The Local Taxation Bureaus and Direct Sub-bureaus in each district and County,
We hereby forward to you the Notice of the State Administration of Taxation on the Management after Canceling and Transferring to Lower Level the Administrative Examination and Approval for Several Taxation Items Concerning Foreign-invested and Overseas Enterprises and Individuals (Guo Shui Fa [2004] No. 80), and propose the following requirements combined with the practical situation of the taxation system in Beijing. Please implement them.
　　1. Each bureau shall fully understand the important meaning of the reform of administrative examination and approval, study and implement the working requirements proposed by the state administration, and take effective measures to do a good job in the management after canceling relevant administrative examination and approval.
　　2. Each bureau shall, in accordance with the provisions of the state administration, formulate corresponding management measures combined with practical requirements and report in time the problems found in implementation to the relevant competent departments of the city bureau.

Sept. 6, 2004



Document of the State Administration of Taxation

Guo Shui Fa [2004] No. 80

　　The Notice of the State Administration of Taxation on the Management after Canceling and Transferring to Lower Level the Administrative Examination and Approval for Several Taxation Items Concerning Foreign-invested and Overseas Enterprises and Individuals

　　The state taxation bureaus, local taxation bureaus in each province, autonomous region, municipality and city specially designated in state plan,
To implement the Decision of the State Council on the Third Time’s Canceling and Adjusting Administrative Examination and Approval (Guo Fa [2004] No. 16), we, in accordance with the Document Guo Fa [2004] No. 16, notify you of the management after canceling and transferring to lower level the administrative examination and approval for several taxation items concerning foreign-invested and overseas enterprises (hereinafter referred to as enterprises) and individuals as follows:
　　1. The management after canceling the examination and approval for application of the Sino-foreign joint ventures that are not legal entities for united calculation of business income tax.
　　In accordance with Article 7 to the Implementing Rules of the Income Tax Law for Foreign-invested and Overseas Enterprises of People’s Republic of China (hereinafter referred to as the Implementing Rules of the Tax Law), The Sino-foreign joint ventures that are not legal entities may, upon approval by local taxation bureau, apply for unitedly calculating the income tax payable according to the tax law. After the above examination and approval is canceled, the enterprises that defined joint operation, united audit and joint responsibility for profits and losses in their articles of association may have a mind of their own whether they adopt united application for paying business income tax. All that decide to adopt united payment of business income tax shall submit such relevant documents as the article of association, the resolution of united application for business income tax when submitting to the tax organ the income tax declaration form for the first time. After accepting the application, the competent tax organ shall recheck whether the enterprise meets the requirements of united application for tax payment. If the enterprise meets the requirements, the tax organ shall accept the application and handle the application in accordance with the Notice of the State Administration of Taxation on Implementing Several Matters on the Income Tax of Foreign-invested and Overseas Enterprises (Guo Shui Fa [1991] No. 165). If the enterprise fails to meet the requirements, the tax organ shall notify each party of the joint venture of paying the income tax respectively.
　　2. Management after canceling the examination and approval of depreciation methods
　　In accordance with Article 34 to the Implementing Rules of the Tax Law, the fixed assets of enterprises shall be depreciated with straight method. If an enterprise needs to adopt other methods, it shall submit an application to the local tax organ, which shall, upon examination, submit the application level by level to the state administration for approval. After the above examination and approval is canceled, enterprises shall principally still adopt straight method to depreciate their fixed assets that have been used. If the newly purchased fixed assets and the used fixed assets that used to be depreciated in straight way need to adopt or be changed to adopt the methods other than that prescribed in the tax law for depreciation, the enterprise may have their own mind and submit to the tax organ the materials on the new methods of depreciation, specific period and reasons of change with the annual income tax application in the first tax year when the depreciation method of fixed assets is changed. The competent tax organ shall demonstrate the above materials submitted by the enterprise and conduct field investigation when necessary. In case of weak reasons or unreality, the competent tax organ shall have the right to make tax adjustment and still adopt the method prescribed in the tax law for depreciation.
