中华人民共和国外商投资企业和外国企业所得税法

the Income Tax Law ofthe People's Republic of China for Enterprises with Foreign Inv
estment and Foreign Enterprises


Article 1
Income tax shall be paid in accordance with the pr
ovisions of this Law by enterprises with foreign i
nvestment within th eterritory of the People's Rep
ublic of China on their income derived from produc
tion, business operations and other sources.

Income tax shall be paid in accordance with the pr
ovisions of this Law by foreign enterprises on the
ir income derived from production, business operat
ions and other sources within the territory of the
People's Republic of China.

Article 2
"Enterprise with foreign investment" referred to i
n this Law means Chinese-foreign equity joint vent
ures, Chinese foreign contractual joint ventures a
nd foreign-capital enterprises that are establishe
d in China.

"Foreign enterprises" referred to in this Law mean
s foreign companies, enterprises and other economi
c organizations which have establishments or place
s in China and engage in production or business op
erations, or which, though without establishments
of places in China, have income from sources withi
n China.

Article 3
Any enterprise with foreign investment which estab
lishes its head office in China shall pay income t
ax on its income derived from sources inside and o
utside China. Any foreign enterprise shall pay inc
ome tax on its income derived from sources within
China.

Article 4
The taxable income of enterprises with foreign inv
estment and establishments or places set up in Chi
na by foreign enterprises to engage in production
or business operations shall be the amount remaini
ng from gross income in a tax year after costs, ex
-penses and losses have been deducted.

Article 5
The income tax on enterprises with foreign investm
ent and the inome tax which shall be paid by forei
gn enterprises on the income of their establishmen
ts or places set up in China to engage in producti
on or business operations shall be computed on tax
able income at the rate of 30%; local income tax s
hall be computed on taxable income at the rate of
3%.

Article 6
The state shall, in accordance with the industrial
policies, guide the orientation of foreign invest
ment and encourage the establishment of enterprise
s with foreign invesment which adopt advanced tech
nology and equipment and export all or the greater
part of their products.

Article 7
The income tax on enterprises with foreign investm
ent established in special economic zones, foreign
enterprises which have establishments or places i
n special economic zones engaged in production or
business operations, and enterprises with foreign
investment of a production nature in economic and
technological development zones shall be levied at
the reduced rate of 15%.

The income tax on enterprises with foreign investm
ent of a production nature established in coastal
economic open zones, or in the old urban districts
of cities where the special economic zones or the
economic and technological development zones are
located, shall be levied at the reduced rate of 24
%.

The income tax on enterprises with foreign investm
ent in coastal economic open zones, old urban dist
ricts of cities where the special economic zones o
r the economic and technological development zones
are located, or other regions defined by the Stat
e Council within the scope of energy. communicatio
ns, harbour, wharf or other projects encouraged by
the state, may be levied at the reduced rate of 1
5%. The speific rules shall be regulated by the St
ate Council.

Article 8
Any enterprise with foreign investment of a produc
tion nature scheduled to operate for a period of n
ot less than 10 years shall , from the year in whi
ch it begins to make profits, be exempted from inc
ome tax in the first and second years and allowed
a 50% reduction in the third to fifth years. Howev
-er, the exemption from or reduction of income tax
for enterprises with foreign investment engaged i
n the exploitation of resources such as petroleum,
natural gas, rare metals and precious metals shal
l be regulated separately by the State Council. En
terprises with foreign investment which have actua
lly operated for a period of less than 10 years sh
all repay the amount of income tax already exempte
d or reduced.

The relevant regulations promulgated by the State
Council before the entry into force of this Law,
which provide preferential treatment in the form o
f exemption from or reduction of income tax for en
terprises engaged in energy, communications, harbo
ur, wharf and other major projects of a production
nature for a period longer than that specified in
the preceding paragraph, or which provide prefere
ntial treatment in the form of exemption from or r
eduction of income tax for enterprises engaged in
major projects of a non-production nature, shall r
emain applicable after this Law enters into force.
Any enterprise with foreign investment which is en
gaged in agriculture, forestry or animal husbandry
and any other enterprise with foreign investment w
hich is established in remote underdeveloped areas
may, upon approval by the competent department for
tax affairs under the State Council of an applica
tion filed by the enterprise, be allowed a 15% to
30% reduction of the amount of income tax payable
for a period of 10 years following the expiration
of the period for tax exemption or reduction provi
ded for in the preceding two paragraphs.

