Circular of the General Administration Customs on Import Taxation Policy for Further Encouraging Foreign Investment

ShuShui [1999] No.791 November 22, 1999

In accordance with the spirit of the instructions of the State Council, With a view to encouraging foreign investment, the Customs General Administration has decided, after consulted with the Ministry of Foreign Trade and Economic Cooperation, the State Economic and Trade Commission and the Ministry of Finance, to further expand the preferential import taxation policy on foreign investment. The relevant issues are notified as follows:

Article 1 For importation, within their productive operation scope originally approved, of self-using equipment and technology, fittings and spare parts that can not be produced at home or their capacities can not meet the demands, by the established foreign investment enterprises under Encouraged Category and Restrictive Category B, research and development centres with foreign investment, foreign investment enterprises with advanced technology and foreign investment enterprises of export oriented products (hereinafter referred to as five categories of enterprises for short) for technology reform, Customs duties and import tax may be exempt in accordance with the Circular of the State Council on the Adjustment of the Taxation Policy On Imported Equipment (GuoFa [1999] No. 37).

1. Those enjoying tax exemption incentives specified in this Article should meet the following conditions:

(1) Their sources of funds should be self-owned funds (specifically referred to the enterprise's reserve funds, development funds, deducting depreciation fee and profit after tax payment) outside the total amount of investment of the five categories of enterprises;

(2) The use of imported commodities: renewal or maintenance, within the productive operation scope originally approved, of the original equipment of the enterprises (complete set of equipment and production lines are not included);

(3) Import commodities scope: equipment not capable to produce at home (commodities outside the List of Import Commodities by Home Investment Projects Not to Be Exempted from Tex) as well as technology, fittings and spare parts forming complete set with the above mentioned equipment (including those imported along with the equipment or those imported in separation).

2. Procedures to go through for levy or exemption from tax:

(1) Importation testimony produced: Testimonial Paper for Importation, by Enterprises with Foreign Investment, of Renewal Equipment, Technology, Fittings and Spare Parts (for the form, see Attachment one below) produced by the departments concerned in accordance with the provisions of sub- sections one and two, Paragraph 1 of this Article, of which testimonial paper for enterprises under Encouraged Category and Restrictive Category B should be produced by the original authorities for examination and approval that had produced project confirmation (for the above mentioned enterprises set up with approval prior to the date of December 31, 1997, their testimonial paper should be produced by the original authorities for examination and approval); testimonial paper for research and development centres with foreign investment should be produced by the original authorities for examination and approval (for the details, see the sub-section one, Paragraph l, Article 2 of the present Circular); testimonial paper for products export-oriented enterprises and enterprises with advanced technology should be produced by the Ministry of Foreign Trade and Economic Cooperation or by the departments of foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie directly under the Central Government and municipalities separately listed on the State plan that had issued Confirmation Paper for products Export-Oriented Enterprises with Foreign Investment and Confirmation Paper for Enterprises with Foreign Investment with Advanced Technology.

(2) Procedures to go through for testimony for levy or exemption from tax: Customs directly under the General Administration of Customs in the places where the enterprises are located shall produce testimonial paper by the above mentioned testimonial papers, contracts and import licenses and other material related after verifying the importation commodities scope against the provisions of sub-section three, Paragraph l of this Article.

3. Specific rules:

(1) In case the five categories of enterprises carry out technology reform beyond the scope as defined by sub-section two, Paragraph 1 of this Article, their importation should be testified by Registration Certificate for Confirmation of Technology Reform Projects produced according to their respective examination and approval power by the State or the provincial economic and trade commission (for the form, see Attachment 2);

(2) In case the five categories of enterprises carry out equipment renewal and maintenance or technology reform by using their own funds, which needs to import commodities within the confines of the List of Import Commodities by Home Investment Projects Not to Be Exempt from Tax, and if the commodities are surely of the same kind of products whose capacities can not meet the demands, they shall be verified by the State industrial department in charge of the said products, and shall have to produce from the same department Certificate for Importation of the Same Kind of Equipment Needed by Enterprises with Foreign Investment for Equipment Renewal or Technology Reform that Can Not Be Produced at Home (for the form, see Attachment 3). And Customs directly under the Customs General Administration shall handle the procedures for examination and approval for tax exemption for the equipment and technology forming a complete set imported, by the above mentioned testimony and Certificate for Importation by Enterprises with Foreign Investment, of Renewal Equipment, Technology, Fittings and Spare Parts or Registration Certificate for Confirmation of Technology Reform Projects, and contracts, import license and other material related.

Article 2 Importation, within their total amount of investment, by research and development centres established by using foreign investment, of self-using equipment and technology, fittings and spare parts forming a complete set which can not be produced at home or their capacities can not meet the demands, shall be exempt from Customs duties and import tax in accordance with the Provisions of Circular of the State Council On the Adjustment of Taxation Policy On Imported Equipment (Guofa [1999] No. 37).