　　3. The management after canceling the examination and approval for doubtful accounts loses
　　In accordance with Article 25 to the Implementing Rule of the Tax Law, the doubtful account arises from an enterprise’s account receivable shall be examined and acknowledged by the local tax organ. After the above examination and approval is canceled, the part of an enterprise’s account receivable that can be treated as the doubtful account in accordance with Article 26 to the Implementing Rule of the Tax Law may be deducted when calculating the income tax payable. The enterprise shall, when submitting its quarter or annual declaration form of income tax, account for the doubtful account loses in that period with effective certificates. The competent tax organ shall, when examining and assessing the tax application, carefully verify the above certificates submitted by the enterprise according to the provisions on taxation of doubtful accounts. In case of weak reasons and unclear accounts, the tax organ shall conduct field investigation and verification, and demand the enterprise to re-produce evidence, render an account or make notarization. In case the doubtful accounts that have been deducted fail to meet the requirements and the concerned enterprises cannot provide certificates, the tax organ shall make adjustment for tax payment accordingly.
　　4. The management after canceling the examination and approval for the overhead of the headquarter listed foreign enterprises
　　In accordance with Article 25 to the Implementing Rule of the Tax Law, an overseas enterprise that sets up offices or departments in China shall provide relevant certificates to apply for listing its reasonable overhead paid to its headquarter related to the said offices or departments upon the examination and approval by local tax organs. After the above examination and approval is canceled, the overseas enterprises that list the overhead paid to their headquarters related to their offices and departments set up in China shall submit the certificates provided by the headquarter on the range of overhead collection, the total amount, the basis and method of apportionment together with the accountant verification reports on the above materials. The competent tax organ shall, during the examination and assessment of the tax application, examine the certificates provided by the enterprises in accordance with the tax law. In case the materials are incomplete and unable to prove that the overhead is reasonable, the tax organ shall demand the enterprise to supplement the materials. For those that fail to meet the tax requirements or fail to provide effective materials, the tax organ shall have the right to make corresponding tax adjustment. The dealing of overhead listed by the branches of an overseas bank shall strictly comply with the Notice of the State Administration of Taxation on the Overhead Listed by Overseas Bank Branches (Guo Shui Han [2002] No. 11).
　　5. The management after canceling the examination and approval for an overseas oil company transferring the exploration charge from one oil (gas) exploration contract area to another
　　In accordance with Article 48 to the Implementing Rule of the Tax Law, for an overseas oil company that stops its operation in a contract area it owns due to no commercial oil (gas) field is found, and neither has the contract of oil (gas) exploitation nor remains its operation unit in China, if it has invested reasonable exploration charge in the contract area upon the verification by the tax organ with a certificate, and it signs a new joint oil (gas) exploration contract within 10 years as of the termination date of the contract, it is allowed to amortize the exploration charge in the production income earned in its new contract area. After the above examination and approval is canceled, if an overseas oil company needs to amortize the above-said exploration charge in its new joint oil (gas) exploration contract area, it shall keep the former accounts and certificates of the exploration charge. If the overseas oil company does have adequate reason that it is unable to keep the former certificates, it may apply to the competent tax organ within one year after the former contract terminates for pre-auditing and verification to the exploration charge allowed to be amortized in the new contract area.
　　6. The management after canceling the examination and approval for the tax reduction and exemption in the fixed period for Sino-foreign high-tech joint ventures
　　In accordance with Section (6), Article 75 to the Implementing Rule of the Tax Law, a Sino-foreign joint venture set up in national high-tech industry zone and defined as a high-tech enterprise may, if its operation period reaches 10 years or above, apply to the local tax organ for exemption from business income tax of the first and second year beginning from the profitable year. After the above examination and approval is canceled, a Sino-foreign joint venture set up in national high-tech industry zone and defined as a high-tech enterprise by relevant department may enjoy exemption from business income tax of the first and second year if its operation period reaches 10 years or above. The enterprise shall, when submitting annual income tax declaration form during the period when enjoying tax exemption, provide such materials as the certificate of high-tech enterprise, its business license and so on. The competent tax organ shall, when examining and assessing the tax application, strictly examine the validity period of the certificate provided by the enterprise and the operation period on the business license, and conduct field investigation to verify whether the actual situation of the enterprise meets the requirements of a high-tech enterprise. If the tax organ finds something wrong with the certificate, it shall check with relevant department and make corresponding tax adjustment.
