Decision of the Standing Committee of the National People's Congress Regarding the Application of Provisional Regulations on Such Taxes as Value-added Tax,Consumption Tax and Business Tax to Enterprises with Foreign Investment and Foreign Enterprises

(Adopted at the Fifth Meeting of the Standing Committee of the Eighth National People's Congress and promulgated by Order No. 18 of the President of the People's Republic of China on December 29, 1993)

The Fifth Meeting of the Standing Committee of the Eighth National People's Congress, having considered the Proposal submitted by the State Council on the Application of the Provisional Regulations on Such Taxes as Value-added Tax, Consumption Tax and Business Tax to Enterprises with Foreign Investment and Foreign Enterprises, with a view to unifying the tax system, balancing the tax burden, improving the investment environment of our country, and catering for the need of establishing and developing the socialist market economy, specifically makes the following decisions:

1. Prior to the formulation of the relevant tax laws, the Provisional Regulations on Value-added Tax, the Provisional Regulations on Consumption Tax and the Provisional Regulations on Business Tax promulgated by the State Council shall be applicable to enterprises with foreign investment and foreign enterprises as of the date of January 1, 1994. The Regulations of the People's Republic of China on Industrial and Commercial Consolidated Tax (Draft) adopted in principle at the 101st Meeting of the Standing Committee of the National People's Congress on September 11, 1958 and promulgated by the State Council for trial implementation on September 13, 1958 shall be annulled on the same date.

Value-added Tax for the Chinese-foreign co-operative exploitation of offshore oil and natural gas shall be collected in kind. The tax rates and measures of collection shall be separately formulated by the State Council.

2. Where the tax burden of the enterprises with foreign investment established with due approval before the date of December 31, 1993 increases due to the change to the levy of Value-added Tax, Consumption Tax and Business Tax pursuant to Article 1 of this Decision, such enterprises may, upon application to and with the approval of the tax authorities, have a refund of the excess tax paid due to such increased tax burden for a maximum period of five years within the approved term of operation. Where there is no fixed term of operation, the enterprises may, upon application to and with the approval of the tax authorities, have a refund of the excess tax paid due to such increased tax burden for a maximum period of five years. The specific measures shall be formulated by the State Council.

3. Apart from Value-added Tax, Consumption Tax and Business Tax, the application of other types of tax to enterprises with foreign investment and foreign enterprises shall be governed by the laws wherein there are such provisions, and shall be governed by the provisions of the State Council in the absence of such legal provisions.

Enterprises with foreign investment referred to in this Decision mean Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and wholly foreign-owned enterprises established within the territory of China.

Foreign enterprises referred to in this Decision mean foreign companies, enterprises and other economic organizations which have establishments or places within the territory of China to engage in production or business operations, or which, though have no establishments or places, have income sourced within the territory of China.

This Decision shall go into effect as of the date of promulgation.

Appendix 1:

Provisional Regulations of the People's Republic of China on Value-added Tax

(Adopted at the 12th Executive Meeting of the State Council on November 26, 1993, promulgated by Decree No.134 of the State Council of the People's Republic of China and effective as of January 1, 1994)

Article 1 Units and individuals in the territory of the People's Republic of China that sell goods, provide processing or repair and replacement services or import goods shall be payers of value-added tax (hereafter, "taxpayers") and shall pay value-added tax in accordance with these Regulations.

Article 2 The value-added tax rates shall be as follows:

1. The tax rate for goods sold or imported by taxpayers other than the goods set forth in Items 2 and 3 of this Article shall be 17%.

2. The tax rate for sale or import of the following goods by taxpayers shall be 13%:

(1) grain, edible vegetable oil;

(2) tap water, central heating, air-conditioning, hot water, coal gas, liquid petroleum gas, natural gas, methane, and coal products for use by residents;

(3) books, newspapers, magazines;

(4) feed, chemical fertilizer, agrochemicals, agricultural machinery, agricultural film; and

(5) other goods specified by the State Council.

3. The tax rate for goods exported by taxpayers shall be zero, except where otherwise determined by the State Council.

4. The tax rate for processing and repair and replacement services provided by taxpayers (hereafter, "taxable labour services") shall be 17%.

Adjustments to the tax rates shall be decided upon by the State Council.

Article 3 Taxpayers that concurrently deal in goods or provide taxable labour services with different tax rates shall separately calculate the sales amounts of the goods or taxable labour services with different tax rates. Where the sales amounts are not calculated separately, the highest applicable tax rate shall be applied.

