Laws of the People's Republic of China
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The State Administration of Taxation
Circular of the State Administration of Taxation Concerning Withholding of Business Tax with Regard to Price for Software Paid by Chinese Enterprises to Foreign Enterprises
GuoShuiFa  No.179
November 3, 2000
The Administration of State Taxation and the Administration of Local Taxation of every province, autonomous region, municipality directly under the Central Government and municipality separately listed on the State plan:
From recent reports by some localities, it has been contentious that whether the price for software paid by Chinese enterprises to foreign enterprises without any establishment in China is subject to withholding of business tax. With a view to standardizing the taxation control, the following provisions are made for clarification of the above-mentioned problem.
Where a foreign enterprise sells to a Chinese enterprise mere software or related software together with the transfer of postal or telecommunication equipment or computers, the price for such software paid by the Chinese transferee is not subject to withholding of business tax on the foreign enterprise, regardless of whether the customs duty and import link value added tax have been paid for the imported software.
Where a foreign enterprise rents to a Chinese enterprise postal or telecommunication equipment or computers and software relating to them, and the Chinese enterprise is charged for the software separately, such charges shall be regarded as rental receipts from renting the above-mentioned goods and, according to provisions of Circular of the State Administration of Taxation Regarding the Problem of Whether the Interests and Rental Receipts Earned in China by Foreign Enterprises Are Subject to Business Tax', be exempt from business tax.
This Circular shall become effective as of October 1, 1999. No tax payment or refund is to be conducted with regard to the above-mentioned software imported before October 1, 1999 (reference made to the declaration date) for self use, regardless of whether the tax has been or has not been paid; business tax paid after October 1, 1999 with regard to price for software paid by the Chinese enterprise to the foreign enterprise shall be refunded.