(February 22,1994)
According to the Decision of the Standing Committee of the National People's Congress on the Application of the Interim Regulations on Taxes such as Value-Added Tax, Consumption Tax, and Business Tax to Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as the Decision) as examined and adopted at the Fifth Meeting of the Standing Committee of the Eighth National People's Congress, several issues concerning the application of the categories of taxes to enterprises with foreign investment and foreign enterprises are hereby notified as follows:
1. Issues Concerning the Application of the Categories of Taxes to Enterprises with Foreign Investment and Foreign Enterprises
According to the provisions of the Decision, in addition to the application of Interim regulations of the People's Republic of China on Value-Added Tax, Interim Regulations of the People's Republic of China on Consumption Tax, Interim Regulations of the People's Republic of China on Business Tax and Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, the following interim regulations hall also be applicable to enterprises with foreign investment and foreign enterprises:
(1) Interim Regulations of the People's Republic of China on Land Appreciation Tax, promulgated on December 13, 1993 by the State Council;
(2) Interim Regulations of the People's Republic of China on Resource Tax promulgated on December 25, 1993 by the State Council;
(3) Interim Regulations of the People's Republic of China on Stamp Tax promulgated on August6, 1988 by the State Council;
(4) Interim Regulations Concerning Tax on Slaughtering Animals promulgated on December 19, 1950 by the Government administration Council of the Central People's Government;
(5) Interim Regulations Concerning Urban Real Estate Tax promulgated on August 8, 1951 by the Government Administration Council of the Central People's Governments;
(6) Interim Regulations Concerning the Vehicle and Vessel Usage License Plate Tax promulgated on September 13, 1951 by the Government Administration Council of the Central People's Government; and
(7) Interim Regulations Concerning Deed Tax promulgated on April 3, 1950 by the Government Administration Council of the Central People's Government.
In the process of the taxation system reform, the State Council shall successively be revising and making new interim regulations on taxation as well, and enterprises with foreign investment and foreign enterprises shall accordingly comply with the provisions of the relevant regulations.
2. Issues Concerning Handling of the Increased Tax Burden of Enterprises with Foreign Investment Due to the Imposition of Value-Added Tax, Consumption Tax and Business Tax as a Result of the Tax Change
(1) As to an enterprise with foreign investment approved to be established before December 31, 1993, where its tax burden increases as a result of the imposition of value-added tax, consumption tax and business tax, the enterprise may, upon application to and with the approval of the tax authorities, be allowed to be refunded the excess tax paid due to the increased tax burden within the approved operation period, with a maximum limit of not exceeding five years.
(2) Where an enterprise with foreign investment pays both value-added tax and consumption tax and its payment exceeds the original tax burden, the exceeding part shall, according to the proportion of the paid value-added tax and the paid consumption tax, be refunded respectively.
(3) Where the products manufactured by an enterprise with foreign investment are exported directly or through selling to an export enterprise, that enterprise with foreign investment may, according to the provisions of the Interim regulations of the People's Republic of China on Value-Added Tax, handle the refundment affairs at one stop by producing the export declaration form and the tax payment receipt.
(4) The refundment of the excess tax payment applied for by an enterprise with foreign investment shall, in principle, be conducted at one time after the end of the year; where the tax burden increases are comparatively higher, the enterprises concerned may apply for the refund quarterly in advance, and the clearance shall be done after the end of the year.
(5) The State Administration of Taxation and its affiliated establishment shall be responsible for dealing with the refundment affairs relation to the value-added tax and the consumption tax, and the state treasuries at various levels shall conduct examination and verification seriously and make strict checks. The computation of the refund, as well as the procedures of the application for refund and the approval thereof, shall be prescribed by the State Taxation Administration separately.
(6) The refundment affairs relating to the business tax shall be prescribed by the people's governments of provinces, autonomous regions or municipalities directly under the Central Governmet.
3. Issues Concerning Taxation on Chinese-foreign Cooperative Exploitation of Petroleum Resources
Crude oil and natural gas exploited by a Chinese-foreign cooperative oil field shall be taxed of value-added tax in kind at a rate of 5%, and the royalties shall be levied in accordance with the relevant provisions in effect, with temporary exemption from the resource tax. The input tax amount shall not balance the value-added tax payable. Where crude oil or natural gas is exported, there shall be no refund of tax.
Self-operative offshore oil field of China Offshore Petroleum Company shall comply with the above provisions mutates mutandis.
This Circular shall go into effect as January 1, 1994.
This translation, together with any explanatory material, is provided courtesy of Lehman Tax & Accounting.
