CaiShuiHan [1998] No.797 December 21, 1998

The Ask for Instruction on the Sales Tax by the Local Taxation Bureau of JiLin Province (JiDiShuiLiuZi [1998] No.301 ) has been received. Through study, the issue how the sales tax of the intangible assets transferred into the enterprises within the territory of China should be paid by the foreign enterprises is replied as follows:

I. The Article 1 of the Interim Measures of Sales Tax of the PRC (hereinafter referred to as the Measures) prescribes that the enterprises and individuals that transfer the intangible assets within the territory of China should be taxpayer of sales tax and pay the sales tax according to this measure. The Article 7 of the Rules for Implementation of the Interim Measures of Sales Tax of the PRC (hereinafter referred to the Rules) stipulates the intangible assets transferred that are used within the territory of China should be regarded as the assets transferred within the territory of China. The fifth plenary session of the 8th Standing Committee of the National People's Congress make a decision that the enterprises with foreign investment and foreign enterprise are applied to the interim measures on added-value, consumer tax and sales tax and etc from January 1, 1994 distributed by the State Council. According to hereinabove, the transferred into our country by the foreign enterprises that have not established the institutions within the territory of China belong to the intangible assets transferred within the territory of China. It should be levied the sales tax when the intangible assets transferring occurs after January 1, 1994. The Circular of the State Administration of Taxation on Issues Concerning Sales Tax of Earnings From Transferring the Intangible Assets into Our Country by the Foreign Enterprises(GuoShuiFa [1998] No.4) distributed by the State Administration of Taxation in January 1998 reiterates and emphasizes that transferring the intangible assets into our country by the foreign enterprises should be levied sales tax in accordance with the relevant provisions of the Measures and the Rules for Implement.

II. The design project and labor services charge that have not be indicated in the transfer contract that happen beyond our boundary should be levied the sales tax as the labor services provided within the territory of China.

III. The sales tax of the foreign enterprises that have not established the institutions within the territory of China should be paid and deducted on a commission base by the agents under the 1st article 29th paragraph of the Rules. Without agent, the consignor or the buyer should deal it. That the above agent pays tax means that agents should be the obligors of withholding tax if the foreign enterprises settle accounts with the domestic buyers through agents. The consignor or buyers are the obligors of withholding tax if the foreign enterprises settle accounts with the domestic buyers without agents.

Promulgated by The State Administration of Taxation on 1998-12-21