　　7. The management after canceling the examination and approval for business loan rate
　　In accordance with Article 21 to the Implementing Rule of the Tax Law, when an enterprise shall pay loan rate related to its operation, it shall provide the certificates of the loan rate to list it in the expenditure upon the examination and approval by the local tax organ. After the above examination and approval is canceled, the enterprise may provide the following materials for each loan when submitting its annual income tax declaration form.
　　1. The comparison between the general business loan rate when the loan contract is signed and the loan rate of this loan.
　　2. Report of registered capital verification
　　If an enterprise raises a loan from a non-related bank or financial department, the materials prescribed in Item 1 are not required.
　　When examining and assessing the tax declaration submitted by enterprises, the tax organ shall analyze relevant interest materials provided by the enterprises. In case the materials fail to meet the requirements or effectively account for the situation, the tax organ shall demand the enterprises to re-provide materials in a time limit. In case an enterprise fails to provide the comparison between loan rates, its interests paid shall not be deducted from the income. In case an enterprise pays the interest higher than that calculated by general business interest rate, the difference shall not be deducted from the income. The loan interest paid by an enterprise that has not paid the registered capital shall be dealt with strictly according to the Reply of the State Administration of Taxation on the Interests Listed by Foreign-invested Enterprises (Guo Shui Han Fa [1991] No. 326).
　　8. The management after canceling the examination and approval for the depreciation of fixed assets according to valid fixed number of years
　　According to Article 42 to the Implementing Rule of the Tax Law, if an enterprise obtains used fixed assets and the service life of the fixed assets is shorter than the depreciation term prescribed in the Implementing Rule of the Tax Law, the enterprise may submit certificates and evidence to depreciate the fixed assets according to the valid service life of the fixed assets upon the examination and approval by the local tax organ. After the above examination and approval is canceled, if an enterprise obtains used fixed assets and the service life of the fixed assets is shorter than the depreciation term prescribed in the Implementing Rule of the Tax Law, the fixed assets may be depreciated according to actual service life. The enterprise shall, when submitting the annual income tax application, provide materials to the competent tax organ to account for price, service life and valid service life of the fixed assets that is depreciated in accordance with the above provisions.
　　9. The management after canceling the examination and approval for enterprises’ alternation of inventory pricing
　　In accordance with Article 51 to the Implementing Rule of the Tax Law, the inventory pricing shall not be altered once determined. If an enterprise needs to alter its inventory pricing, it shall submit the new inventory price before the next tax year for the approval by the local tax organ. After the above examination and approval is canceled, if an enterprise needs to alter its inventory pricing, it shall account for the reason of alternation to the competent tax organ before the next tax year. The competent tax organ shall analyze and verify the reason of inventory pricing alternation. In case of inadequate reason or intent to delay the tax payment, the competent tax organ may demand the enterprise to maintain the original inventory pricing.
　　10. The management after canceling the examination and approval for the deduction of the financial losses from the income tax payable.
　　In accordance with the Notice of the State Administration on the Deduction of Financial Losses of Foreign-invested Enterprises from the Income Tax Payable (Guo Shui Fa [2000] No. 46), when an enterprise suffers financial losses, the losses may be deducted from the income tax payable in the same period upon the examination and approval by the tax organ. After the above examination and approval is canceled, in case an enterprise suffers financial losses, it shall, when submitting its annual income tax declaration form, account in writing for the type, degree, price, cause and deduction period of the losses enclosed with the financial losses expert evidence of the relevant department inside of the enterprise. In case the losses are caused by the outside of the enterprise, the expert evidence of the financial losses provided by the relevant departments and offices outside the enterprises shall be submitted.
