Laws of the People's Republic of China

Circular of the State Administration of Taxation on the Relevant Tax Issues of the Economic and Trade Office of the Government of Hong Kong SAR in the Mainland

Guo Shui Han [2006] No. 494

The state taxation bureaus and local taxation bureaus of Shanghai Municipality, Sichuan and Guangdong provinces,

In order to settle the tax issues of the Economic and Trade Office of the Government of Hong Kong SAR in Guangdong as well as the economic and trade offices to be set up in Shanghai and Chengdu, Hong Kong and Macao Affairs Office of the State Council has, upon the approval of the State Council, approved and transmitted to our Administration Facilitating the Work of the Economic and Trade Office of the Government of Hong Kong SAR in Guangdong (Gang Ban Lian Zi [2006] No. 203) and the Affairs Relating to the Economic and Trade Office to Be Set Up by the Government of Hong Kong SAR in Chengdu and Shanghai(Gang Ban Lian Zi [2006] No. 201). The Notification on relevant contents is hereby transmitted as follows. Please abide hereby.

1.

The Economic and Trade Office of the Government of Hong Kong SAR in Guangdong may not pursue commercial and any other activities concerning making money. It may charge service fees on the base of cost for the relevant services it provides and the revenues from such services are exempted from business tax and enterprise income tax.

2.

The wages, salaries and other similar remunerations paid by the government of Hong Kong SAR to the functionaries dispatched by it to its Economic and Trade Office in Guangdong (except other functionaries thereof) are exempted from individual income tax. The specific tax-exemption matters shall be handled in accordance with the relevant provisions of the Arrangement between the Mainland of China and Hong Kong SAR on the Avoidance of Double Taxation on Incomes.

3.

The office supplies, motor vehicles transported into the Mainland by the Economic and Trade Office in Guangdong, and the self-use resettlement articles transported into the Mainland by the Chief of the Office are exempted from the import link value added tax and consumption tax within the scope of rational amount upon the auditing of the customs . The self-use resettlement articles transported into the Mainland by other functionaries within a half year since they assume their posts may also enjoy the aforesaid tax-exemption treatments.

4.

The number of vehicles for the official business of the Economic and Trade Office of Government of Hong Kong SAR in Guangdong is limited to 2. The number of individuals' self-use cars and that of motorcycles for each family are limited to 1respectively. The aforesaid vehicles and motorcycles are exempted from the vehicle and vessel license and plate tax.

5.

The tax treatments for the economic and trade offices to be set up in Shanghai and Chengdu by the Government of Hong Kong SAR shall be transacted according to the Economic and Trade Office of Hong Kong SAR in Guangdong.

State Administration of Taxation

May 24, 2006