Article 4 Subject to Article 13 of these Regulations, the amount of tax payable on the sale of goods or provision of taxable labour services (hereafter, "sale of goods or taxable labour services") by taxpayers shall be the balance of the value-added tax on outputs for the current period after setting off or deducting the value-added tax on inputs for the current period. The formula for calculation of the amount of tax payable is set forth below:

Amount of tax payable = value-added tax on outputs for the current period - value-added tax on inputs for the current period.

If the value-added tax on inputs for the current period cannot be fully set off against or deducted from the value-added tax on outputs for the current period because the latter amount is smaller than the former, the balance may be carried over to the next period for continued set-off or deduction.

Article 5 The amount of value-added tax calculated in accordance with the sales amount and the tax rates provided in Article 2 of these Regulations and collected from purchasers for the sale of goods or taxable labour services by taxpayers, shall be the value-added tax on outputs. The formula for calculation of the value-added tax on outputs is set forth below:

Value-added tax on outputs = sales amount ×tax rate

Article 6 The sales amount shall be the full price and all additional charges that are collected by the taxpayer from the purchaser for the sale of goods or taxable labour services, but shall not include the collected value-added tax on outputs.

Sales amounts shall be calculated in Renminbi. Taxpayers that settle the sales amounts in foreign exchange shall calculate the amounts by converting them into Renminbi at the foreign exchange market rate.

Article 7 If a taxpayer's price for the sale of goods or taxable labour services is obviously on the low side and no proper grounds are presented for such low price, the tax authorities in charge shall determine such sales amount.

Article 8 The value-added tax paid or borne by taxpayers for the purchase of goods or for receiving taxable labour services (hereafter, the "purchase of goods or taxable labour services"), shall be the value-added tax on inputs.

The value-added tax on inputs that is permitted to be set off against or deducted from the value-added tax on outputs shall be limited to the value-added tax amounts specified in the following value-added tax deduction certificates, with the exception of the situation set forth in Paragraph 3 of this Article:

1.the value-added tax amount specified on the special value-added tax receipt obtained from the seller; and

2. the value-added tax amount specified in the duty-and tax-paid certificate obtained from Customs.

The value-added tax on inputs that is permitted to be set off or deducted in the case of purchase of tax-exempt agricultural produce shall be calculated in accordance with the purchase price and a deduction rate of 10%. The formula for calculation of the value-added tax on inputs is set forth below:

Value-added tax on inputs = purchase price ×deduction rate

Article 9 If a taxpayer fails to obtain and preserve a value-added tax deduction certificate for the purchase of goods or taxable labour services in accordance with the regulations, or if the value-added tax amount and other relevant particulars are not specified in accordance with the regulations on the value-added tax deduction certificate, the value-added tax on inputs may not be set off against or deducted from the value-added tax on outputs.

Article 10 The value-added tax on the following purchases may not be set off against or deducted from the value-added tax on outputs:

1. purchase of fixed assets;

2. purchase of goods or taxable labour services used for non-taxable items;

3. purchase of goods or taxable labour services used for tax-exempt items;

4. purchase of goods or taxable labour services used for collective welfare or individual consumption;

5. purchase of goods in respect of which extraordinary losses are incurred;

6 purchased goods or taxable labour services used for goods in process or finished products in respect of which extraordinary losses are incurred.

Article 11 The tax payable on the sale of goods or taxable labour services by small-scale taxpayers shall be calculated by a simplified method.

The standard for small-scale taxpayers shall be specified by the Ministry of Finance.

Article 12 The rate of levy on the sale of goods or taxable labour services by small-scale taxpayers shall be 6%.

Adjustments to the rate of levy shall be decided on by the State Council.

Article 13 The amount of tax payable by small-scale taxpayers for the sale of goods or taxable labour services shall be calculated in accordance with the sales amount and the rate of levy set forth in Article 12 of these Regulations, without setting off or deducting the value-added tax on inputs. The formula for calculation of the amount of tax payable is set forth below:

Amount of tax payable = sales amount ×rate of levy

The sales amount shall be determined by reference to Article 6 and Article 7 of these Regulations.