　　When examining the income tax payment, the competent tax organ shall focus the examination on the financial losses of the enterprise. If an enterprise cannot provide certificates or actual evidence for its listed financial losses, the tax organ may make tax adjustment.
　　The Document Guo Shui Fa [2000] No. 46 issued by this Bureau on March 13, 2000 shall cease to be implemented on the same date.
　　11. The management after canceling the examination and approval for income conversion by appropriation expenditure of permanent representative offices of overseas enterprises
　　In accordance with the Notice of the State Administration of Taxation on Strengthening the Taxation Management to Permanent Representative Offices of Overseas Enterprises (Guo Shui Fa [1996] No. 165), the permanent representative offices of an overseas enterprise may apply for income conversion by appropriation expenditure upon approval by the state administration. This Bureau issued the Notice of the State Administration of Taxation on Taxation Management to Permanent Representative Offices of Overseas Enterprises (Guo Shui Fa [2003] No. 28) on March 12, 2003, which adjusted the range and specific management requirements of income conversion by appropriation expenditure and canceled the examination and approval for income conversion by appropriation expenditure of permanent representative offices of overseas enterprises. After the State Council canceled this examination and approval, each region or area shall continue to implement Document Guo Shui Fa [2003] No. 28.
　　12. The Management after canceling the examination and approval for business tax exemption for the income an overseas enterprise or individual obtains by transferring technology to China
　　In accordance with Article 2 to the Notice of the Ministry of Finance and the State Administration of Taxation on Implementing the ‘Decision of the State Council, CCPC on Strengthening Technical Innovation, Developing High Technology and Achieving Industrialization’ (Cai Shui Zi [1999] No. 273), if an overseas enterprise or individual obtains income by transferring technology to China, it or he may apply for business tax exemption upon the approval by the State Administration. After the examination and approval is canceled, domestic transferees shall keep the following documents on the above-said technology transfer fee for the examination by tax organs.
　　1. The technology transfer permit approved by the competent national department.
　　2. The technology transfer contract
　　In case an overseas enterprise or individual transfers its right to the use of a trademark when transferring technology to China, it or he shall define in the contract the technology transfer fee and charge for trademark use respectively. In case of no charge of trademark use in the contract or obviously too low charge, the charge of trademark use shall be determined as no less than 50% of the total price of the contract to calculate the business income. For the technology transfer contracts that haven’t been approved by competent national department, the charge paid shall not be treated as technology transfer fee for tax exemption, but shall handled according to the taxation provisions related to general service charge.
　　13. The management after canceling the examination and approval for foreign taxpayers declaring personal income tax in a fixed place
　　In accordance with Article 10 to the Notice of the State Administration of Taxation on Printing and Issuing the ‘Provision of Several Problems on Collecting Personal Income Tax’ (Guo Shui Fa [1994] No. 089), if an foreign tax payer temporarily goes to China to work or provide labor services in several places in China, he may apply for declaring and paying income tax in a fixed place upon the approval. After the above examination and approval is canceled, if an foreign tax payer temporarily goes to China to work or provide labor services in several places in China, he shall declare and pay his income tax at the actual place where he works during the declaration and payment period prescribed in the tax law, i.e. at the declaration date, he shall declare the income tax in the place where he works then.