After this Law enters into force,any modification
to the provisions of the preceding three paragraph
s of this Article on the exemption from or reducti
on of income tax on enterprises shall be submitted
by the State council to the Standing Committee of
the National People's Congress for decision.

Article 9
The exemption from or reduction of local income ta
x for any enterprise with foreige investment which
operates in an industry or undertakes a project e
ncouraged by the state shall, in accordance with t
he actual situation, be at the discretion of the p
eople's government of the relevant provincek, auto
nomous region or municipality directly under the C
-entral Government.

Article 10
Any foreign investor of an enterprise with foreign
investment which reinvests its share of profit ob
tained from the enterprise directly into that ente
rprise by increasing its registered capital, or wh
ich uses the profit as capital investment to estab
lish other enterprises with foreign investment to
operate for a period of not less than 5 years shal
l , upon approval by the tax authorities of an app
lication filed by the investor, be refunded 40% of
the income tax already paid on the reinvested amou
nt. Where regulation of the State Council provide
otherwise in respect of preferential treatment, su
ch provisions shall apply, if the investor withdra
ws its reinvestment before the expiration of a per
iod of 5 years , it shall repay the refunded tax.

Article 11
Losses incurred in a tax year by an enterprise wit
h foreign investment or by an establishment or pla
ce set up in China by a foreign enterprise to enga
ge in production or business operations may be off
-set against income of the following tax year. Sho
uld the income of the following tax year be insuff
icient to offset the said losses, the balance may
be offset against income of the next subsequent ye
ar, and so on, over a period not exceeding 5 years

Article 12
Any enterprise with foreign investment shall be al
lowed, when filing a consoliated income tax return
, to deduct from the amount of tax payable the for
eign income tax already paid abroad in respect of
income derived from sources outside China. The ded
uctible amount shall not, however, exceed the amou
nt of income tax other wise payable under this Law
in respect of income derived from sources outside
China.

Article 13
The payment or receipt of charges or fees in busin
ess transactions between an enterprise with foreig
n investment, or an establishment or place set up
in China by a foreign enterprise to engage in prod
uction or business operations, and its associated
enterprises shall be made in the same manner as th
e payment or receipt of charges of fees in busines
s transactions between independent enterprises, Wh
ere the payment or receipt of charges or fees in n
ot made in the same manner as in business transact
ions between independent enterprises and this resu
lts in a reduction of taxable income, the tax auth
orities shall have the right to make reasonable ad
justments.

Article 14
Where an enterprise with foreign investment or an
establishment or place set up in China by a foreig
n enterprise to engage in production or busines op
erations is established, moves to a new site, merg
es with another enterprise, breaks up, winds up or
makes a change in any of the main entries of regis
tration, it shall present the relevant documents t
o and shall go through tax registration or a chang
e or cancellation in registration with the local t
ax authorities, after the relevant event is regist
ered or a change or cancellation in registration h
as been made with the administrative agency for in
dustry and commerce.

Article 15
Income tax on enterprises and local income tax sha
ll be computed on an annual basis and paid in adva
nce in quarterly installments. Such payments shall
be made within 15 days from the end of each quart
er and the final settlement shall be made within 5
months from the end of each tax year. Any excess
payment shall be refunded and any deficiency shall
be repaid.

Article 16
Any enterprise with foreign investment and any est
ablishment or place set up in China by a foreign e
nterprise to engage in production or business oper
ations shall file its quarterly provisional income
tax returns in respect of advance payments with t
he local tax authorities within the period for eac
h advance payment of tax and shall file an annual
income tax return together with the final accounti
ng statements within 4 months from the end of the
tax year.

Article 17
Any enterprise with foreign investment and any est
ablishment or business operations shall report its
financial and accounting systems to the local tax
authorities for reference purposes. All accountin
g records must be complete and accurate, with legi
timate vouchers as the basis for entries.

If the financial and accounting bases adopted by a
nd enterprise with foreign investment or an establ
ishment or place set up in China by a foreign ente
rprise to engage in production or business operati
ons contradict the relevant tax provisions of the
State Council, tax payment shall be computed in ac
cordance with the relevant tax provisions of the S
tate Council.

