprise shall be allowed to pay reasonable management fee out of its head office account for the institution or office established in our country after providing the evidence to justify the payment. After cancellation of the said approval, a foreign enterprise shall provide evidence, for which an accreditation report made by a certified accountant shall be attached, for the collection, coverage, total amount and distribution ground and mold of the management fee provided by its head office for disbursement of its management fee for the institutions and offices established in our country. The tax authorities concerned shall carefully examine the said evidence pursuant to the relevant regulations of tax law when they assess the tax returns filed by companies and advise the company to provide complete evidence when the information provided are not sufficient or convincing to justify the reasons for the disbursement of the management fee. The tax authorities are authorized to take the relevant administrative actions to deal with the disbursement that does not meet the relevant requirements or is not justified by valid evidence. And the management fee disbursed by foreign banks from its head office’s account shall be dealt with strictly in compliance with “The Notice of State Administration concerning the Relevant Issues on Amortization by Foreign Banks’ Branches of the Management Fee of the Head Office" (Guo Shui Han [2002]No.11)
　　5. The follow-up management after canceling the approval of foreign oil companies’ application for carrying forward the exploration expanses between the contractual oil (gas) fields
　　Subject to Article 48 of the Detailed Rules for the Implementation of the Tax Law, a foreign oil company is allowed to amortize its reasonable exploration expanses incurred in the area specified in the contract that has terminated because of failure in finding any oil (gas) field of commercial value by the income generated from the production in the new area it has obtained by contract signed for joint exploration of oil (gas)within 10 years from the termination of the previous contract after being approved and certified by tax authorities if it has waived the previous contract to explore oil (gas) and maintains no business or management offices in China. After cancellation of the approval, a foreign oil company shall keep the account and evidence for the previous exploration expanses if it wishes to amortize the expanses by the income generated in the area obtained by new contract for oil (gas) exploration in future. If a foreign oil company can clearly justify that it is not able to maintain the relevant evidence, it can apply within one year from the termination of the previous contract to the relevant tax authority for advance audit of the expanses to be amortized by the income generated in the new area subject to contract signed in future.
　　6. The follow-up management after canceling the approval of regular tax exemption applied by Sino-foreign high-tech joint ventures
　　Subject to Clause 6, Article 75 ofthe Detailed Rules for the Implementation of the Tax Law, a Sino-foreign joint venture established in the state high-tech development zone and is deemed as a high-tech enterprise shall be exempted from corporate income tax for the first and second year after the year in which the enterprises start to gain profit after its application for tax exemption has been approved by the local tax authorities if it has a contractual operation period of over 10 years. After cancellation of the said approval, any Sino-foreign joint venture accredited as a high-tech enterprise by the relevant state authorities and established in the state high-tech development zone shall be exempted from corporate income tax for the first and second year if it has a contractual operation period of over 10 years. The enterprise shall file the tax returns attached with the information like the granted certification of high-tech enterprise and business license in the year of tax exemption. The tax authorities shall strictly examine the validity of the certificate granted to the enterprise and the operational period stated in the license when it assess the tax return filed by the enterprise and make on-the-spot investigation to prove its business situation and the qualification as a high-tech enterprise. In case any certificate is ascertained to be in error, the competent taxation authorities shall coordinate and check with the relevant ascertainment department, and make taxation adjustments accordingly
　　7. The follow-up management after canceling the approval of enterprises’ loan interests
　　Subject to Article 21 of the Detailed Rules for the Implementation of the Tax Law, if there is any reasonable interest of loans occurred in the operation of the enterprise, the enterprise shall provide the testimonials on borrowing loans and paying interest. Upon verification and consent by the local taxation organ, the interest is permitted to be listed as the expenditure. After cancellation of the said approval, an enterprise shall file the annual income tax return with the following documents in connection to each lease interest.
　　1) Comparison between the Loan interest and the common commercial loan interest at the effective date of the contract.
　　2) The capital verification report to prove the commitment of capital.
　　If the enterprise obtain loan from the unrelated bank financial institution, it can be free from providing the information specified in paragraph 1).
　　The local tax authorities shall examine and analyze the information about the loan interests presented by enterprises when it assesses the tax returns filed by the enterprises. The presented information that does not meet the requirements or not convincing enough to prove itself shall be requested to be replaced by new one . If an enterprise fails to provide the comparison of the loan interests, the interest spending shall not be deducted from the tax payable computed by the tax authorities. If an enterprise’s interest spending is higher than that of common commercial loan, the excessive amount shall not be deducted from the tax payable computed by tax authorities. As for the loan interests spent in an enterprise that the registered capital is not available, the case shall be handled strictly in compliance with “The Reply of State Administration of Taxation on the Issues of Listing the Interest of Foreign-funded Enterprises as Expenditures” (Guo Shui Han Fa [1991]No. 326 )
　　8．The follow-up management after canceling the approval of depreciation of the used fixed assets obtained by enterprises on the basis of the remained service life
　　Subject to Article 42 of the Detailed Rules for the Implementation of the Tax Law, an enterprise can make depreciation of the used fixed assets it has obtained on the basis of the remained service life which is shorter than that specified in the Detailed Rules for the Implementation of the Tax Law subject to approval by the local tax authorities of its application attached with evidence. After cancellation of the said approval, an enterprise can make depreciation of the used fixed assets it has obtained on the basis of the remained service life which is shorter than that specified in the regulations on implementation of tax law. An enterprise shall provide the evidence to state the purchase price, service life spent, the remained service life, etc. of the fixed assets of which depreciation is made in accordance with the said regulations when it files the annual income tax return with the tax authorities.
