Laws of the People's Republic of China
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The Ministry of Finance and the State Administration of Taxation
Official Reply of the Ministry of Finance and the State Administration of Taxation Concerning Tax Policies in the Enforcement of the Provisions of the State Council on Encouraging Foreign Investment (Excerpt)
CaiShuiWaiZi  No.118
January 1, 1987
With regard to preferential tax treatment accorded by the Article 22 to export-oriented enterprises with foreign investment, the Ministry of Foreign Economic Relations and Trade promulgated specific measures on January 5 of this year by WaiJingMaoZiZongZi  No.1, which stipulate an enterprise with foreign investment may not be recognized as export-oriented enterprises unless three conditions are simultaneously met. First, it must be an enterprise that produces products for export. Second, its products are mainly for export and the annual value of exported products must constitute over 50 percent of its total production value in the same year. Third, foreign exchange income and expenses in the same year must be in balance or surplus. It was also stipulated that a recognized export-oriented enterprise may not enjoy the preferential tax treatment accorded by Article 22 unless the value of its exported products reaches over 70 percent of its total production value in the same year and qualify annual review.
Therefore, though the income tax of remitted profits that has been exempted and corporate income tax that has been deducted by half in the same year must be refunded if the enterprise fails to meet in the annual review all the three conditions for export-oriented enterprises.