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中华人民共和国外商投资企业和外国企业所得税法实施细则(部分)

Detailed Rules and Regulations for the Implementation of the the Income Tax Law of th
e People's Republic of China for Enterprises with Foreign Investment and Foreign Ent
erprises


Article 1
These Rules are formulated in accordance with the
provisions of Article 29 of the Income Tax Law of
the People's Republic of China for Enterprises wi
th Foreign Investment and Foreign Enterprises (her
einafter referred to as the "Tax Law").

Article 2
Income from production and business operations men
tioned in Article 1, Paragraph 1 and Paragraph 2 o
f the Tax Law means income from production and bus
iness operations in manufacturing, mining, communi
cations and transportation, construction and insta
llation, agriculture, forestry, animal husbandry,
fishing , water conservation, commerce, finance, s
ervice industries, exploration and exploitation, a
nd in other trades.

Income from other sources mentioned in Article 1,
Paragraph 1 and Paragraph 2 of the Tax law means p
rofits (dividends), interest, rents, income from t
he transfer of property, income from the provision
or transfer of patents, proprietary technology, i
ncome from trademark rights and copyrights as well
as other non-business income.

Article 3
"Enterprises with foreign investment" mentioned in
Article 2, Paragraph 1 of the Tax Law and "foreig
n companies, enterprises and other economic organi
zations which have establishments or places in Chi
na and engage in production or business operations
" mentioned in Article 2, Paragraph 2 of the Tax L
aw are, unless otherwise especially specified,gene
rally all referred to as "enterprises" in these Ru
les.

"Establishments or places" mentioned in Article 2,
Paragraph 2 of the Tax Law refers to management o
rganizations, business organizations, administrati
ve organizations, and places for factories and the
exploitation of natural resources, places for con
tracting of construction, installation, assembly a
nd exploration work, places for the provision of l
abor services, and business agents.

Article 4
"Business agents" mentioned in Article 3, Paragrap
h 2 of these Rules means companies, enterprises an
d other economic organizations or individuals intr
usted by foreign enterprises to engage as agents i
n any of the following:

(1)representing principals on a regular basis in t
he arranging of purchases and signing of purchase
contracts and the purchasing of commodities on com
mission;

(2)entering into agency agreements or contracts wi
th principals, storing on a regular basis products
or commodities owned by principals, and deliverin
g on behalf of principals such products or commodi
ties to other parties; and

(3)having authority to represent principals on a r
egular basis in the signing of sales contracts or
in the accepting of purchase orders.

Article 5
"Head office" mentioned in Article 3 of the Tax La
w refers to the central organization which is esta
blished in China by and enterprise with foreign in
vestment as a legal person pursuant to the laws of
china and which is responsible for the management
, operations and control over such enterprise.

Income from production and business operations and
other income derived by the branches within or ou
tside China of an enterprise with foreign investme
nt shall be consolidated by the head office for pu
rposes of the payment of income tax.

Article 6
Income derived from sources inside China mentioned
in Article 3 of the Tax Law refers to:

(1)income from production and business operations
derived by enterprises with foreign investment and
foreign enterprises which have establishments or
places in China, as well as profits (dividends), i
nterest, rents, royalties and other income arising
within or outside China actually connected with e
stablishments or sites established in China by ent
erprises with foreign jinvestment or foreign enter
prises;

(2)the following income received by foreign enterp
rises which have no establishments or sites in Chi
na;

(a)profits(dividends) earned by enterprises in Chi
na;
(b)interest derived within China such as on deposi
ts or loans, interest on bonds, interest on paymen
ts made provisionally for other, and deferred paym
ents;
(c)rentals on property leased to and used by lesse
es in China;
(d)royalties such as those received from the provi
sion of patents, proprietary technology, trademark
s and copyrights for use in China;
(e)gains from the transfer of property, such as ho
uses, buildings , structures and attached faciliti
es located in china and from the assigment of land
-use rights within China;
(f)other income derived from China and stipulated
by the Ministry of Finance to be subject to tax.

Article 7
In respect of Chinese-foreign capital ventures tha
t do not constitute legal persons, each partner th
ere to may separately compute and pay income tax i
n accordance with the relevant tax laws and regula
tions of the state; income tax may, upon approval
by the local tax authorities of an application sub
mitted by such enterprises, be computed and paid o
n a consolidated basis in accordance with the prov
isions of the Tax Law.

Article 8
"Tax year" in Article 4 of the Tax Law begins on 1
January and ends on 31 December of the Gregorian
Calendar.

Foreign enterprises that have difficulty computing
taxable income in accordance with the tax year st
ipulated in the Tax Law may, upon approval by the
local tax authorities of an application submitted
by such enterprises, use their own 12-month fiscal
year as the tax year.

Enterprises commencing business operations in the
middle of a tax year or actually operating for a p
eriod of less than 12 months in any tax year due t
o such factors as merger or shut-down shall use th
e actual period of operations as the tax year.

Enterprises that undergo liquidation shall use the
period of liquidation as the tax year.

Article 9
The compertent authority for tax affairs under the
State Council mentioned in Article 8, Paragraph 3
and Article 19, Paragraph 3, Item(4) of the Tax L
aw and Article 72 of these Rules refers to the Min
istry of Finance and the State Administration of T
axation


Chapter 2- Computation of Taxable Income

Article 10
The formula for the computation of taxable income
mentioned in Article 4 of the Tax Law is as follow
s:

(1)Manufacturing:

(a)taxable income = (profit on sales) + (profit fr
om other operations) + (non-business income ) - (n
on-business expenses);
(b)profit on sales = (net sales) - (cost of produc
ts sold) - (taxes on sales) - [ (selling expenses)
+ (administrative expenses) + (finance expenses)
];
(c)net sales = (gross sales) - [(sales returns) +
(sales discounts and allowances) ];
(d)cost of products sold = (cost of products manuf
actured for the period) + (inventory of finished p
roducts at the beginning of the oeriod) - (invento
ry of finished products at the end of the period);
(e)cost of products manufactured for the period =
(manufacturing costs for the period) + (inventory
of semi-finished products and products in process
at the beginning of the period) - (inventory of se
mi-finished products and products in process at th
e end of the period);
(f)manufacturing costs for the period = (direct ma
terials consumed in production for the period) + (
direct labor ) + (manufacturing expenses).

(2)Commerce:

(a)taxable income = (profit on sales) + (profit fr
om other operations) + (non-business income) -(non
-business expenses);

(b)profit on sales = )net sales) - (cost of sales)
-[(selling expenses) + (administrative expenses) +
(finance expenses)];

(c)net sales = (gross sales) - [(sales returns) +
(sales discounts and allowances)];

(d)cost of sales = (inventory of merchandise at th
e beginning of the period) + [(purchase of merchan
dise during the period) - (purchase returns) + (pu
rchase discounts and allowances) -(purchasing expe
nses)] - (inventory of merchandise at the end of t
he period).

(3)Service trades:

(a)taxable income =(net business income) + (non-op
erating income) - (non-operating expenses);

(b)net business income = (gross business income) -
[(taxes on business income ) + (operating expenses
) + (administrative expenses) + (finance expenses)
].

(4)Other lines of business:

Computations shall be made with reference to the a
bove formulas.