　　14. The management after canceling the examination and approval for the income tax exemption for foreigners’ house and board subsidy
　　In accordance with Article 2 to the Notice of the Ministry of Finance and the State Administration of Taxation on Several Policies of Personal Income Tax (Cai Shui Zi [1994] No. 020) and the Replay of the State Administration of Taxation on Income Tax Exemption for Related Foreign Individuals’ Subsidy (Guo Shui Fa [1997] No. 54), the subsidy an foreign individual obtains in non-cash form or reimbursed for what spends, such as house subsidy, board subsidy, laundry fee, moving cost, official business subsidy, family visit fee, language training charge, children education cost, etc. may be exempted from income tax upon verification by competent tax organs with relevant certificates provided by the foreign individual. After the above verification is canceled, if a foreign individual obtains the above income, he shall, when declaring personal income tax payment or withholding, provide relevant effective certificates and evidence according to the provisions in Document Guo Shui Fa [1997] No. 54. The competent tax organ shall, according to the Document Guo Shui Fa [1997] No. 54, verify the relevant subsidies one by one declared by the taxpayer or withholding agent. If the provided certificates and evidence cannot prove the reasonability of the above-said subsides, the competent tax organ shall demand the taxpayer or withholding agent to re-provide certificates and evidence within a prescribed time limit. In case the taxpayer or withholding agent fails to provide effective certificates and evidence, the tax organ shall have the right to make tax adjustment to the concerned income.
　　15. The management after canceling the examination and approval for the tax exemption for the wages and salaries a foreign individual earns before he comes to China but obtains during his stay in China
　　In accordance with Article 1 to the Reply of the State Administration of Taxation on the Tax Payment by Foreign Employees of Dalian XXX Offices Who Have Obtained Several Months’ Bonus (Guo Shui Han [1997] No. 546), if an individual who has no residence in China obtains several months’ bonus at one time after he comes to China, he may, upon verification by competent local tax organ, enjoy exemption from personal income tax as long as he provides the prize systems of his employer unit to prove that the above-mentioned bonus contains the parts earned outside China before he comes to China. After the above verification is canceled, if an individual who has no residence in China obtains several months’ bonus, he shall, when declaring tax, account for the bonus exempted from income tax with related prize systems of his employer unit to prove that the above-mentioned bonus is earned outside China before he comes to China. Otherwise, the tax organ shall have the right to make tax adjustment.
　　16. The management after canceling the examination and approval for tax payment by stages for individual securities (shares, etc.) subscription
　　In accordance with Article 2 to the Notice of the State Administration of Taxation on Collecting Personal Income Tax Related to the Discount or Subsidy Obtained from Employers by Securities (shares, etc.) Subscription (Guo Shui Fa [1998] No. 009), if an individual obtains discount or subsidy by subscribing securities (shares, etc.) from his employer and it is difficult to include so large amount of income into the salary of the same month to calculate the income tax, he may apply to the competent tax organ for calculating tax payment on average by no more than six months upon approval. After the above examination and approval is canceled, if an individual obtains such large amount of income, he may decide to calculate the income tax on average by no more than six months and account for the calculation when declaring income tax.
　　The above-said time limit of tax payment calculation is not allowed to be altered once determined.
　　17. The management after transferring to a lower level the examination and approval for income tax exemption for investment in domestic equipment
　　In accordance with Article 10 to the Notice of the State Administration of Taxation on Printing and Issuing the ‘Management Method of Business Income Tax Exemption for Foreign-invested and Overseas Enterprises’ Investment in Domestic Equipment (Guo Shui Fa [2000] No. 90), if an enterprise applies for business income tax exemption after purchasing domestic equipment, it shall, within 2 months after purchasing the domestic equipment, apply to the competent tax organ and submit step by step to the provincial tax organ for approval. After the above examination and approval is transferred to local (city) tax organ, if an enterprise applies for business income tax exemption for its investment in domestic equipment, it shall still, according to the provisions in Document Guo Shui Fa [2003] No. 90, submit related materials to the competent tax organ. After receiving the application, the competent tax organ shall submit to the (city) tax organ for approval. The local (city) tax organ shall carefully verify and approve the application strictly according to the Notice of the Ministry of Finance and the State Administration of Taxation on Business Income Tax Exemption for Foreign-invested and Overseas Enterprises’ Investment in Domestic Equipment (Cai Shui Zi [2003] No. 49) and the provisions in Document Guo Shui Fa [2000] No. 90, and submit the approval comments to the provincial tax organ for record.
　　18. This Notice shall come into effect as of July 1, 2004. The examination and approval that have not been finished before the enforcement of this Notice shall be handled in accordance with the original provisions.


June 25, 2004