　　9. The follow-up management after canceling the approval of enterprises’ modification of inventory pricing method
　　Subject to Article 51 of the Detailed Rules for the Implementation of the Tax Law, an enterprise shall not change the inventory pricing method that has chosen. In case it is necessary to change the pricing method, it shall apply to the local tax authorities for the approval of the change in the next tax year. After cancellation of the said approval, the enterprise that needs to change its inventory pricing method shall submit written statement to the relevant tax authorities prior to the next tax year. The tax authorities concerned shall analyze and prove the statement. In case the statement is proved to be unreasonable or involves the fraud of intentionally delay the payment of tax payable, the tax authorities concerned may notify the enterprise to maintain the existing inventory pricing method.
　　10. The follow-up management after canceling approval of pre-income-tax deduction of asset loss
In accordance with “The Notice of the State Administration of Taxation on the Management of the Pre-income-tax Deduction of Asset Loss of Foreign-funded Enterprises (Guo Shui Fa [2000] No.46,), an enterprise’s asset loss can be deducted from the tax payable computed in the current period subject to approval of the tax authorities. After cancellation of the said approval, an enterprise that suffers asset loss shall attach with the annual tax return filed with the tax authorities the written statement of the type, loss degree, quantity, price, loss cause and deduction period for the tax of the asset loss, and the identified evidence of the damages suffered by the relevant departments of the enterprise as well as , if any, the identified evidence made by other enterprises, departments and institutions that have caused the loss. .
　　The tax authorities concerned shall especially examine the asset loss of the enterprises when they investigate the payment of tax payable by them and take the relevant measures to assess the tax on the asset claimed to loss but no said evidence is available and the loss is impossible to identify.
　　The document Guo Shui Fa [2000] No. 46, issued by the State Administration of Taxation on March 3, 2000 is terminated at the same time.
　　11. The follow-up management after canceling the approval of the assessment of the taxes imposed on foreign enterprises’ resident representative offices on the basis of their expenditures .
In accordance with “The Notice of the State Administration of Taxation concerning the Strengthening 　　Management of Taxes Imposed on the Resident Representative Offices of Foreign Enterprises” (Guo Shui Fa [1996] No. 165,), a foreign enterprises’s resident representative office may be imposed of the tax assessed on the bases of its expenditures subject to its application, be directed to and approved by State Administration of Taxation via certain channel, for the assessment of the taxable services that is engaged in. State Administration of Taxation has modified the management and the items of the taxes to be imposed on the WOFE’s resident representative offices on the basis of the assessment of their expenditures and canceled the approval of the assessment of the taxes to be imposed on the WOFE’s resident representative offices on the basis of their expenditures in accordance with “The Notice of State Administration of Taxation on the Management of Taxes Imposed on the WOFE’s Resident Representative Offices” (Guo Shui Fa [2003] No. 28, ,) issued by State Administration of Taxation on March 12, 2003. After cancellation of this approval by the State Council, the tax authorities at all levels shall continue to implement the document of Guo Shui Fa. [2003] No. 28.
　　12. The follow-up management after Canceling the Approval of Exemption of Taxes for the Technology Introduced into Our Country by WOFE and Foreign Individuals
　　In accordance with Article 2 of “The Notice of Ministry of Finance and State Administration of Taxation on Tax Imposition Related to the Resolution of CPC Central Committee and State Council on Improvement of Technological Innovation and Development of High-tech Industry and Realization of Its Industriliazation” (Cau Shui Zi [1999] No. 273, , WOFE and foreign individuals can be exempted from business tax for the income they earned by introducing technology into China subject to their applications directed to and approved by State Administration of Taxation via certain channel. After cancellation of the said approval, the domestic assignee shall keep the following information concerning the payment to the said transferred technology for the reference of the tax authorities.
　　1) The permit document issued by the state authorities concerned.
　　2) The contract for the technology transfer.
　　The WOFE and foreign individuals shall specify the prices for technology and the trade mark respectively in the contract if the trade mark is transfered with the technology into our country. The price of the trade mark will be assessed as no less than 50% of the total contract price if it is not specified in the contract or is apparently set lower.
　　13. The follow-up management after canceling the approval of personal income tax return filed by foreign tax payer at a appointed place
　　In accordance with Article 10 of “The Notice of the State Administration of Taxation on Issuance of the Regulations on Imposition of Personal Income Tax” (Guo Shui Fa [1994] No. 089), a foreign tax payer who temperately stays in China to work or provide service in several places can file his or her tax return with the tax authorities to pay tax at a appointed place subject to the approval of his or her application by the tax authorities. After cancellation of the said approval, a foreign tax payer who temperately stays in China to work or provides service in several places can file his or her tax return with the tax authorities to pay tax at the place where he or she is actually working according to the regular schedule specified by tax law. That is to say, he or she can file return to pay tax at the very place he or she arrives at when the time is due for the tax payment.