Article 11
The computation of taxable income of an enterprise
shall, in principle, be on an accrual basis.

the following income from business operations of a
n enterprise may be determined by stages and used
as the basis for the computation of taxable income
:

(1)where products or commodities are sold by insta
llment payment methods, income from sales may be r
ecognized according to the invoice date of the pro
ducts or commodities to be delivered ; income from
sales may also be recognized according to the dat
e of payment to be made by the buyer as agreed upo
n in the contract;

(2)where construction, installation and assembly p
rojects, and provision of labor services extend be
yond one year, income may be recognized according
to the progress of th project or the amount of wor
k completed;

(3)where the processing or manufacturing of heavy
machinery, equipment and ships for other enterpris
es extends beyond one year, income may be recogniz
ed according to the progress of the project or amo
unt of work completed.

Article 12
Where Chinese-foreign contractual joint ventures o
perate on the basis of product sharing, the partne
rs thereto shall be deemed to receive income at th
e time of the division of the products; the amount
of income shall be computed according to the pric
e sold to third parties or with reference to preva
iling market prices.

Where foreign enterprises are engaged in the coope
rative exploration of petroleum resources, the par
ther thereto shall be deemed to receive income at
the time of the division of the crude oil; the amo
unt of income shall be computed according to a pri
ce which is adjusted periodically with reference t
o the international market prices of crude oil of
similar quality.

Article 13
In respect of income obtained by enterprises in th
e from of non-monetary assets or rights and intere
sts, such income shall be computed or appraised wi
th reference to prevailing market prices.

Article 14
Exchange rate quoted by the State Administration o
f Exchange Control mentioned in Article 21 of the
Tax Law refers to the buying rate quoted by the St
ate Administration of Exchange Control.

Article 15
In respect of income obtained by enterprises in fo
reign currency, upon payment of income tax in quar
terly installments in accordance with the provisio
ns of Article 15 of the Tax Law, taxable income sh
all be computed by converting the income into Renm
inbi according to the exchange rate quotation of t
he State Administratijon of Exchange Control on th
e last day of the quarter. At the time of final se
ttlement following the end of the year, no recompu
tation and reconversion need be made in respect of
income in a foreign currency for which tax has al
ready been paid on a quarterly basis; only that po
rtion of the foreign currency income of the entire
year for which tax has not been paid shall, in re
spect of the computation of taxable income, be con
verted into Renminbi according to the exchange rat
e quotation on the last day of the tax year.

Article 16
Where an enterprise is unable to provide complete
and accurate certificates of costs and expenses an
d is unable to correctly compute taxable income, t
he local tax authorities shall determine the rate
of profit and compute taxable income with referenc
e to the profit level of other enterprises in the
same or similar trade. Where an enterprise is unab
le to provide complete and accurate certificates o
f revenues and is unable to report income correctl
y, the local tax authorities shall appraise and de
termine taxable income by the use of such methods
as cost(expense)plus reasonable profits.

Where the tax authorities would otherwise appraise
and determine profit rates or revenues in accorda
nce with the provisions of the preceding paragraph
s, and where other treatment is provided by the la
ws, regulations and rules, such other treatment sh
all be applicable.

Article 17
Foreign air transportation and ocean shipping ente
rprises engaged in international transport busines
s shall use 5% of the gross revenues from passenge
r and cargo transport and shipping services arisin
g within China as taxable income.

Article 18
Where an enterprise with foreign investment invest
s in another enterprise within China, the profit (
dividends )so obtained from the enterprise receivi
ng such investment may be excluded from the taxabl
e income of the enterprise; however, expenses and
losses incurred in such above-mentioned investment
s shall not be deducted from the taxable income of
the enterprise.

Article 19
Unless otherwise stipulated by the state, the foll
owing items shall not be itemized as costs, expens
es or losses in the computation of taxable income.

(1)expenses in connection with the acquisition or
construction of fixed assets;
(2)expenses in connection with the transfer or dev
elopment of intangible assets;
(3)interest on capital;
(4)various income tax payments;
(5)fines for illegal business operations and losse
s due to the confiscation of property;
(6)surcharges and fines for overdue payment of tax
es;
(7)the portion of losses due to natural disasters
or accidents for which there has been compensation
;
(8)donations and contributions other than those us
ed in China for public welfare or relief purposes;
(9)royalties paid to the head office;
(10)other expenses not related to production or bu
siness operations;

Article 20
Reasonable administrative expenses paid by a forei
gn enterprise with an establishment or place in Ch
ina to the head office in connection with producti
on or business operations of the establishment or
site shall be permitted to itemized as expenses fo
llowing agreement by the local tax authorities aft
er an examination and verification of documents of
proof issued by the head office in respect of the
scope of the administrative expenses, total amoun
ts, the basis and methods of allocation, which sha
ll be provided together with an accompanying verif
ication report of a certified public accountant.

Administrative expenses in connection with product
ion and business operations shall be allocated rea
sonably between enterprises with foreign investmen
t and their branches.

Article 21
Reasonable interest payments incurred on loans in
connection with production and business operations
shall be permitted to be itemized as expenses fol
lowing agreement by the local tax authorities afte
r an examination and verification of documents of
proof, which shall be provided by the enterprises
in respect of the loans and interest payments.

Interest paid on loans used by enterprises for the
purchase or construction of fixed assets or the t
ransfer or development of intangible assets prior
to the assets being put into use shall be included
in the original value of the assets .

Reasonable interest mentioned in the first paragra
ph of this Article refers to interest computed at
a rate not higher than normal commercial lending r
ates.

Article 22
Entertainment expenses incurred by enterprises in
connection with production and business operations
shall, when supported by authentic records or inv
oices and vouchers, be permitted to be itemized as
expenses subject to the following limits:

(1)Where annual net sales are 15 million yuan or l
ess, not to exceed 0.5% of net sales; for that por
tion of annual net sales that exceeds 15 million y
uan, not to exceed 0.3% of that portion of net sal
es.

(2)Where annual gross business income is 5 million
yuan or less, not to exceed 1% of annual gross bu
siness income; for that portion of annual gross bu
siness income that exceeds 5 million yuan. not to
exceed 0.5% of that portion of annual gross busine
ss income.

Article 23
Exchange gains or losses incurred by enterprises d
uring pre-construction of during production and bu
siness operations shall, excipt as otherwise provi
ded by the state, be appropriately itemized as gai
ns or losses for that respective period.

Article 24
Salaries and wages, and benefits and allowances pa
id by enterprises to employees shall be permitted
to employees shall be permitted to be itemized as
expenses following agreement by the local tax auth
orities after an examination and verification of t
he submission of wage scales and supporting docume
nts and relevant materials.

Foreign social security premiums paid by enterpris
es to employees working in China shall not be item
ized as expenses.

Article 25
Enterprises engaged in such businesses as credit a
nd leasing operations may, on the basis of actual
requirements and following approval by the local t
ax authorities of a report thereon, provide year-b
y-year bad debt provisions, the amount of which sh
all not exceed 3% of the amount of the year-end lo
an balances(not including inter-bank loans)or the
amount of accounts receivable, bills receivable an
d other such receivables, to be deducted from taxa
ble income of that year.

The portion of the actual bad debt losses incurred
by an enterprise which exceeds the bad debt provi
sions of the preceding year may be itemized as a l
oss in the current year; the portion less than the
bad debt provisions of the previous year shall be
included in taxable income of the current year. Ba
d debt losses mentioned in the preceding paragraph
shall be subject to approval after examination an
d verification by the local tax authorities.