Article 18
If any enterprise with foreign investment goes int
o liquidation, and if the balance of ita net asset
s or the balance of its remaining property after d
eduction of the enterprise's undistributed profit,
various funds and liquidation expenses exceeds the
enterprise's paid-in capital, the excess portion
shall be liquidation income on which income tax sh
all be paid in accordance with the provisions of t
his Law.

Article 19
Any foreign enterprise which has no establishment
or place in China but which derives profits, inter
est, rent, royalties or other income from sources
in china, or which, though it has an establishment
or place in china, derives such income and the in
come is not effectively connected with such establ
ishment or place, shall pay an income tax of 20%
on such income.

From the payment of income tax in accordance with
the provisions of the preceding paragraph, the inc
ome beneficiary shall be the taxpayer and the paye
r shall be the withholding agent. The tax shall be
withheld from the amount of each payment by the p
ayer. The withholding agent shall, within 5 days,
remit the amount of taxes withheld on each payment
to the State Treasury and submit a withholding in
come tax return to the local tax authorities.

An exemption from or reduction of income tax shall
apply to the following income :
(1)profits derived by a foreign investor from an e
nterprise with foreign investment shall be exempte
d from income tax;
(2)income from interest on loans made to the Chine
se Government or Chinese state banks by internatio
nal financial organizations shall be exempted from
income tax;
(3)income from interest on loans made at a prefere
ntial interest rate to Chinese state banks by fore
ign banks shall be exempted from income tax; and
(4)income tax on royalties for the supply of techn
ical know-how in scientific research, exploitation
of energy resources, development of the communica
tions industries, agricultural, forestry and anima
l husbandry production, and the development of imp
ortant technologies may, upon approval by the comp
etint department for tax affairs under the State C
-ouncil, be levied at the reduced rate of 10%. whe
re the technology supplies is advanced or the term
s are preferential, exemption from income tax may
be allowed.

Apart from the aforesaid provisions of this articl
e, if preferential treatment in the from of reduct
ion of or exemption from income tax on profits, in
terest, rent, royalties and other income is requir
ed, it shall be regulated by the State Council.

Article 20
The tax authorities shall have the right to inspec
t the financial, accountihg and tax affairs of ent
erprises with foreign investment and establishment
s or places set up in China by foreign enterprises
to engage in production ot business operations, a
nd shall have the right to inspect the tax withhol
ding of the withholding agent and its payment of t
he withheld tax to the State Treasury.

The entities and withholding agents being inspecte
d must report the facts and provide relevant infor
mation. They may not conceal or refuse to report a
ny facts.

When making an inspection, the tax officials shall
produce their identity documents and shall be res
ponsible for confidentiality.

Article 21
Income tax payable according to this Law shall be
computed in terms of Renminbi(RMB). Income in fore
ign currency shall be converted into Renminbi acco
rding to the exchange rate quoted by the state exc
hange control authorities for purposes of tax paym
ent.

Article 22
If any taxpayer fails to pay tax within the prescr
ibed time limit, or if the withholding agent fails
to remit the tax withheld within the prescribed t
ime limit, the tax authorities shall, in addition
to setting a new time limit for tax payment, impos
e a surcharge for overdue payment equal to 0.2% of
the overdue tax for each day in arrears, starting
from the first day the payment became overdue.

Article 23
The tax authorities shall set a new time limit for
registration or submission of documents and may i
mpose a fine of 5,000 yuan or less on any taxpayer
or withholding agent which fails to register for
tax purposes or to make a change or cancellation i
n registration with the tax authorities within the
prescribed time limit; submit an income tax retur
n, final accounting statements or withholding inco
me tax return to the tax authorities within the pr
escribed time limit; or report its financial and a
ccounting systems to the tax authorities for refer
ence purposes.


Where the tax authorities have set a new time limi
t for registration for submission of documents, th
ey shall impose a fine of 10,000 yuan or less on t
ax payers or withholding agents which again fail t
o meet the time limit for registration or making a
change in registration with the tax authorities,
or for submitting an income tax return, final acco
unting statements or withholding income tax return
to the tax authorities. Where the circumstances a
re serious, the legal representative and the perso
n directly responsible shall be investigated for c
riminal responsibility by applying, mutatis mutand
is, the provisions of Article 121 of the Criminal
Law.