Article 14 If a small-scale taxpayer's accounts are sound and such taxpayer can provide accurate tax information, it shall, following approval by the tax authorities in charge, not be deemed as a small-scale taxpayer, and shall be permitted to calculate the amount of tax payable in accordance with the relevant provisions of these Regulations.

Article 15 The amount of tax payable on goods imported by taxpayers shall be calculated in accordance with the composite price for tax calculation purposes and the tax rate provided in Article 2 of these Regulations, without setting off or deducting any amounts of tax. The formulas for calculation of the composite price for tax calculation purposes and the amount of tax payable are set forth below:

Composite price for tax calculation purposes = dutiable value + duty +consumption tax

Amount of tax payable = composite price for tax calculation purposes × tax rate

Article 16 The following items shall be exempt from value-added tax:

1. agricultural produce sold by the agricultural producers that produced them;

2. contraceptive pharmaceuticals and devices;

3. antique books;

4. imported instruments and equipment to be used directly in scientific research, scientific experimentation or teaching;

5. imported supplies and equipment given gratis in aid by foreign governments and international organizations;

6. equipment that is required to be imported for processing of supplied materials, assembly of supplied parts or compensation trade;

7. articles for the specific use of disabled persons that are imported directly by disabled persons' organizations; and

8. articles sold after having been used by oneself.

Items that are exempt from value-added tax or liable for value-added tax at a reduced rate other than those set forth in the preceding paragraph shall be decided upon by the State Council. No regions or authorities may determine items exempt from tax or liable for tax at reduced rates.

Article 17 Taxpayers that concurrently deal in items that are exempt from value-added tax or liable for value-added tax at reduced rates shall separately calculate the sales amounts of the items exempt from tax or liable for tax at reduced rates. Where the sales amounts are not calculated separately, no exemption or reduction of tax may be granted.

Article 18 Where a taxpayer's sales amount is less than the minimum amount liable for value-added tax specified by the Ministry of Finance, the sales amount shall be exempt from value-added tax.

Article 19 The obligation to pay value-added tax arises:

1. in the case of sale of goods or taxable labour services, on the day when the taxpayer receives full payment of the sales sum or obtains a voucher on the basis of which he can demand payment of the sales sum; and

2. in the case of import of goods, on the day on which declaration is made to Customs for import.

Article 20 Value-added tax shall be levied and collected by the tax authorities. Value-added tax on imported goods shall be collected by Customs on behalf of the tax authorities.

Value-added tax on articles that are carried or mailed into the territory of the People's Republic of China by individuals for their own use shall be calculated and levied together with Customs duties. The specific measures for such calculation and levy shall be formulated by the State Council Commission for the Customs Tariff in conjunction with the relevant departments.

Article 21 A taxpayer shall issue a special value-added tax receipt to the purchaser for the sale of goods or taxable labour services, and shall separately specify on such receipt the sales amount and the value-added tax on outputs.

If it is necessary to issue a receipt under any of the following circumstances, and ordinary receipt shall be issued and no special value-added tax receipt may be issued:

1. in case of sale of goods or taxable labour services to consumers;

2. in case of sale of tax-exempt goods; or

3. in case of sale of goods or taxable labour services by small-scale taxpayers.

Article 22 Value-added tax shall be paid at the following places:

1. A fixed business entity shall submit tax returns and pay its tax to the competent tax authorities in the place where its office is located. If the head office and branch(es) are in different counties (municipalities), tax returns shall be submitted and tax paid separately to the competent tax authorities in the places where they are located. Following approval by the State General Administration of Taxation or by a tax authority authorized by it, the head office may submit tax returns and pay tax on a consolidated basis to the tax authorities in the place where it is located;

2. If a fixed business entity sells goods in another county (municipality), it shall apply for issuance of a tax administration certificate for business activities outside the county (municipality), and submit tax returns and pay tax, to the tax authorities in charge of the place where its office is located. If such entity sells goods or taxable labour services in another county (municipality) without holding a tax administration certificate for business activities outside the county (municipality) issued by the tax authorities in charge of the place where its office is located, it shall submit tax returns and pay tax to the tax authorities in charge of the place of sale. If it fails to submit tax returns and pay tax to the tax authorities in charge of the place of sale, the tax authorities in charge of the place where its office is located shall collect the tax in order to compensate for such failure;

3. A non-fixed business entity shall submit tax returns and pay tax on its sale of goods or taxable labour services to the tax authorities in the place of sale; and

4. An importer or its agent shall submit tax returns and pay tax to Customs of the place of Customs declaration of the imported goods.