Article 26
"Bad debt losses" mentioned in Article 25, Paragra
ph 2 of these Rules refers to the following accoun
ts receivable:

(1)due to the bankruptcy of the debtor, collection
is still not possible after the use of the bankru
ptcy assets for settlement;

(2)due to the death of the debtor, collection is s
till not possible after use of the estate for repa
yment;

(3)due to the failure of the debtor to fulfill rep
ayment obligations for over 2 year, collection is
still not possible.

Article 27
Accounts receivable already itemized as bad debt l
osses which are recovered in full or in part by an
enterprise in a subsequent year shall be included
in taxable income of the year of recovery.

Article 28
Foreign enterprises with establishments or places
in China may, except as otherwise provided by the
state, deduct as expenses foreign income tax, whic
h has been paid on profits (dividends ),interest,
rents, royalties and other income received from ou
tside China and actually connected with such estab
lishments or sites .

Article 29
"Net assets or remaining property" mentioned in Ar
ticle 18 of the Tax Law means the amount of all as
sets or property following deduction of various li
abilities and losses upon the liquidation of an en
terprise.

Chapter 3- Tax Treatment for Assets

Article 30
Fixed assets of enterprises means houses, building
s and structures, machinery, mechanical apparatus,
means of transport and other such equipment, appl
iances and tools related to production and busines
s operations with a useful life of one year or mor
e, Items not in the nature of major equipment whic
h are used for production or business operations a
nd which have a unit value of 2,000 yuan or less,
or with a useful life of 2 years or less may be it
emized as expenses on the basis of actual consumpt
ion.

Article 31
The valuaion of fixed assets shall be based on ori
ginal cost.

The original cost of purchased fixed assets shall
be the purchase price plus transportation expenses
, installation expenses and other related expense
s incurred prior to the use of the assets.

The original cost of fixed assets manufactured or
constructed by an enterprise itself shall be the a
ctual expenses incurred in their manufacture or co
nstruction.

The original cost of fixed assets treated as inves
tments shall, giving consideration to the degree o
f wear and tear of the fixed assets, be such reaso
nable price as is specified in the contract, or a
price appraised with reference to the relevant mar
ket price plus the relevant expenses incurred prio
r to the use thereof.

Article 32
Depreciation of fixed assets of an enterprise shal
l be computed commencing with the month following
the month in which they are first put into use , T
he computation of depreciation shall cease in the
month following the month in which the fixed asset
s cease to be used.

All investments made during the development stage
by enterprises engaged in the exploitation of oil
resources shall, taking the oil(gas) field as a un
it, be aggregated and treated as capital expenditu
res; the computation of depreciation shall begin i
n the month following the month in which the oil(g
as) field commences commercial production.

Article 33
In respect of the computation of depreciation of f
ixed assets, the salvage value shall first be esti
mated and deducted from the original cost of the a
sset, The salvage value shall not be less than 10%
of the original value; any request for retaining a
lower salvage value or no salvage value must be a
pproved by the local tax authorities.

Article 34
Depreciation of fixed assets shall be computed usi
ng the straight-line method. Where it is necesary
to use any other method of depreciation, an applic
ation may be filed by an enterprise which , follow
ing examination and verification, shall be reporte
d level-by-level to the State Administration of Ta
xation for approval.

Article 35
The computation of the minimum useful life in resp
ect of the depreciation of fixed assets is as foll
ows:

(1)for houses and buildings-20 years;

(2)for railway rolling stock, boats ans ships, mac
hery and other production equipment-10 years;

(3)for electronic equipment and means of transport
, other than railway rolling stock and boats and s
hips, as well as such fixtures, tools and furnishi
ngs related to production and business operations
-5 years.

Article 36
Depreciation of fixed assets in the nature of inve
stments during the development stage and subsequen
t stages of an enterprise engaged in the exploitat
ion of oil resources may be computed on a consolid
ated basis without retaining salvage value; the pr
eiod of depreciation shall not be less than 6 year
s.

Article 37
"Houses and buildings" mentioned in Article 35, It
em (1) of these Rules means houses, buildings and
attached structures used for production and busine
ss operations, and living quarters and welfare fac
ilities for employees, the scope of which is as fo
llows:

houses, including factory buildings, business prem
ises, office buildings, warehouses, residential bu
ildings canteens, and other such buildings; buildi
ngs, including towers, ponds, troughs, wells, rack
s, sheds(not including temporary, simply construct
ed structures such as work sheds and vehicle sheds
), fields, roads, bridges, platforms, piers, docks
, culverts, gas stations, as well as pipes, smokes
tacks, and enclosing walls that are detached from
buildings, machinery and equipment.

Facilities attached to buildings and structures me
an auxiliary facilities that are inseparable from
buildings and structures and for which no separate
value is computed, including for example, buildin
g and structure ventilation and drainage systems,
oil pipelines, communication and power lines, elev
ators and sanitation equipment.

Article 38
The scope of railway rolling stock, ships and vess
els, machines , machinery and other production equ
ipment mentioned in Article 35, Paragaph 1, Item(2
) of these Rules is as follows:

"railway rolling stock" includes various of locomo
tives, passenger coaches, freight cars, as well as
auxiliary facilities on rolling stock for which no
separate value is computed;

"ships and vessels" includes various types of moto
r ships as well as auxiliary facilities on ships a
nd vessels for which no separate value is computed

"machines,machinery and other production equipment
" includes various types of machines, machinery, m
achinery units, production lines, as well as auxil
iary equipment such as various types of power, tra
nsport and conduction equipment.

Article 39
The scope of electronic equipment, means of transp
ort other than railway rolling stock and ships men
tioned in Article 35, Paragraph 1, Item(3) of thes
e Rules is as follows:

"electronic equipment" means equipment comprising
mainly integrated circuits, transistors, electron
tubes, and other electronic components whose prima
ry function is to bring into use the application o
f electronic technology (including software) , inc
luding computers , as well as computer-controlled
robots, and digital-control or program-control sys
tems;

"means of transport, other than railway rolling st
ock and ships and vessels" includes airplanes, aut
omobiles, trams, tractors, motor bikes(boats), mot
orized sailboats, sailboats, and other means of tr
ansport.

Article 40
Where, for special reasons it is necessary to shor
ten the useful life of fixed assets, an applicatio
n may be submitted by an enterprise to the local t
ax authorities which following examination and ver
ification shall be reported level-by-level to the
State Administration of Taxation for approval.

Fixed assets which for special reasons as mentione
d in the preceding paragraph require the useful li
fe to be shortened include:

(1)machinery and equipment subject to strong corro
sion by acid or alkali and factory buildings and s
tructures subject to constant shaking and vibratio
n;

(2)machinery and equipment operated continually ye
ar-round for the purpose of raising the unilizatio
n rate or increasing the intensity of use;

(3)fixed assets of a Chinese-foreign contractual j
oint venture having a period of cooperation shorte
r than the useful life specified in Article 35 of
these Rules and which will be left with be left wi
th the chinese party upon termination of the coope
ration.

Article 41
Enterprises which acquire used fixed assets having
a remaining useful life shorter than the useful l
ife specified in Article 35 of these Rules may, fo
llowing agreement by the local tax authorities aft
er examination and verification of certifying docu
ments so submitted, compute depreciation according
to the remaining useful life.