14.The follow-up management after canceling the approval of the exemption of personal income tax imposed on the housing and food allowances for foreign individuals
　　In accordance with Article 2 of “The Notice of Ministry of Finance and State Administration of Taxation on Imposition of Individual Income Taxes ” (Cai Shui Zi [1994 ]No. 020) and “The Reply of State Administration of Taxation to Execution of Individual Income Tax Exemption from the Foreign Individual’s Personal Allowances (Guo Shui Fa [1997] No. 54) a foreign individual can be exempted from paying personal income taxes for the allowances of housing, food, laundry, home moving, travel on business, holiday spending, language training, issue’s education, etc. he or she has obtained without paying any cash or by complete reimbursement subject to approval of his or her application with the relevant evidence for the allowances by the tax authorities concerned. After cancellation of the said approval, a foreign individual who has obtained the said allowances shall submit the relevant proof and statement when he or she files tax return to pay or withhold and remit personal income tax pursuant to the document of Guo Shui Fa [1997] No.54 . The tax authorities concerned shall carefully examine the income of allowance filed by the tax payers or the withholding agents pursuant to the document of Guo Shui Fa [1997] No.54. The tax authorities concerned shall request the tax payer or withholding agent to submit mew proof and statement for the income of allowances to replace the previously submitted ones that are not convincing enough to prove the allowances to be exempted form payment of tax within a limited period of time and for the incomes of allowances that are not justified by valid proof and statement, the tax authorities has the right to demand the payment of the relevant taxes.
　　15. The follow-up management after canceling the approval of the exemption of individual income tax imposed on the salaries obtained by foreign individuals staying in China that are payable before he or she came to China.
　　In accordance with Article 1 of “The Reply of State Administration of Taxation to Imposition of tax on the Bonus of Several Months Obtained by a Foreign Employee from Dalian Office ” (Cai Shui Zi [1997 ] No. 546), a foreign individual staying in China without his or her own house who has obtained the bonus of several months at one time can be exempted from paying personal income tax subject to approval by the local tax authorities if he or she can provide the evidence that the bonus he or she has obtained containing the portion that he or she should get before coming to China is in compliance with the incentive system of his or her employer. After cancellation of the said approval, a foreign individual staying in China without his or her own house shall provide statement for the said exempted bonus and attach a copy of his or her employer’s incentive system to prove that the said bonus contains the portion he or she should have obtained before coming to China and that it can be exempted from paying tax. Otherwise, the tax authorities has the right to impose relevant tax on it.
　　16. The follow-up management after canceling the approval of the periodic imposition of tax on the securities like shares
　　In accordance with Article 2 of “The Notice of State Administration of Taxation on Imposition of Levying Individual Income Taxes on Incomes Generated from the Deductions or Subsidizes Incomes Given by Employer to Individuals for Subscription of Securities like shares ” (Cai Shui Zi [1998] No. 009), an individual who has obtained discount or allowance from his or her employer can pay tax averagely each month within six months subject to approval by the local tax authorities of his or her application if the income at one time is too much to be assessed as the salary of the current month. After cancellation of the said approval, an individual who has obtained the said income that is too much to be assessed can pay tax averagely each month with the income obtained diluted in the salary of each month to pay the tax within six months at his or her option and attach statement with the tax return to indicate that the tax is to be paid on the basis of assessment of the salary.
　　The said option is not changeable once made.
　　17. The follow-up management after canceling the approval of tax credit for the decentralized enterprises that have purchased domestic equipment
　　In accordance with Article 10 of “The Notice of State Administration of Taxation on Issuance of the Regulations on Deduction and Offset of Enterprise Income Tax of Foreign-funded Enterprises and Foreign Enterprises that have Purchased Home Made Equipment ” (Cai Shui Zi [2000] No. 90), an enterprise that has purchase dhome made equipment for application of deduction and offset of enterprise income tax shall submit application to the relevant tax authorities within two months after purchasing the equipment, and the application that will be passed on via the tax authorities at all levels shall be approved by the authorities of provincial level. The above-approval shall be transferred to the tax authorities at regional and city level, and an enterprise that has purchased domestic equipment shall submit the relevant information regularly to the competent tax authorities when they apply for deduction and offset of enterprise income tax pursuant to the document Guo Shui Fa [2003]No. 90 . The competent tax authorities shall pass on the application to the tax authorities at regional and city level for approval and the latter shall carefully examine and approve the application and file the approval with the tax authorities at provincial level pursuant to “The Notice of State Administration of Taxation on Deduction and Offset of Income Tax of Foreign-funded Enterprises and Foreign Enterprises that have Purchased Home Made Equipment ” (Cai Shui Zi [2000 ] No. 90).
　　18. This notice will come into effect from July 1, 2004. The application under examination before the effective date of this notice shall be handled pursuant to the previous regulations.
June 25,2004