1. Those enjoying taxation incentives specified in this Article should meet the following conditions:

(1) The enjoying units should be research institutions set up within the enterprises with foreign investment or separately established, specially engaged in the development of products or technology that are approved by the State Planning Commission, State Economic and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation as well as the departments or bureaus of planning commissions, economic and trade commissions and foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie directly under the Central Government and municipalities separately listed on the State plan;

(2) The source of funds is confined within the total amount of investment;

(3) Import commodities scope: self-using equipment can not be produced at home or their capacities can not meet the demands (referred to commodities outside the List of Import Commodities by Foreign Investment Projects Not to Be Exempt from Tax) and technology, fittings and spare parts forming complete set which do not constitute laboratories with production size or medium experiment norm, and do not include ships, airplanes, special types of vehicles and construction machinery.

2. Procedures to go through for levy and exemption from Tax:

(1) Project confirmation paper to be produced: Project confirmation paper for research and development centres with foreign investment shall be produced, according to the examination and approval power over the above mentioned research institutions, and the provisions of sub- sections one and two, Paragraph 1 of this Article, by the State Planning Commission, the State Economic and Trade Commission, Ministry of Foreign Trade and Economic Cooperation and the departments or bureaus of planning commissions, economic and trade commissions and foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie directly under the Central Government and municipalities separately listed on the State plan. The form and contents of the project confirmation paper are the same with those of Confirmation Papers for Home and Foreign Investment Projects Encouraged for Development by the State attached to Document ShuShui [1999] No. 1062.

(2) Handling of the certificate for levy or exemption from tax: Customs directly under the General Administration of Customs in the places where the enterprises are located shall handle the certificate by the above mentioned projects for confirmation paper and the relevant material and on the analogy of the provisions of Document ShuShui [1999] No. 1062.

Article 3 For those projects conforming to the list of the advantageous industries and advantageous projects for utilizing foreign investment of the central and west provinces, autonomous regions and municipalities directly under the State Council (the list will separately be issued after approval by the State Council, same below), their import within their total amount of investment, of self-using equipment which can not be produced at home or their capacities can not meet the demands, and technology, fittings and spare parts forming a complete set, shall be exempt from import duties and import tax, except those prescribed in Document GuoFa [1999] No.37 entitled the List of Import Commodities by Foreign Investment Projects Not to Be Exempt from Tax. The relevant procedures shall be handled on the analogy of the regulations on foreign investment projects described in Document ShuShui [1999] No.1062.

Article 4 For those projects conforming to the list of the advantageous industries and advantageous projects for utilizing foreign investment in the central and west provinces, autonomous regions and municipalities directly under the State Council, the scope of commodities imported with their own funds outside their total amount of investment which enjoy preferential taxation policy and the procedures for tax exemption shall be handled on the analogy of the relevant provisions on the five categories of enterprises described in Article l of the present Circular.

Article 5 Where the goods imported with tax exemption in accordance with the regulations of this Circular are goods under the Customs' supervision and control, they shall not be sold and transferred freely by the enterprises themselves. Equipment replaced owing to equipment renewal or technology reform, if continually to be used within the enterprises, shall be managed over according to the period for supervision and control by the Customs, and shall be exempt from additional tax payment in case the equipment is sold or transferred within the period for supervision and control to enterprises enjoying preferential taxation policy for imported equipment. In other cases, tax shall be levied according to the laws and regulations related.

Article 6 Customs directly under the General Administration of Customs where the enterprises are located should strengthen contact and coordination with the Customs where the goods are imported and should raise up working efficiency. Customs directly under the Customs General Administration should inform as soon as possible the Customs where the goods are imported for handling the procedures for check and approval of tax exemption after verifying without error the Certificate for Levy or Exemption from Tax for Imported Goods presented. In case the Customs where the enterprises are located are not the seating places of the Customs directly under the General Administration of Customs, applications can be accepted and examined by the Customs at lower level in the seating place, be reported to the Customs directly under the Customs General Administration for verification and for producing certificate for levy or exemption from tax. The General Administration of Customs will organize forces to supplement and readjust as soon as possible the Management System for Tax Reduction and Exemption and to computerize the management of this preferential taxation policy.

Article 7 This preferential taxation policy involves multi-departments and multi-policies, and the various Customs should learn and grasp in real earnest the spirit of the document, and should strictly carry it out and should not expand at their will tax exemption scope. The Customs should actively contact local governments and the responsible departments concerned to do well propaganda work.

Article 8 The present Circular shall be enforced from September 1, 1999, but the tax payment already collected shall not be returned. Those declared and imported after this date but without going through tax levy procedures, Customs clearance shall be made for them with tax exemption, and their securities already charged shall be returned to them.

For any question and situation that may arise in implementation, please report in time to the Department for Customs Duties Collection and Control of the General Administration of Customs.

Attachment 1: Certificate for Importation of Renewal Equipment, Technology, Fittings and Spare Parts by Enterprises with Foreign Investment (omitted)

Attachment 2: Certificate Registered for Confirmation for Technology Reform Projects (omitted)

Attachment 3: Certificate for Importation of the Same Kind of Equipment Needed by Enterprises with Foreign Investment for Equipment Renewal or Technology Reform that Can Not Be Produced at Home (omitted)

Promulgated by The Customs General Adiministration on 1999-11-22