Laws of the People's Republic of China

The Ministry of Finance, the State Administration of Taxation

Circular of the Ministry of Finance and the State Administration of Taxation on Some Business Tax Issues for Foreign Enterprises and Foreign Individuals to Transfer Intangible Assets

CaiShui [2001] No.36

March 16,2001

The departments (bureaus) of finance and the local tax bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan:

After the issuance and execution of the Circular of the Ministry of Finance and State Administration of Taxation ("SAT") on Relevant Taxation Issues on Carrying out and Ensuring the Implementation of the Decision of Central Committee of the Communist Party of China and the State Council on Strengthening Technical Innovation, Developing Hi-techs and Realizing Industrialization (CaiShuiZi [1999] No.273), some issues have been put forward in succession by various jurisdictions. In order to execute the Circular more conveniently, relevant business tax issues for foreign enterprises and foreign individuals to transfer technologies and other intangible assets from outside the mainland of China into China's mainland are hereby clarified as follows:

I.

On the issue of the period for collecting and exempting the business tax of foreign enterprises and foreign individuals in transferring intangible assets

In accordance with the provisions of the Interim Regulations of the People's Republic of China on Business Tax, Circular of the SAT on the Issue of Business Tax to be Collected upon the Income Obtained by Foreign Enterprises from Transferring Intangible Assets into China's Mainland (GuoShuiFa [1998] No. 4 ), Circular of the SAT on Relevant Business Tax Issues for Foreign Enterprises to Transfer Intangible Assets (GuoShuiFa [2000] No. 70 ) and Circular of Ministry of Finance and SAT on Relevant Taxation Issues on Carrying out and Ensuring the Implementation of the Decisions of Central Committee of the Communist Party of China and the State Council on Strengthening Technical Innovation, Developing Hi-techs and Realizing Industrialization (CuiShuiZi [1999] No.273), if a foreign enterprise or a foreign individual transfers intangible assets into China's Mainland, the period of tax collection and exemption on the income obtained form such transfer shall be:

(1)

If the contract was concluded before the end of 1993 and if one of the parties to which was inside China's Mainland, the business tax shall not be collected no matter when the income is obtained;

(2)

If the contract was concluded after January 1, 1994, no matter whether the business tax has been collected upon the income obtained prior to December 31, 1997, the amount of the business tax shall be neither refunded nor made up;

(3)

If the contract was concluded after January 1, 1994, the business tax shall, in accordance with relevant provisions, be collected upon the income obtained after January 1, 1998;

(4)

If the technology transfer contract was concluded after January 1, 1994, the business tax upon the income obtained after October 1, 1999 may be exempted on the condition that the enterprise has, after having obtained relevant certificates and documents, applied to and been approved by the SAT. The business tax upon intangible assets other than technologies shall be collected in accordance with the rules.

II.

On the issue of certificates and documents to be provided by foreign enterprises and foreign individuals who apply for exemption of business tax upon technology transfer fees.

In accordance with the provisions of CaiShuiZi [1999] No.273, where a foreign enterprise or a foreign individual who transfers technology into China's Mainland needs to be exempted from business tax, such tax may not be exempted until it/he has provided the certificate of examination and check opinions issued by the provincial department in charge of science and technology at the location of the transferee of the technology. In order to simplify the formalities and improve the efficiency, if, when handling the tax exemption on technology transfer, the said enterprise or individual can provide the technology transfer contract or agreement and the approval documents issued by the authority which examined and approved the technology import project, that is, Ministry of Foreign Trade and Economic Cooperation or its authorized local department of foreign trade and economic relations, it/he is no longer required to provide the certificate of examination and check opinions issued by the provincial department in charge of science and technology.