Article 42
Where the value of fixed asets increases during th
e course of ues of the fixed assets due to expendi
tures in respect of expansion, reconstruction and
technical innovation, the value of the fixed asset
s shall be increased; where the period of use of t
he fixed assets can be extended, the useful life s
hall be appropriately extended and the computation
of depreciation adjusted accordingly.

Article 43
No further depreciation shall be allowed in respec
t of fixed assets which can be continued to be use
d after having been fully depreciated.

Article 44
The balance of proceeds from the transfer or dispo
sal of fixd assets by an enterprise shall. after d
eduction of the undepreciated amount or the salvag
e value and handing fees, be entered into the prof
it and loss account year.

Article 45
Depreciation of fixed assets received as gifts by
enterprises may be computed on the basis of reason
able valuation.

Article 46
Patents, proprietary technology, trademarks, copyr
ights, land use rights and other intangible assets
of enterprises shall be appraised on the basis of
the original value.

For alienated intangible assets, the original valu
e shall be the actual amount paid based on a reaso
nable price.

For self-developed intangible assets, the original
value shall be the actual amount of expenditure i
ncurred in the course of development.

For intangible assets used as investment, the orig
inal value shall be such reasonable price as is st
ipulated in the agreement or contract.

Article 47
The amortization of intangible assets shall be com
puted using the straight-line method.

Intangible assets transferred or assigned or used
as investments, where the useful life is stipualte
d in the agreement or contract, may be amortized o
ver the period of that useful life; the amortizati
on period in respect of intangible assets for whic
h no useful life has been stipulated or which have
been developed internally shall not be less than
10 years.

Article 48
Reasonable exploration expenses incurred by enterp
rises engaged in the exploitation of petroleum res
ources may be amortized against income from oil(ga
s) fields that have already commenced commercial p
roduction. The amortization period shall not be le
ss than one year.

Where operation of a contract filed owned by a for
eign oil company is terminated due to failure to f
ind commercially viable oil(gas),and where ownersh
ip of the contract for the exploitation of petrole
um (gas) resources is not continued and management
organiztions or offices for carrying on operation
s for the exploitation of petroleum (gas) resource
s are no longer maintained in china , reasonable e
xploration expenses already incurred in respect of
the terminated contract field shall, upon examinat
ion and confirmation and the issuance of certifica
tion by the tax authorities, be permitted to be am
ortized against production income of a newly owned
contract field when the new contract for cooperat
ive exploitation of oil(gas) resources is signed w
ithin 10 years from the date of the termination of
the old contract.

Article 49
Expenses incurred by enterprises during the organi
zation period shall be amortized beginning with th
e month following the month in which production an
d business operations commence; the period of amor
tization shall not be less than 5 years.

The period of organization mentioned in the preced
ing paragraph means the period from the date of ap
proval of the organization of the enterprises to t
he enterprises to the date of commencement of prod
uction and business operations(including trial pro
duction and trial business operations).

Article 50
Inventories of merchandise, finished products, goo
ds in process, semi-finished products, raw materia
ls , and other such materials of enterprises shall
be valued at cost.

Article 51
Enterprises may choose one of the following such m
ethods: first-in, first-out; moving average; weigh
ted average; or last-in, first-out as the method o
f computing actual costs in respect of the deliver
y or receipt and use of goods in stock.

Once a method of valuation has been adopted for us
e, no change shall be made thereto. where a change
in the method of valuation is indeed necessary, t
he matter shall be reported to the local tax autho
rities for approval prior to the commencement of t
he next tax year.

Chapter 4- Business Dealings Between Associate
d Enterprises

Article 52
"Associated enterprises" mentioned in Article 13 o
f the Tax Law refers to companies enterprises and
other economic units that have any of the followin
g relationships with other enterprises.

(1)relationships in respect of existing direct or
indirect ownership of or control over such matters
as finances, business operations, or purchases an
d sales;

(2)direct or indirect ownership of or control over
it and another by a third party;

(3)any other relationship in respect of an associa
tion of reciprocal interests.

Article 53
"Business transactions between independent enterpr
ises" mentioned in Article 13 of the Tax Law means
business dealings carried out between unassociate
d and unassocitated and unrelated enterprises on t
he basis of arm's length prices and common busines
s practices.

Enterprises have a duty to provide to the local ta
x authorities relevant materials such as standard
prices and charges in respect of business dealings
between associated enterprises.

Article 54
Where prices in respect of purchase and sales tran
sactions between an enterprise and its associated
enterprises are not based on independent business
dealings, adjustments may be made thereto by the
local tax authorities according to the following a
rrangements and methods of determination:

(1)based on prices of the same or similar business
activities between independent enterprises.

(2)based on the level of profits obtained from res
ales in respect of unassociated and unrelated thir
d party prices;

(3)based on costs plus reasonable expenses and pro
fit margin;

(4)based on any other reasonable method.

Article 55
Where interest paid or received in respect of acco
mmodating financing between an enterprise and as a
ssociated enterprise exceeds or is lower than the
amoubt that would be agreed upon by unassociated a
nd unrelated parties, or where the rate of interes
t exceeds or is lower than the normal rate of inte
rest in respect of similar business, adjustments m
ay be made thereto by the local tax authorities wi
th reference to normal rates of interest.

Article 56
Where labor service fees paid or received in respe
ct of the provision of labor services by an enterp
rise to an associated enterprise are not based on
business dealings between independent enterprises,
adjustments may be made thereto by the local tax
authorities with reference to the normal fee stand
ards of similar labor activities.

Article 57
Where the valuation or the receipt or payment of u
sage fees in respect of such business dealings as
the transfer of property or the granting of rights
to the use of property between an enterprise and
an associated enterprise is not based on business
dealings between independent enterprises, adjustme
nts may be made thereto by the local tax authoriti
es with reference to amounts that would be agreed
to by unassociated and unrelated parties.

Article 58
Management fees paid by an enterprise to an associ
ated enterprise shall not be expensed.


Article 59
"Taxable income on profits, interest, rents, royalties and other
income"mentioned in Article 19, paragraph 1 of the Tax Law shall, except
asotherwise stipulated by the State, be computed on the basis of
grossincome. Gross royalties obtained from the provision of patents
andproprietary technology include fees for blueprint materials,
technicalservices and personnel training, as well as other related fees.
Article 60
"Profits" mentioned in Article 19 of the Tax Law means income derived
from
the right to profits according to the proportion of investment,
equity
rights, stockholding, or other non-debt profit-sharing rights.
Article 61
"Other income" mentioned in Article 19 of the Tax Law includes gains
from
the transfer of property such as houses, buildings and structures
and
attached facilities within China and land-use rights.
"Gains" mentioned in the preceding paragraph means the amount
remainingfrom the receipt on transfer minus the original value of the property.
Where foreign enterprises are unable to provide correct certification
of
the original value of the property, the original value of the
propertyshall be determined by the local tax authorities according to the
specific
circumstances thereof.
Article 62
"The amount of payment" mentioned in Article 19, paragraph 2 of the
Tax
Law means cash payments, payment by remittances, and amounts paid
by
account transfers, as well as amounts in equivalent cash value paid
in
non-cash assets or rights and interests.
Article 63
"Profits obtained from an enterprise with foreign investment" mentioned
in
Article 19, paragraph 3, Item (1) of the Tax Law means income
obtained
from profits of an enterprise with foreign investment following
the
payment or the reduction of or exemption from income tax in
accordance
with the provisions of the Tax Law.
Article 64
"International finance organizations" mentioned in Article 19,
paragraph
3, Item (2) of the Tax Law means financial institutions such as
the
International Monetary Fund, the World Bank, the Asian Development
Bank,
the International Development Association, and the International Fund
for
Agricultural Development.
Article 65
"Chinese State banks" mentioned in Article 19, paragraph 3, Item (2)
and
Item (3) of the Tax Law means the People's Bank of China, the
Industrial
and Commercial Bank of China, the Agricultural Bank of China, the Bank
of
China, the People's Construction Bank of China, the Bank of
Communications
of China, the Investment Bank of China, and other financial
institutions
authorized by the State Council to engage in credit businesses such
as
foreign exchange deposits and loans.

