Laws of the People's Republic of China

IMPLEMENTATION MEASURES OF
THE MINISTRY OF FINANCE FOR PUTTING INTO EFFECT
THE PREFERENTLAL TERMS ON TAXATION PROVIDED IN
"THE PROVISIONS OF THE STATE COUNCIL FOR
THE ENCOURAGEMENT OF FOREIGN INVESTMENT"

(Promulgated by the Ministry of Finance on January 30,1987)

 

 

SUBJECT: TAXATION

ISSUING-DEPT: MINISTRY OF FINANCE

ISSUE-DATE: 01/30/1987

IMPLEMENT-DATE: 01/30/1987

LENGTH: 1226 words

TEXT:

These Implementation Measures are specially formulated to put into effect the relevant preferential terms on taxation provided in the "Provisions of the State Council For The Encouragement of Foreign Investment" (hereinafter referred to as the "Provisions").

(1) Article 7 of the Provisions: "When Foreign Investors In Export Enterprises and Technologically Advanced Enterprises remit abroad profits distributed to them by such enterprises, the amount remitted shall be exempt from income tax" shall mean that when Foreign Investors remit abroad the profits for the year 1986 and subsequent years distributed to them by the Export Enterprises and Technologically Advanced Enterprises operated with Chinese and foreign investment, the amount remitted shall be exempt from the ten (10%) percent income tax.  As for the pre-distributed profit for the year 1986 remitted by the Foreign Investors prior to the date of promulgation of the Provisions, the amount of income tax paid on the amount remitted upon remittance shall be refunded.  When a foreign co-venturer remits abroad the profits distributed to him for the years preceding 1986, the remitted amount shall be subject to income tax in accordance with the original stipulations.

(2) Article 8 of the Provisions: "After the expiration of the period of exemption and reduction of enterprise income tax in accordance with the stipulations of the State, an Export Enterprise whose output value of export products in a year reaches seventy (70%) percent or more of the output value of its products for that year may pay enterprise income tax at a reduced rate of fifty (50%) percent of that currently in effect" shall apply to Export Enterprises that have a period of exemption and reduction of enterprise income tax and Export enterprises that do not have a period of exampt and reduction of enterprise income tax pursuant to tax laws currently in effect and relevant stipulations.

a.  Any of the Export Enterprises mentioned above whose output value of export products in a year reaches seventy (70%) percent or more (inclusive of 70%) of the output value of its products for that year must present certifying documents issued by the verification and confirmation authority, and only upon examination and confirmation thereof by the local authority in charge of taxation may the enterprises be entitled to the preferential treatment of payment of enterprise income tax at a reduced rate of fifty (50%) percent of that currently in effect for that year.

b.  With regard to enterprises confirmed to be Export Enterprises in the year 1986, the amount of quarterly enterprise income tax prepaid in 1986 may be refunded, in the case of excess payments, or, made good, in the case of deficiencies, upon final settlement of the annual income tax.

c.  Export Enterprises mentioned above that have a tax rate of enterprise income tax lower than ten (10%) percent after the fifty (50%) percent reduction shall pay enterprise income tax at a tax rate of ten (10%) percent.

(3) Article 9 of the Provisions: "After the expiration of the period of exemption and reduction of enterprise income tax in accordance with the stipulations of the State, Technologically Advanced Enterprises may have the payment of enterprise income tax at a fifty (50%) percent reduction extended for three (3) years" shall apply to Technologically Advanced Enterprises that have a period of exemption and reduction of enterprise income tax and Technologically Advanced Enterprises that do not have a period of exemption and reduction of enterprise income tax pursuant to tax laws currently in effect and relevant stipulations.

a.  Any Technologically Advanced Enterprise mentioned above, whose period of exemption and reduction of enterprise income tax in accordance with tax laws currently in effect and relevant stipulations has not expired, amy pay enterprise income tax at a fifty (50%) percent reduction from the first year to the third year after the period of exemption and reduction of enterprise income tax of such enterprise has expired.  Those whose period of exemption and reduction of enterprise income tax in accordance with tax laws currently in effect and relevant stipulations has expired, or those that do not have a period of exemption and reduction of enterprise income tax, may pay enterprise income tax at a fifty (50%) percent reduction from the year such enterprises are confirmed to be Technologically Advanced Enterprises to the third year.  With regard to enterprises that are newly established after 1986, those that do not have a period of exemption and reduction of enterprise income tax in accordance with tax laws currently in effect and relevant stipulations may pay enterprise income tax at a profit making year of such enterprises to the third year.

b.  The amount of quarterly enterprise income tax prepaid in 1986 by the aforesaid Technologically Advanced Enterprises may be refunded, in the case of excess payments, or made goods, in the case of deficiencies, upon final settlement of the annual income tax.

c.  Technologically Advanced Enterprises mentioned above that have a tax rate of enterprise income tax lower than tan (10%) percent after the fifty (50%) percent reduction shall pay enterprise income tax at a tax rate of ten (10%) percent.

(4) Article 10 of the Provisions: "Any Foreign Investor who reinvests the profits distributed to him by the enterprise within the territory of China to establish or expand an Export Enterprise or a Technologically Advanced Enterprise and the term of operation is not less than five (5) years, subject to application to and approval by the tax authorities, shall obtain a full refund of the amount of enterprise income tax already paid on the reinvested portion" shall mean that when a Foreign Investor reinvests the profits distributed to him by the enterprise within the territory of China to establish or expand an Export Enterprise or a Technologically Advanced Enterprise, such profits must be profits distributed to him in 1986 and subsequent years.  Foreign Investors who reinvest with profits for years preceding 1986 shall be subject to provisions of the original stipulations.

(5) With respect to an Enterprise with Foreign Investment that is approved by the verification and confirmation authority as an Export Enterprise and a Technologically Advanced Enterprise in the same year, such enterprise may be permitted to opt for either the preferential treatment granted under Article 8 or that granted under Article 9 the Provisions; it may not be entitled to both preferential treatments at the same time.  With respect to Technologically Advanced Enterprises that meet the requirement of article 8 of the Provisions after the expiry of the three year period of fifty (50%) percent reduction of enterprise income tax, they may be entitled to the preferential treatment granted under said Article.

(6) The prefential terms on taxation set forth in the Provisions shall not apply to taxation of Chinese-foreign enterprises that engage in cooperative exploration and exploitation of petroleum or precious metal resources.

(7) These Implementation Measures shall without exception be deemed definitive by all districts and departments in putting into effect the preferential policy on taxation set forth in the Provisions.