Circular on Taxation of Chinese-foreign Equity Joint Ventures and Contractual Joint Ventures

the State Council September 21, 1982

On September 10, 1980, the National People's Congress promulgated "The Income Tax Law on Chinese-foreign Equity Joint Ventures" and " The Individual Income Tax Law"; and later on December 13, 1981, it also issued "The Income Tax Law on Foreign Enterprises". Before the promulgation of these laws, some localities, departments and enterprises, on the approval by the competent authorities of the state, had signed contracts of joint ventures and cooperative operations with foreign and Hongkong businessmen, some of which included the provisions for the payment of taxes. The State Administration of Taxation and the Ministry of Finance has laid down that the question of tax payment should be carried out according to the original provisions in the contracts. But as things are, there still remain some disputes and arguments on this point. In order to implement the policy correctly, the following Circular is made:

(1) Before the promulgation of "The Income Tax Law on Chinese-foreign Equity Joint Ventures" and "The Income Tax Law on Foreign Enterprises", any contract signed with the approval of the competent authorities of the state, with foreign and Hongkong firms for joint ventures and cooperative operations which provides a preferential treatment of income tax payment on their enterprises, and which states clearly that the import goods necessary for the projects will be given a preferential treatment of taxation should be carried out according to the original provisions.

(2) Provisions on preferential treatment of taxation given to foreign and Hongkong businessmen for their income derived from their permission to use their patent and copyrights should also be carried out according to the original contracts.

(3) Before "The Individual Income Tax Law" was promulgated, provided it has been approved by the competent authorities of the state, any preferential treatment of income tax given to an individual should also be carried out according to the original provisions as stipulated in the contracts.

The above three points should continue until the original contracts expire. If the contracts are extended, tax should be paid according to the regulations of "The Income Tax Law on Chinese-foreign Equity Joint Ventures". "The Income Tax Law on Foreign Enterprises" and "The Individual Income Tax Law". All financial and tax departments should act accordingly; any question raised in the enforcement should be clarified by the Ministry of Finance.

Promulgated by The State Council on 1982-9-21