Article 66
The scope of the reduction of or exemption from income tax on
royalties
provided for in Article 19, paragraph 3, Item (4) of the Tax Law is
as
follows:
(1) royalties received in providing proprietary technology for
the
development of farming, forestry, animal husbandry and fisheries:
(a) technology provided to improve soil and grasslands, develop
barren
mountainous regions and make full use of natural conditions;
(b) technology provided for the supplying of new varieties of animals
and
plants and for the production of pesticides of high effectiveness and
low
toxicity;
(c) technology provided such as to advance scientific
production
management in respect of farming, forestry, fisheries and
animal
husbandry, to preserve the ecological balance, and to
strengthen
resistance to natural calamities;
(2) royalties received in providing proprietary technology for
scientific
institutions, institutions of higher learning and other
scientific
research units to conduct or cooperate in carrying out scientific
research
or scientific experimentation;
(3) royalties received in providing proprietary technology for
the
development of energy resources and expansion of communications
and
transportation;
(4) royalties received in providing proprietary technology in respect
of
energy conservation and the prevention and control of
environmental
pollution;
(5) royalties received in providing the following proprietary
technology
in respect of the development of important fields of science
and
technology:
(a) production technology for major and advanced mechanical and
electrical
equipment:
(b) nuclear power technology;
(c) production technology for large-scale integrated circuits;
(d) production technology for photoelectric integrated circuits,
microwave
semi-conductors and microwave integrated circuits, and
manufacturing
technology for microwave electron tubes;
(e) manufacturing technology for ultra-high speed computers
and
microprocessors;
(f) optical telecommunications technology;
(g) technology for long-distance, ultra-high voltage direct current
power
transmission; and
(h) technology for the liquefaction, gasification and
comprehensive
utilization of coal.

Article 67
In respect of income of foreign enterprises engaged in China
in
construction, installation, assembly, and exploration contracting
work,
and provision of labour activities such as consulting, management
and
training, the tax authorities may designate the parties paying
the
contracted amounts and labour service fees as tax withholding agents.
【章名】 Chapter VI Tax Preferences

Article 68
Pursuant to the provisions of Article 6 of the Tax Law, the granting
of
any necessary preferential treatment in respect of enterprise income
tax
to enterprises with foreign investment that are encouraged by the
State
shall be implemented in accordance with the provisions of the
relevant
laws and administrative rules and regulations of the State.
Article 69
"Special economic zones" mentioned in Article 7, paragraph 1 of the
Tax
Law means the special economic zones of Shenzhen, Zhuhai, Shantou
and
Xiamen and the Hainan Special Economic Zone established by law
or
established upon approval of the State Council; "economic
and
technological development zones" mentioned therein means the economic
and
technological development zones in the coastal port cities
established
upon approval of the State Council.
Article 70
"Coastal economic open zones" mentioned in Article 7, paragraph 2 of
the
Tax Law means those cities, counties and districts established as
coastal
economic open zones upon approval of the State Council.
Article 71
"Imposition of enterprise income tax at the reduced rate of 15%"
mentioned
in Article 7, paragraph 1 of the Tax Law shall be limited to
income
obtained by enterprises from production and business operations in
the
respective areas so specified in Article 7, paragraph 1 of the Tax Law.
"Imposition of enterprise income tax at the reduced rate of 24%"
mentioned
in Article 7, paragraph 2 of the Tax Law shall be limited to
income
obtained by enterprises from production and business operations in
the
respective areas so specified in Article 7, paragraph 2 of the Tax Law.
Article 72
"Enterprises with foreign investment of a production nature" mentioned
in
Article 7, paragraph 1 and paragraph 2 and Article 8, paragraph 1 of
the
Tax Law means enterprises with foreign investment engaged in the
following
industries:
(1) machine manufacturing and electronics industries;
(2) energy resource industries (not including exploitation of oil
and
natural gas);
(3) metallurgical, chemical and building material industries;
(4) light industries, and textiles and packaging industries;
(5) medical equipment and pharmaceutical industries;
(6) agriculture, forestry, animal husbandry, fisheries and
water
conservation;
(7) construction industries;
(8) communications and transportation industries (not including
passenger
transport);
(9) development of science and technology, geological survey
and
industrial information consultancy directly for services in respect
of
production and services in respect of repair and maintenance of
production
equipment and precision instruments;
(10) other industries as specified by the tax authorities under the
State
Council.

Article 73
"Imposition of enterprise income tax at the reduced rate of 15%"
mentioned
in Article 7, paragraph 3 of the Tax Law applies to the following:
(1) production-oriented enterprises with foreign investment established
in
the coastal economic open zones, special economic zones and in the
old
urban districts of municipalities where economic and
technological
development zones are located and which are engaged in the
following
projects:
(a) technology-intensive or knowledge-intensive projects;
(b) projects with foreign investments of over US $ 30 million and
having
long periods for return on investment;
(c) energy resource, transportation and port construction projects;
(2) Chinese-foreign equity joint ventures engaged in port and
dock
construction;
(3) financial institutions such as foreign capital banks and
Chinese-
foreign banks established in the special economic zones and other
areas
approved by the State Council, where the capital contribution of
the
foreign investor or the funds for business activities allocated by
the
head office bank to the branch bank exceeds US $ 10 million, and where
the
period of operations is ten years or more;
(4) production-oriented enterprises with foreign investment established
in
the Pudong New Area of Shanghai, as well as enterprises with
foreign
investment engaged in energy resource and transport construction
projects
such as airports, ports, railways, highways and power stations;
(5) enterprises with foreign investment recognized as high or
new
technology enterprises established in the State high or new
technology
industrial development zones designated by the State Council, as well
as
enterprises with foreign investment recognized as new
technology
enterprises established in the new technology industrial
development
experimental zone of the municipality of Beijing;
(6) enterprises with foreign investment engaged in projects encouraged
by
the State and established in other areas stipulated by the State
Council.
Enterprises with foreign investment in projects listed in Item (1) of
the
preceding paragraph shall, following approval by the State Tax Bureau
of
an application submitted by such enterprises, be subject to
enterprises
income tax at the reduced tax rate of 15%.
Article 74
"The period of business operations" mentioned in Article 8, paragraph 1
of
the Tax Law means the period commencing on the date an enterprise
with
foreign investment actually begins production or business
operations
(including trial production and trial business operations) and ending
on
the date the enterprise ceases production or business operations.
Enterprises with foreign investment that pursuant to the provisions
of
Article 8, paragraph 1 of the Tax Law may enjoy treatment in respect
of
reductions of or exemptions from enterprise income tax shall submit to
the
local tax authorities for examination and verification such
circumstances
as the lines of business in which engaged, names of major products,
and
the period of operations decided upon. No treatment in respect
of
reductions of or exemptions from enterprise income tax shall be
enjoyed
without examination and verification and agreement thereof.