Article 23 The terms for payment of value-aaded tax shall be one day, three days, five days, ten days, fifteen days or one month, respectively. Taxpayers' specific terms of tax payment shall be determined by the tax authorities in charge on the basis of the size of the taxpayers' amounts of tax payable. Taxpayers that cannot pay tax according to fixed terms may pay tax each time the liability to pay tax arises.

Taxpayers whose term of tax payment is one month shall submit a tax return and pay tax within a period of ten days commencing from the date of expiration of the term. Taxpayers whose term of tax payment is one, three, five, ten or fifteen days shall prepay the tax within a period of five days commencing from the date of expiration of the term and, within a period of ten days commencing from the first day of the next month, submit a tax return and pay tax and settle in full the amount of tax payable for the preceding month.

Article 24 Taxpayers that import goods shall pay tax within a period of seven days commencing from the date immediately following the date of issuance by Customs of the duty and tax payment certificate.

Article 25 A taxpayer that exports goods for which the applicable tax rate is zero may, after carrying out export procedures with Customs, submit declarations to and carry out tax refund procedures for the exported goods with the tax authorities on a monthly basis, on the strength of relevant certificates such as the export Customs declaration forms. Specific measures shall be formulated by the State General Administration of Taxation.

If export goods are returned or shut out after tax has been refunded, the taxpayer shall make up the tax refunded in accordance with the law.

Article 26 The levy and collection of value-added tax shall be administered in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the relevant provisions of these Regulations.

Article 27 The levy of value-added tax on enterprises with foreign investment and foreign enterprises shall be handled in accordance with the relevant decisions of the Standing Committee of the National People's Congress.

Article 28 The Ministry of Finance shall be responsible for the interpretation of these Regulations. Implementing rules shall be formulated by the Ministry of Finance.

Article 29 These Regulations shall be implemented as of January 1, 1994. At the same time, the Regulations on Value-added Tax of the People's Republic of China (Draft) and the Regulations on Product Tax of the People's Republic of China (Draft) promulgated by the State Council on September 18, 1984 shall be annulled.

Appendix 2:

Provisional Regulations of the People's Republic of China on Consumption Tax

(Adopted at the 12th Executive Meeting of the State Council on November 26, 1993, promulgated by Decree No.135 of the State Council of the People's Republic of China and effective as of January 1, 1994)

Article 1 Units and individuals that produce, commission others with processing or import consumer goods specified in these Regulations (hereafter, "taxable consumer goods") in the territory of the People's Republic of China shall be payers of consumption tax (hereafter, "taxpayers") and shall pay consumption tax in accordance with these Regulations.

Article 2 The items and rates (amounts) of the consumption tax shall be as set forth in the Table of Consumption Tax Items and Rates (Amounts) appended to these Regulations.

Adjustments to the consumption tax items and rates (amounts) shall be decided upon by the State Council.

Article 3 Taxpayers that concurrently deal in taxable consumer goods with different tax rates shall separately calculate the sales amounts and sales quantities of taxable consumer goods with different tax rates. Where the sales amounts and sales quantities are not calculated separately, or where taxable consumer goods of different tax rates are combined into sets of consumer goods and sold as such, the highest applicable tax rate shall be applied.

Article 4 Tax on the taxable consumer goods produced by taxpayers shall be paid at the time of sale. Taxable consumer goods produced by taxpayers for their own use shall be exempt from tax if used for continued production of taxable consumer goods, and shall be liable for tax at the time of transfer if used for other purposes.

Tax on taxable consumer goods that are processed pursuant to a commission shall be collected and turned over by the commissioned party at the time of delivery of the goods to the commissioning party. Where taxable consumer goods processed pursuant to a commission are used by the commissioning party in the continued production of taxable consumer goods, the tax paid may be set off or deducted in accordance with regulations.

Tax on imported taxable consumer goods shall be paid at the time of Customs declaration for import.

Article 5 The amount of consumption tax payable shall be calculated at a fixed rate according to the price or at a fixed amount according to the quantity. The formula for calculation of the amount of tax payable is set forth below:

The amount of tax payable by the method of calculation at a fixed rate according to the price = sales amount ×tax rate

The amount of tax payable by the method of calculation at a fixed amount according to the quantity = sales quantity ×unit tax amount

Taxpayers that settle the sales amounts of taxable consumer goods sold in foreign exchange shall calculate the amount of tax payable by converting the amounts into Renminbi at the foreign exchange market rate.

