GuoFa [1994] No.10 February 22, 1994

According to the Decision of the Standing Committee of the National People's Congress Concerning the Application of Interim Regulations on Such Taxes As Value-added Tax, Consumption Tax and Business Tax to Foreign Investment Enterprises and Foreign Enterprises (hereinafter referred to as "the Decision") as examined and approved at the Fifth Meeting of the Standing Committee of the Eighth National People's Congress, several issues such as the categories of taxes applicable to enterprises with foreign investment and foreign enterprises and so on are hereby notified as follows:

1. Problems Concerning the Categories of Taxes Applicable to Enterprises with Foreign Investment and Foreign Enterprises

According to provisions of "the Decision", the following interim regulations, in addition to "Interim Regulations of the People's Republic of China on Value-added Tax", "Interim Regulations of the People's Republic of China on Consumption Tax", "Interim Regulations of the People's Republic of China on Business Tax" and "Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises", shall be applicable to enterprises with foreign investment and foreign enterprises:

(1) "Interim Regulations of the People's Republic of China on Land Value-added Tax", promulgated on December 13, 1993 by the State Council;

(2) "Interim Regulations of the People's Republic of China on Resource Tax", promulgated on December 25, 1993 by the State Council;

(3) "Interim Regulations of the People's Republic of China on Stamp Tax", promulgated on August 6, 1988 by the State Council;

(4) "Interim Regulations Concerning Tax on Slaughtering Animals", promulgated on December 19, 1950 by the Government Administration Council of the Central People's Government;

(5) "Interim Regulations Concerning Urban Real Estate Tax", promulgated on August 8, 1951 by the Government Administration Council of the Central People's Government;

(6) "Interim Regulations Concerning the Tax of License Plate Usage of Vehicle and Vessel", promulgated on September 13, 1951 by the Government Administration Council of the Central People's Government; and

(7) "Interim Regulations Concerning Deed Tax", promulgated on April 3, 1950 by the Government Administration Council of the Central People's Government.

With the progress of taxation system reform, the State Council shall be revising and making other interim regulations on taxation, and enterprises with foreign investment and foreign enterprises shall accordingly comply with the provisions of the relevant regulations.

2. Problems Concerning Handling of the Increased Tax Burden of Enterprises with Foreign Investment Due to the Imposition of Value-Added Tax, Consumption Tax and Business Tax

(1) As to an enterprise with foreign investment approved to be established before December 31, 1993, where its tax burden increases as a result of the imposition of value-added tax, consumption tax and business tax, the enterprise may, upon application to and with the approval of the tax authorities, have a refund on the excess tax payment due to the increased tax burden within the approved operation period, with a maximum limit of not exceeding five years; if no operation period has been specified, the enterprise may, upon application to and with the approval of the tax authorities, have a refund on the excess tax payment as mentioned above within a period of not exceeding five years.

(2) Where an enterprise with foreign investment pays both value-added tax and consumption tax, the payment exceeding the original tax burden shall, according to the proportion of the paid value-added tax to the paid consumption tax, be refunded respectively.

(3) Where the products manufactured by an enterprise with foreign investment are to be exported directly or through selling to an export enterprise, that enterprise with foreign investment may, according to the provisions of "Interim Regulations of the People's Republic of China on Value-Added Tax", handle the refundment affairs at one stop by producing the export declaration form and the tax payment receipt.

(4) The refundment of the excess tax payment applied for by an enterprise with foreign investment shall, in principle, be conducted at one time after the end of the year; where the tax burden increases are comparatively higher, the enterprises concerned may apply for the refund quarterly in advance, and the clearance shall be done after the end of the year.

(5) The State Administration of Taxation and its affiliated establishments shall be responsible for dealing with the refundment affairs relating to the value-added tax and the consumption tax, and the state treasuries at all levels shall conduct examination and verification seriously and make strict checks. The computation of the refund, as well as the procedures of the application for refund and the approval thereof, shall be prescribed by the State Administration of Taxation separately.

(6) The refundment affairs relating to the business tax shall be prescribed by the people's governments of the provinces, autonomous regions or municipalities directly under the Central Government.

3. Problems Concerning Taxation on Chinese-Foreign Cooperative Exploitation of Petroleum Resources

Crude oil and natural gas exploited by a Chinese-foreign cooperative oil field shall be taxed of value-added tax in kind at a rate of 5%, and the royalties shall be levied in accordance with the relevant provisions in effect, with temporary exemption from the resource tax. The input tax shall not balance the value-added tax payable. Where crude oil or natural gas is exported, there shall be no refund of tax.

Self-operative offshore oil field of China Offshore Petroleum Company shall comply with the above provisions mutatis mutandis.

This Circular shall enter into force as of January 1, 1994.

Promulgated by The State Council on 1994-2-22