Ministry of Finance, State General Taxation Administration Bureau Cai Shui No.  42
To: Finance Department (Bureau) of each Province, Autonomous Region, Municipal City and Separate Planned City, State Taxation Administration, Local Taxation Bureaus:
As part of the implementation of the "Guidelines for Urban and Township Healthcare System Reform" (Guo Ban Fa No.  16), in promoting the development of the healthcare industry in China, with approval of the State Council, the relevant taxation policies for medical institutions are hereby issued:
Article 1: Taxation Policies for Non-profit Medical Institutions
(a) For a non-profit medical institution, revenues from medical services with government set prices shall be exempt from all taxes. Revenues for medical services without government set prices do not enjoy such treatment.
"Medical services" refers to services provided by a medical institution in the form of examination, diagnosis, treatment, rehabilitation, preventive healthcare service, child delivery, family planning, etc. The medical services also include the provision of drugs, medical devices and materials, ambulance, and boarding and lodging in the patient ward.
(b) For a non-profit medical institution, taxes shall be levied according to relevant regulations on revenues from non-medical services such as lease, property transfer, provision of training, external investment, etc. With the approval of the taxation department, the part of taxable revenue from non-medical services that is re-invested to improve medical service conditions may be deducted from the total amount of taxable revenues from non-medical services, the remainder of revenues from non-medical services still subject to business tax.
(c) Drug preparations made and used by a non-profit medical institution shall be exempt from value-added tax.
(d) The pharmacy of a non-profit medical institution, being separated from the institution and operated as an independent retail drugstore, shall be subject to taxation according to relevant regulations.
(e) Real estate, land, vehicles and vessels used by a non-profit medical institution for self-use shall be exempt from real estate tax, urban-and-township land use tax and vehicle and vessel use tax.
Article 2: Taxation Policies of For-profit Medical Institutions
(a) Taxes shall be levied on the revenues generated by a for-profit medical institution according to regulations. However, in order to support the development of for-profit medical institutions, during the initial three years of business from the date of registration, the revenues reinvested to improve healthcare conditions may enjoy the following preferential taxation policies: revenues of medical services shall be exempt from business tax; drug preparations made and used by the institution shall be exempt from value-added tax; real estate, land, vehicles and vessels used by the institution shall be exempt from real estate tax and vehicle and vessel use tax. Taxation shall resume upon completion of the three-year tax-exempt period.
(b) The pharmacy of a for-profit medical institution, being separated from the institution and operated as an independent retail drugstore, shall be subject to taxation according to relevant regulations.
Article 3: Taxation Policies for Disease Control Institutions and Healthcare Institutions for Women and Children and Other Healthcare Institutions
(a) For a disease control institution, or a healthcare institution for woman and children, or other institutions, revenues of healthcare services (including the allocation, sale, and inoculation with vaccines) with government set prices shall be exempt from all taxes. The revenues of healthcare service without government set prices shall not enjoy this treatment. With the approval of taxation department, other business revenues obtained by a disease control institution or a healthcare institution for women and children that are re-invested to improve medical service conditions of the institution may be deducted from total amount of taxable revenue, the remainder still subject to business tax.
(b) Real estate, land, vehicle and vessels of a disease control institution or a healthcare institution for women and children shall be exempt from real estate tax, urban land use tax and vehicle and vessel use tax.
A medical institution shall declare its nature in writing to the health administration department and shall apply for initial approval and registration according to the "Regulation for the Administration of Medical Institutions". The health administration department with whom the medical institution is registered shall verify and certify (its classification) and clearly indicate on the business license the nature of the medical institution as either "non-profit medical institution" or "for-profit medical institution" .
The above-mentioned medical institutions refer to: hospitals of all types and levels, outpatient units (clinics), community health service centers (stations), emergency aid centers (stations), urban and rural health centers, patient care centers (units), sanatoriums, clinical test centers, etc. The above mentioned disease control institution, healthcare institutions for women and children, and other health institutions specifically include: health epidemic prevention stations (disease control centers) sponsored by governments of all levels and relevant departments; all kinds of specialized disease prevention stations (units), healthcare units (stations) for women and children sponsored by governments of all levels, maternity care institutions, child healthcare institutions, etc., blood stations (blood centers) sponsored by governments of all levels.
The Notice shall be effective from the date of issuance.