Article 6 The sales amount mentioned in Article 5 of these Regulations shall be the full price and all additional charges that are collected by the taxpayer from the purchaser for the sale of taxable consumer goods.

Article 7 Tax on taxable consumer goods produced by taxpayers for their own use that are taxable under Paragraph 1 of Article 4 of these Regulations shall be calculated and paid according to the selling price of the same type of consumer goods produced by the taxpayer. In the absence of a selling price of the same type of consumer goods, tax shall be calculated and paid according to a composite price for tax calculation purposes. The formula for calculation of the composite price for tax calculation purposes is set forth below:

Composite price for tax calculation purposes = (cost +profit) / (1 - consumption tax rate)

Article 8 Tax on taxable consumer goods processed pursuant to a commission shall be calculated and paid according to the selling price of the same type of consumer goods of the commissioned party. In the absence of a selling price of the same type of consumer goods, tax shall be calculated and paid according to a composite price for tax calculation purposes. The formula for calculation of the composite price for tax calculation purposes is set forth below:

Composite price for tax calculation purposes = (cost of materials + processing fee) / (1 - consumption tax rate)

Article 9 Tax on imported taxable consumer goods shall be calculated and paid according to a composite price for tax calculation purposes if the amount of tax payable is calculated by the method of calculation at a fixed rate according to the price. The formula for calculation of the composite price for tax calculation purposes is set forth below:

Composite price for tax calculation purposes = (dutiable value + Customs duty ) / (1 - consumption tax rate)

Article 10 If the price for tax calculation purposes of a taxpayer's taxable consumer goods is obviously on the low side and no proper grounds are presented for such a low price, the tax authorities in charge shall determine the price for tax calculation purposes for such goods.

Article 11 Taxable consumer goods exported by taxpayers shall be exempt from consumption tax, except where the State Council determines otherwise. Procedures for the exemption of exported taxable consumer goods from tax shall be formulated by the State General Administration of Taxation.

Article 12 Consumption tax shall be levied and collected by the tax authorities. Consumption tax on imported taxable consumer goods shall be levied by Customs on behalf of the tax authorities.

Consumption tax on taxable consumer goods that are carried or mailed into the territory of the People's Republic of China by individuals shall be calculated and levied together with Customs duties. The specific measures for such calculation and levy shall be formulated by the State Council Commission for the Customs Tariff in conjunction with the relevant departments.

Article 13 Unless otherwise provided by regulations of the State, tax returns and tax on taxable consumer goods sold by taxpayers and on taxable consumer goods produced by taxpayers for their own use shall be submitted and paid to the tax authorities in the place of calculation.

Consumption tax on taxable consumer goods processed pursuant to a commission shall be turned over by the commissioned party to the tax authorities in the place where it is located.

Tax returns and tax on imported taxable consumer goods shall be submitted and paid by the importers or their agents to Customs of the place of Customs declaration.

Article 14 The terms for payment of consumption tax shall be one day, three days, five days, ten days, fifteen days or one month, respectively. Taxpayers' specific terms of tax payment shall be determined by the tax authorities in charge on the basis of the size of the taxpayers' amounts of tax payable. Taxpayers that cannot pay tax according to fixed terms may pay tax each time the liability to pay tax arises.

Taxpayers whose term of tax payment is one month shall submit a tax return and pay tax within a period of ten days commencing from the date of expiration of the term. Taxpayers whose term of tax payment is one, three, five, ten or fifteen days shall prepay the tax within a period of five days commencing from the date of expiration of the term and, within a period of ten days commencing from the first day of the next month, submit a tax return and pay tax and settle in full the amount of tax payable for the preceding month.

Article 15 Taxpayers that import taxable consumer goods shall pay tax within a period of seven days commencing from the date immediately following the date of issuance by Customs of the duty and tax payment certificate.

Article 16 The levy and collection of consumption tax shall be administered in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the relevant provisions of these Regulations.

Article 17 The levy and collection of consumption tax on enterprises with foreign investment and foreign enterprises shall be handled in accordance with the relevant decisions of the Standing Committee of the National People's Congress.

Article 18 The Ministry of Finance shall be responsible for the interpretation of these Regulations. Implementing rules shall be formulated by the Ministry of Finance.