Article 75
"The relevant provisions promulgated by the State Council before the
entry
into force of this Law" mentioned in Article 8, paragraph 2 of the Tax
Law
means the following provisions in respect of exemptions from or
reductions
of enterprise income tax promulgated or approved for promulgation by
the
State Council:
(1) Chinese-foreign equity joint ventures engaged in port and
dock
construction where the period of operations is 15 years or more
shall,
following application by the enterprise and approval thereof by the
tax
authorities of provinces, autonomous regions, or municipalities
directly
under the Central Government of the location and commencing with the
first
profit-making year, be exempt from enterprise income tax from the
first
year to the fifth year and subject to enterprise income tax at a
rate
reduced by one half for the sixth year through the tenth year.
(2) Enterprises with foreign investment established in the Hainan
Special
Economic Zone and engaged in infrastructure facility projects such
as
airports, harbours, docks, highways, railways, power stations, coal
mines
and water conservation, and enterprises with foreign investment engaged
in
the development of and operations in agriculture where the period
of
operations is 15 years or more shall, following application by
the
enterprise and approval thereof by the tax authorities of Hainan
Province
and commencing with the first profit-making year, be exempt
from
enterprise income tax from the first year to the fifth year and subject
to
enterprise income tax at a rate reduced by one half for the sixth
year
through the tenth year.
(3) Enterprises with foreign investment established in the Pudong New
Area
of Shanghai and engaged in construction projects such as airports,
ports,
railways, highways and power stations where the period of operations is
15
years or more shall, following application by the enterprise and
approval
thereof by the tax authorities of the municipality of Shanghai
and
commencing with the first profit-making year, be exempt from
enterprise
income tax from the first year to the fifth year and subject to
enterprise
income tax at a rate reduced by one half for the sixth year through
the
tenth year.
(4) Enterprises with foreign investment established in the
special
economic zones and engaged in service-oriented industries where the
amount
of the foreign investment exceeds US $ 5 million and the period
of
operations is ten years or more shall, following application by
the
enterprise and approval thereof by the tax authorities of the
special
economic zone and commencing with the first profit-making year, be
exempt
from enterprise income tax in the first year and subject to
enterprise
income tax at a rate reduced by one half for the second and third years.
(5) Financial institutions such as foreign capital banks and
Chinese-
foreign banks established in the special economic zones and other
areas
approved by the State Council where the capital contribution of
the
foreign investor or the funds for business activities allocated by
the
head office bank to the branch bank exceeds US $ 10 million and the
period
of operations is ten years or more shall, following application by
the
enterprise and approval thereof by the local tax authorities
and
commencing with the first profit-making year, be exempt from
enterprise

income tax in the first year and subject to enterprise income tax at
a
rate reduced by one half for the second and third years.
(6) Chinese-foreign equity joint ventures recognized as high or
new
technology enterprises and established in the State high or new
technology
industrial development zones designated by the State Council where
the
period of operations is ten years or more shall, following application
by
the enterprise and approval thereof by the local tax authorities
and
commencing with the first profit-making year, be exempt from
enterprise
income tax in the first year and second year. Enterprises with
foreign
investment established in the special economic zones and the economic
and
technological development zones shall be governed by the preferential
tax
provisions of the special economic zones and the economic
and
technological development zones. Enterprises with foreign
investment
established in the new technology industrial development experimental
zone
of the municipality of Beijing shall be governed by the preferential
tax
provisions of the new technology industrial development experimental
zone
of the municipality of Beijing.
(7) Export-oriented enterprises invested in and operated by
foreign
businesses for which in any year the output value of all export
products
amounts to 70% or more of the output value of the products of
the
enterprise for that year may pay enterprise income tax at the tax
rate
specified in the Tax Law reduced by one half after the period
of
enterprise income tax exemptions or reductions has expired in
accordance
with the provisions of the Tax Law. However, export-oriented
enterprises
in the special economic zones and economic and technological
development
zones and other such enterprises subject to enterprise income tax at
the
tax rate of 15% that qualify under the above-mentioned conditions
shall
pay enterprise income tax at the tax rate of 10%.
(8) Advanced technology enterprises invested in and operated by
foreign
businesses which remain advanced technology enterprises after the
period
of enterprise income tax exemptions or reductions has expired
in
accordance with the provisions of the Tax Law may continue to pay for
an
additional three years enterprise income tax at the tax rate specified
in
the Tax Law reduced by one half.
(9) Implementation of other provisions in respect of exemptions from
or
reductions of enterprise income tax promulgated or approved
for
promulgation by the State Council.
Enterprises with foreign investment shall, in applying for exemptions
from
or reductions of enterprise income tax in accordance with the
provisions
of Item (6), Item (7), or Item (8) of the preceding paragraph,
submit
relevant documents of proof issued by departments in respect of
the
examination, verification and confirmation, the application shall
be
subjected to approval by the local tax authorities after examination
and
verification.

Article 76
"The first profit-making year" mentioned in Article 8, paragraph 1 of
the
Tax Law and in Article 75 of these Rules means the first tax year in
which
profits are obtained by an enterprise following commencement of
production
or business operations. Where an enterprise suffers losses during
the
early stages after establishment, such losses may be made up by the
income
of the following tax year in accordance with the provisions of Article
11
of the Tax Law. The first profit-making year shall be the year in
which
profits are obtained after such losses are made up.
The period for exemptions from or reductions of enterprise income
tax
specified in the first paragraph of Article 8 of the Tax Law and
Article
75 of these Rules shall be computed continuously commencing with the
year
in which the enterprise begins to make profits. The computation shall
not
be deferred because of losses incurred in any of the subsequent years.
Article 77
Enterprises with foreign investment which commence operations in
the
middle of a year and earn profits may, where the actual period
of
operations is less than six months, choose to use the following year
as
the period in which to begin the computation of tax exemptions or
tax
reductions; however, income tax shall be paid in accordance with the
Tax
Law on profits earned during the year.
Article 78
Unless otherwise provided by the State Council, the preferential
tax
provisions of Article 8, paragraph 1 of the Tax Law shall not apply
to
enterprises engaged in the exploitation of such natural resources
as
petroleum, natural gas, rare metals and precious metals.
Article 79
Enterprises with foreign investment that have received exemptions from
or
reductions of enterprise income tax pursuant to the provisions of
Article
8, paragraph 1 of the Tax Law and Article 75 of these Rules shall,
where
the actual period of operations is less than the period
stipulated
therein, except in the case of major losses sustained due to
natural
disasters or unforeseen accidents, make up the amount of the
exemptions
from or reductions of enterprise income tax.
Article 80
"Direct reinvestment" mentioned in Article 10 of the Tax Law refers
to
profits received from an enterprise with foreign investment by
foreign
investor of that enterprise which prior to receipt are directly used
to
increase registered capital, or which following receipt are directly
used
to organize another enterprise with foreign investment.
Foreign investors shall, in computing the amount of tax refundable
in
accordance with the provisions of Article 10 of the Tax Law,
provide
certificates confirming the use of the reinvested profits for the year;
the local tax authorities shall adopt any reasonable method for
the
reckoning and determination thereof where certificates cannot be
provided.
Foreign investors shall, in respect of the application for a refund
of
tax, submit within one year of the date of the actual investment of
the
reinvested amount a record of the reinvested amount and a certificate
for
the investment period of the increased capital or contributed capital
to
the tax authorities in the place where the taxes were originally paid.