Article 24
Where the withholding agent fails to fulfill its o
bligation to withhold tax as provided in this Law
, and does not withhold or withholds an amount les
s than that which should have been withheld, the t
ax authorities shall set a time limit for the paym
ent of the amount of tax that should have been wit
hheld, and may impose a fine up to but not exceedi
ng 100% of the amount of tax that should have been
withheld.

Where the withholding agent fails to remit the tax
withheld to the State Treasury within the prescri
bed time limit, the tax authorities shall set a ti
me limit for remitting the taxes and may impose a
fine of 5,000 yuan or less on the withholding agen
t; if the withholding agent again fails to meet th
e time limit , the tax authorities shall pursue th
e taxes according to the law and may impose fine o
f 10,000 yuan or less on the withholding agent. If
the circumstances are serious, the legal represen
tative and the person directly responsible shall b
e investigated for criminal responsibility by appl
ying, mutatis mutandis, the provisions of Article
121 of the Criminal Law.

Article 25
Where any person evades tax by deception or concea
lment or fails to pay tax within the time limit pr
escribed by this Law and, after the tax authoritie
s have pursued the payment of tax, again fails to
pay it within the prescribed time limit, the tax a
uthorities shall, in addition to recovering the ta
x which should have been paid, impose a fine up to
but not exceeding 500% of the amount of tax which
should have been paid, Where the circumstances ar
e serious, the legal representative and the person
directly responsible shall be investigated for cr
iminal responsibility in accordance with the provi
sions of Article 121 of the Criminal Law.

Article 26
In case of a dispute with the tax authorities in r
espect of the payment of tax, any enterprise with
foreign investment, foreign enterprise or withhold
ing agent must first pay tax according to the rele
vant regulations. Thereafter, the taxpayer or with
holding agent may, within 60 days from the date of
receipt of the tax payment certificate issued by
the tax authorities, apply to the tax authorities
at the next highest level for reconsideration. the
higher tax authorities shall make a decision with
in 60 days after receipt of the application for re
consideration. If the taxpayer or withholding agen
t is not satisfied with the decision, it may insti
tute legal proceedings in the people's court withi
n 15 days from the date of the notification on de
cision made after reconsideration.

If the party concerned is not satisfied with the d
ecision on punishment by the tax authorities, it m
ay, within 15 days from the date of receipt of the
notification on punishment, apply for reconsidera
tion to the tax authorities at the next highest le
vel above that which made the decision on punishme
nt. Where the party is not satisfied with the deci
sion made after reconsideration, it may institute
legal proceedings in the people's court within 15
days from the date of receipt of the decision made
after reconsideration. The party concerned may, ho
wever, directly institute legal proceedings in the
people's court within 15 days from the date of rec
eipt of the decision made after reconsideration. T
he party concerned may, however, directly institut
e legal proceedings in the people's court within 1
5 party concerned may, however, directly institute
legal proceedings in the people's court within 15
days from the date of receipt of the notification
on punishment. If the party concerned does not ap
ply for reconsideration to the higher tax authorit
ies or institure legal proceedings in the people's
court within the time limit, and if the decision
on punishment is not fulfilled, the tax authoritie
s which made the decision on punishment may apply
to the people's court for compulsory execution.

Article 27
Where any enterprise with foreign investment which
was established before the promulgation of this L
aw would otherwise, in accordance with the provisi
ons of this Law, be subject or higher tax rates or
enjoy less preferential treatment of tax exemptio
n or reduction than before the entry into force of
this Law, in respect of such enterprise, within i
ts approved period of operation, the law and relev
ant regulations of the State Council in effect bef
ore the entry into force of this Law shall apply.
If any such enterprise has no approved period of o
peration, the law and relevant regulations of the
State COuncil in effect before the entry into forc
e of this Law shall within the period prescribed b
y the State Council. Specific rules shall be regul
ated by the State Council.

Article 28
Where the provisions of tax agreements concluded b
etween the Government of the People's Republic of
China and foreign governments are different from
the provisions of this Law, the provisions of the
respective agreements shall apply.

Article 29
Rules for implementation shall be formulated by th
e State Council in accordance with this Law.

Article 30
This Law shall enter into force on 1 July 1991. Th
e Income Tax Law of the People's Republic of China
for Chinese-Foreign Equity Joint ventures and the
Income Tax Law of the People's Republic of China
for Foreign Enterprises shall be annulled as of th
e same date.