Article 19 These Regulations shall be implemented as of January 1, 1994. At the same time, relevant regulations of the State Council on the levy and collection of consumption tax predating the implementation of these Regulations shall be annulled.

Appendix:

Table of Consumption Tax Items and Rates

(Amounts)

Tax item Scope of levy Unit of tax calculation Tax rate

(amount) I.Tobacco

1. Grade A cigarettes, including

all kinds of imported cigarettes 45%

2. Grade B cigarettes 40%

3.Cigars 40%

4.Cut tobacco 30% II.Alcoholic beverages and ethyl alcohol

1. Spirit distilled from grain 25%

2. Spirit distilled from potatoes 15%

3. Yellow rice or millet wine ton Rmb 240

4. Beer ton Rmb 220

5. Other alcoholic beverages 10%

6. Ethyl alcohol 5% III. Cosmetics, including sets of cosmetics 30% IV. Skin and hair care products 17% V. Precious personal ornaments and precious stones

including all kinds of gold, silver, jewellery

for personal adornment and precious stones 10% VI. Firecrackers and fireworks 15% VII. Gasoline litre Rmb 0.2 yuan VIII. Diesel oil litre Rmb 0.1 yuan IX. Automobile tyres 10% X. Motorcycles 10% XI. Small automobiles

1. Sedans of a cylinder capacity

(which term here and hereinafter

shall refer to the exhaust volume)

of 2,200 ml or more 8%

of a cylinder capacity of 1,000 ml

or more but less than 2,200 ml 5%

of a cylinder capacity of less than 1,000 ml 3%

2. All-terrain vehicles (four-wheel drive)

of a cylinder capacity of 2,400 ml or more 5%

of a cylinder capacity of less than 2,400 ml 3%

3. Mini-buses (vans) of less than 22 seats of a

cylinder capacity of 2,000 ml or more 5%

of a cylinder capacity of less than 2,000 ml 3%

Appendix:

Provisional Regulations of the People's Republic of China on Business Tax

(Adopted at the 12th Executive Meeting of the State Council on November 26, 1993, promulgated by Decree No.136 of the State Council of the People's Republic of China and effective as of January 1, 1994)

Article 1 Units and individuals that provide labour services stipulated in these Regulations (hereafter, "taxable labour services"), assign intangible assets or sell immovable property in the territory of the People's Republic of China shall be payers of business tax (hereafter, "taxpayers") and shall pay business tax in accordance with these Regulations.

Article 2 The items and rates of the business tax shall be as set forth in the Table of Business Tax Items and Rates appended to these Regulations.

Adjustments to the tax items and rates shall be decided upon by the State Council.

The specific tax rates applicable to taxpayers engaged in the entertainment business shall be decided upon by the People's Governments of the provinces, autonomous regions and municipalities directly under the Central Government.

Article 3 Taxpayers that concurrently engage in taxable activities under different tax items shall separately calculate the amounts of business, assignment and sales (hereafter, "amounts of business") under different tax items. Where the amounts of business are not calculated separately, the highest applicable tax rate shall be applied.

Article 4 Taxpayers that provide taxable labour services, assign intangible assets or sell immovable property shall calculate the amounts of tax payable according to the amounts of business and the specified tax rates. The formula for calculation of the amount of tax payable is set forth below:

Amount of tax payable = amount of business × tax rate

The amount of tax payable shall be calculated in Renminbi. Taxpayers that settle their amounts of business in foreign exchange shall convert the amounts into Renminbi at the foreign exchange market rate.

Article 5 The amount of business of a taxpayer shall be the full price and all additional charges that are collected by the taxpayer from the other party for the provision of taxable labour services, assignment of intangible assets or sale of immovable property, except in the following circumstances:

1. where a transport enterprise carries travellers or goods out of the territory of the People's Republic of China and the transport of the passengers or goods is taken over outside the People's Republic of China by another transport enterprise, the amount of business shall be the ticket price or freight for the whole journey less the ticket price or freight paid to such other transport enterprise;

2. where a tourism enterprise organizes a trip outside the People's Republic of China for a tour group and such group is met outside the People's Republic of China by another tourism enterprise, the amount of business shall be the price for the entire tour less the tour price paid to such enterprise meeting the tour group;

3. where a main construction contractor subcontracts or on-contracts the project to others, the amount of business shall be the total amount for which the project was contracted less the amount paid to the subcontractor(s) or to the entity to which the project was on-contracted;

4. for the business of on-lending, the amount of business shall be the loan interest earned less the loan interest paid;

5. for the business of purchasing and selling foreign exchange, valuable securities and futures, the amount of business shall be the selling price less the buying price; or

6. other circumstances specified by the Ministry of Finance.