Article 81
"Other preferential provisions of the State Council" mentioned in
Article10 of the Tax Law refers to direct reinvestment in China by
foreigninvestors for the organization and expansion of
export-orientedenterprises or advanced technology enterprises, as well as prof
its
offoreign investors earned from enterprises established in the
HainanSpecial Economic Zone that are directly reinvested in the Hainan
Special
Economic Zone in infrastructure projects and agriculture
development
enterprises and for which the entire portion of enterprise income tax
that
has already been paid on the reinvested amount may, in accordance with
the
provisions of the State Council, be refunded.
Foreign investors that apply for a refund of tax on reinvestments
in
accordance with the provisions of the preceding paragraph shall,
in
addition to completing the requirements pursuant to Article 80,
paragraph
2 and paragraph 3 of these Rules, submit certificates issued by
the
examining, verifying and confirming departments confirming
the
organization and expansion of export-oriented enterprises or
advanced
technology enterprises.
Enterprises in which foreign investors have reinvested in respect of
the
organization or expansion thereof which within three years of
commencing
production or operations have not achieved the standards in respect
of
export-oriented enterprises or have not continued to be confirmed
as
advanced technology enterprises shall repay 60% of the amount of
tax
refunded.
Article 82
"Tax refunds on reinvestments" mentioned in Article 10 of the Tax Law
and
Article 81, paragraph 1 of these Rules shall be computed according to
the
following formula:
Amount of tax refund = Reinvestment amount v [1 - (originally applicable
enterprise income tax rate + local income tax rate)] X
originally
applicable enterprise income tax rate X tax refund rate
【章名】 Chapter VII Tax Credits

Article 83
"Income tax already paid abroad" mentioned in Article 12 of the Tax
Law
means income tax actually paid abroad by an enterprise with
foreign
investment on income from sources outside China and does not include
taxes
paid for which compensation is later received or assumed by other
parties.
Article 84
"The amount of tax payable computed on income from sources outside
China
in accordance with the provisions of this Law" mentioned in Article 12
of
the Tax Law means the amount of tax payable computed on taxable
income
arising from income from abroad of enterprises with foreign
investment,
following the deduction of costs, expenses and losses allowable
in
accordance with the relevant provisions of the Tax Law and these
Rules
attributable to that income. The limit of the amount of tax payable
that
can be deducted shall be computed on a country-by-country basis;
the
method of computation is as follows:
Limit on deduction Total amount of tax Amount of
of tax payable on = payable on domestic * income from
income from abroad income and foreign sources
income from ---------------
-
abroad computed Total domestic
in accordance with income and
the Tax Law income from
abroad
Article 85
Where the amount of income tax actually paid abroad on income from
sources
from abroad by enterprises with foreign investment is less than
the
deductible limit resulting from computation based on the provisions
of
Article 84 of these Rules, the actual amount of income tax paid abroad
may
be deducted from the amount of tax payable; where the deductible limit
is
exceeded, the portion in excess shall not be deducted from tax and
shall
not be itemized as an expense, however, the portion not exceeding
the
limit thereof may be used as a deduction against following year's taxes;
the time limit for such supplemental deductions shall not exceed
five
years.
Article 86
The provisions of Article 83 to Article 85 of these Rules shall apply
only
to enterprises with foreign investment with head offices
established
within China. Enterprises with foreign investment that deduct taxes
in
accordance with the provisions of Article 12 of the Tax Law shall
provide
the original tax payment certificates signed and issued by the foreign
tax
authorities in respect of the same year; copies or tax
payment
certificates of different years shall not be used as tax
deduction
certificates.
【章名】 Chapter VIII Tax Administration

Article 87
Enterprises shall, within 30 days of completing business
registration,
complete tax registration with the local tax authorities. Enterprises
with
foreign investment that establish or terminate branch offices
outside
China shall, within 30 days of the date of establishment or
termination
thereof, complete with the local tax authorities procedures in respect
of
tax registration, amendments to the registration, or cancellation of
the
registration.
Enterprises that complete registrations in the preceding paragraph
shall,
in accordance with the provisions, present relevant documents,
licenses
and materials.
Article 88
Enterprises that undergo important registration changes such as changes
of
address, restructurings, mergers, spin-offs, terminations, as well
as
changes in the amount of capital and scope of business shall, within
30
days of the completion of the change in business registration or prior
to
the cancellation of registration, complete the change in registration
or
cancellation of registration with the local tax authorities with
the
relevant documents.
Article 89
Foreign enterprises which establish two or more business organizations
in
China may use one of the selected business organizations in respect of
the
consolidated filing and payment of income tax. However, the
business
organization so selected shall meet the following conditions:
(1) assumption of supervisory and management responsibility over
the
business operations of the other respective business organizations;
(2) maintenance of complete account records and certificates
which
accurately reflect the income, cost, expense and profit and
loss
situations of the respective business organizations.

Article 90
In respect of foreign enterprises which in accordance with the
provisions
of Article 89 of these Rules consolidate the filing and payment of
income
tax, the business organization so selected thereunder shall submit
an
application for approval according to the following provisions
after
examination and verification thereof by the local tax authorities:
(1) consolidated filing and payment of income tax in respect of
business
organizations located in the same province, autonomous region,
or
municipality directly under the Central Government shall be subject
to
approval by the tax authorities of the province, autonomous region
or
municipality directly under the Central Government;
(2) consolidated filing and payment of income tax in respect of
business
organizations located in two or more provinces, autonomous regions,
or
municipalities directly under the Central Government shall be subject
to
approval by the State Tax Bureau.
Following approval for the filing and payment of tax on a
consolidated
basis by foreign enterprises, such circumstances as the establishment
of
additional business organizations, mergers, change of address,
termination
of operations, or shutdowns shall, prior to such event, be reported to
the
local tax authorities by the business organization responsible for
the
filing and payment of tax on a consolidated basis. Any change in
respect
of the business organization filing and paying tax on a consolidated
basis
shall be dealt with in accordance with the provisions of the
preceding
paragraph.

Article 91
Where business organizations related to foreign enterprises that file
and
pay income tax on a consolidated basis apply different tax rates
in
respect of the payment of tax, the amount of taxable income of
the
respective business organizations shall be separately computed on
a
reasonable basis and income tax shall be paid on the basis of
the
different tax rates.
Where the respective business organizations mentioned in the
preceding
paragraph have losses and profits, tax shall be paid on the
profit
remaining after the offsetting of losses against profits according to
the
tax rate applicable to the profit-making business organization. A
business
organization which incurs losses shall offset losses using profits of
the
subsequent year of the business organization; tax shall be paid on
the
profit remaining after the offsetting of such losses according to the
tax
rate applicable to the business organization; tax paid on the
offsetting
amounts shall be based on the tax rate applicable to the
business
organization that offsets the losses incurred by the other
business
organization.
Article 92
Notwithstanding the provisions of Article 91 of these Rules, where
a
business organization responsible for filings and payment of tax on
a
consolidated basis is unable to compute separately and reasonably
the
taxable income of the respective business organizations, the local
tax
authorities may make a reasonable apportionment among the
respective
business organizations of the gross taxable income based on the
proportion
of business revenues, the proportion of cost and expenses, the
proportion
of capital assets, and the proportion of the number of staff or
salaries
and wages.
Article 93
Enterprises with foreign investment which establish branch offices
in
China shall complete consolidated filings and payment of income tax
with
reference to the provisions of Article 91 and Article 92 of these Rules.
Article 94
Enterprises that pay taxes in advance on a quarterly basis in
accordance
with the provisions of Article 15 of the Tax Law shall pay in advance
on
the basis of actual quarterly profits; where difficulty exists in
paying
in advance on the basis of actual quarterly profits, the
advanced
quarterly payment of tax may be made according to one-fourth of
the
taxable income of the previous year or any other method approved by
the
local tax authorities.

Article 95
Enterprises, whether realizing profits or losses in a tax years,
shall
file income tax returns and final statements of account with the local
tax
authorities within the time limit prescribed in Article 16 of the Tax
Law,
and unless otherwise provided by the State, shall include when filing
the
final accounting statement an audit statement of a certified
public
accountant registered in China.
Where, for special reasons, an enterprise cannot file an income tax
return
and final accounting statement within the period prescribed in the
Tax
Law, an application shall be submitted within the filing period and,
upon
approval of the local tax authorities, the filing period may be
extended
appropriately.
Article 96
Final accounting statements submitted by branches or
business
organizations to head offices or business organizations that file and
pay
income tax on a consolidated basis, shall be submitted at the same time
to
the local tax authorities.
Article 97
Enterprises that are merged, spun off, or terminated during the
year
shall, within 60 days of the termination of production or
business
operations, complete with the local tax authorities procedures for
the
settlement of any liability for and payment of income tax, with
refunds
for overpayments or supplementary payments for deficiencies.
Article 98
Enterprises which must complete procedures for tax refunds in the case
of
overpayments of tax may, where income in foreign currency has already
been
converted into Renminbi according to the foreign exchange rate,
convert
the amount of the tax in Renminbi to be refunded into foreign
currency
according to the exchange rate in effect when the tax was originally
paid,
and then reconvert this amount of foreign currency into Renminbi
according
to the foreign exchange rate at the date of issuance of the tax
refund
certificate. Where it is necessary to complete procedures
for
supplementary tax payments in the case of underpayments of tax, the
amount
of supplementary tax payments shall be converted into Renminbi
according
to the foreign exchange rate at the date of issuance of the
certificate
for supplementary tax payments.
Article 99
Enterprises with foreign investment that undergo liquidation shall,
prior
to the completion of the cancellation of business registration,
complete
the filing of income tax returns with he local tax authorities.

Article 100
Except as otherwise provided by the State, enterprises shall maintain
in
China accounting vouchers, books and statements that support the
correct
computation of taxable income.
Accounting vouchers, books and statements, and reports of
enterprises
shall be completed in the Chinese language or completed in both
the
Chinese language and a foreign language.
Enterprises that use electronic computers for purposes of
book-keeping
shall treat the accounting records in computer storage or in printed
form
as account books. All records on magnetic tape and diskette that have
not
been printed out shall be completely retained.
Accounting vouchers, books and statements, and reports of
enterprises
shall be retained for at least 15 years.
Article 101
Invoices and certificates of receipts of enterprises shall be subjected
to
approval by the local tax authorities prior to printing and use.
Administrative measures in respect of the printing and use of invoices
and
certificates of receipts of enterprises shall be formulated by the
State
Tax Bureau.
Article 102
All enterprise income tax returns and certificates of tax payments
shall
be printed by the State Tax Bureau.
Article 103
If the final day of the period for payment of tax and the period
for
filing of a tax return falls on a Sunday or a legal holiday, the
day
following the holiday shall be used as the last day of the period.
Article 104
Tax authorities may pay withholding agents as specified in Article
19,
paragraph 2 of the Tax Law and Article 67 of these Rules a handling
fee
based on a certain proportion of the amount of tax withheld; the
specific
methods shall be formulated by the State Tax Bureau.
Article 105
Local tax authorities may, according to the seriousness of the
case,
impose a fine of 5,000 yuan (RMB) or less on taxpayers or
withholding
agents that refuse to accept examination by the tax authorities
in
accordance with the relevant provisions or that refuse to pay late
payment
penalties within the time limit prescribed by the tax authorities.
Article 106
The tax authorities may, according to the seriousness of the case,
impose
a fine of 5,000 yuan (RMB) or less on an enterprise which violates
the
provisions of Article 87; Article 90, paragraph 2; Article 95; Article
96;
Article 97; Article 99; Article 100 and Article 101 of these Rules.

Article 107
"Tax evasion" mentioned in Article 25 of the Tax Law means the
illegal
actions of a taxpayer who has intentionally violated the provisions of
the
Tax Law such as by: falsifying, altering or destroying account
books,
receipts or accounting vouchers; falsely itemizing or overstating
costs
and expenses; concealing or understating taxable income or receipts;
or
avoiding taxes or fraudulently recovering taxes already paid.
Article 108
The tax authorities shall, in punishing taxpayers or withholding agents
in
accordance with the provisions of the Tax Law and these Rules,
serve
notice of contravention.
Article 109
Any entity or individual shall have the right to report a failure
to
comply with the Tax Law and the violators thereof. The tax
authorities
shall maintain confidentiality for informants and award them in
accordance
with the relevant provisions herein.
【章名】 Chapter IX Supplementary Provisions

Article 110
Enterprises with foreign investment which completed business
registration
prior to the promulgation of the Tax Law may, in respect of the payment
of
income tax in accordance with the provisions of the Tax Law and where
the
liability for tax is higher than that prior to the entry into force of
the
Tax Law, use the original applicable tax rate during the approved
period
of operations. Where there is no established period of operations,
income
tax may be paid using the original applicable tax rate for five
years
commencing on the date of the entry into force of the Tax Law. However,
in
respect of the above-mentioned period, if during a tax year the
tax
liability is higher than that stipulated in the Tax Law, income tax
shall
be paid commencing with that tax year according to the tax rate
stipulated
in the Tax Law.
Article 111
Preferential treatment in terms of exemptions from and reductions
of
enterprise income tax enjoyed pursuant to the laws and
administrative
rules and regulations prior to the entry into force of the Tax Law
by
enterprises with foreign investment which completed business
registration
prior to the promulgation of the Tax Law may continue to remain in
effect
until the termination of the period of exemptions and reductions.
Enterprises with foreign investment which completed business
registration
prior to the promulgation of the Tax Law but which have not earned
profits
or have earned profits for less than five years may, in accordance
with
the provisions of Article 8, paragraph 1 of the Tax Law, be granted
a
corresponding period of treatment in respect of exemptions from
or
reductions of enterprise income tax.
Article 112
Enterprises with foreign investment which completed business
registration
after the promulgation of the Tax Law but prior to the entry into force
of
the Tax Law may refer to the provisions of Article 110 and Article 111
of
these Rules for implementation herein.
Article 113
The Ministry of Finance and the State Tax Bureau shall be responsible
for
the interpretation of these Rules.
Article 114
These Rules shall come into force on the effective date of the Income
Tax
Law of the People's Republic of China for Enterprises with
Foreign
Investment and Foreign Enterprises. The Detailed Rules for
the
Implementation of the Income Tax Law of the People's Republic of
China
Concerning Chinese-Foreign Equity Joint Ventures and the Detailed
Rules
for the Implementation of the Income Tax Law of the People's Republic
of
China for Foreign Enterprises shall be abrogated at the same time.




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