Article 6 The following items shall be exempt from business tax:

1. the care provided in nurseries, kindergartens, old people's homes and welfare institutions for disabled persons, matchmaking and funeral services;

2. labour services provided by disabled persons in their individual capacity;

3. medical services provided by hospitals, clinics and other medical institutions;

4. educational labour services provided by schools and other educational institutions and labour services provided by students under work-study programs;

5. the agricultural business of tractor ploughing, irrigation and drainage, prevention and control of plant diseases and elimination of pests, plant protection, agricultural and animal husbandry insurance and relevant technical training, and breeding of, and prevention and control of disease in, poultry, livestock and aquatic animals; and

6. revenue from admission fees for cultural activities organized by memorial halls, museums, cultural centers, art galleries, exhibition halls, painting and calligraphy galleries, libraries and institutions of cultural relic protection, and revenue from admission fees for cultural and religious activities organized by religious sites.

Items that are exempt from business tax or liable for business tax at reduced rates other than those set forth in the preceding paragraph shall be decided upon by the State Council. No regions or authorities may determine items exempt from tax or liable for tax at reduced rates.

Article 7 Taxpayers that concurrently engage in items that are exempt from business tax or liable for business tax at reduced rates shall separately calculate the amounts of business of the items exempt from tax or liable for tax at reduced rates. Where the amounts of business are not calculated separately, no exemption or reduction of tax may be granted.

Article 8 Where a taxpayer's amount of business is less than the minimum amount liable for business tax specified by the Ministry of Finance, the amount of business shall be exempt from business tax.

Article 9 A taxpayer's obligation to pay tax arises on the day when the taxpayer receives full payment of the amount of business revenue or obtains a voucher on the basis of which he can demand payment of the amount of business revenue.

Article 10 Business tax shall be levied and collected by the tax authorities.

Article 11 The following shall be the business tax withholding agents:

1. where a financial institution is commissioned with granting a loan, the financial institution commissioned with granting the loan shall be the withholding agent;

2. where construction and/ or installation business is subcontracted or on-contracted, the main contractor shall be the withholding agent;

3. other withholding agents specified by the Ministry of Finance.

Article 12 Business tax shall be paid at the following places:

1. a taxpayer that provides taxable labour services shall submit tax returns and pay tax to the tax authorities in the place where the taxable labour services are provided; a taxpayer engaged in transport business shall submit tax returns and pay tax to the tax authorities in the place where its office is located;

2. a taxpayer that assigns land-use right shall submit tax returns and pay tax to the tax authorities in the place where the land is situated; a taxpayer that assigns other intangible assets shall submit tax returns and pay tax to the tax authorities in the place where its office is located;

3. a taxpayer that sells immovable property shall submit tax returns and pay tax to the tax authorities in the place where the immovable property is located.

Article 13 The terms for payment of business tax shall be five days, ten days, fifteen days or one month, respectively. Taxpayers' specific terms of tax payment shall be determined by the tax authorities in charge on the basis of the different sizes of the taxpayers' amounts of tax payable. Taxpayers that cannot pay tax according to fixed terms may pay tax each time the liability to pay tax arises.

Taxpayers whose term of tax payment is one month shall submit a tax return and pay tax within a period of ten days commencing from the date of expiration of the term. Taxpayers whose term of tax payment is five, ten or fifteen days shall prepay the tax within a period of five days commencing from the date of expiration of the term and, within a period of ten days commencing from the first day of the next month, submit a tax return and pay tax and settle in full the amount of tax payable for the preceding month.

The terms in which withholding agents shall turn over the tax withheld shall be determined by reference to the preceding two paragraphs.

Article 14 The levy and collection of business tax shall be administered in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the relevant provisions of these Regulations.

Article 15 The levy and collection of business tax on enterprises with foreign investment and foreign enterprises shall be handled in accordance with the relevant decisions of the Standing Committee of the National People's Congress.

Article 16 The Ministry of Finance shall be responsible for the interpretation of these Regulations. Detailed implementing rules shall be formulated by the Ministry of Finance.

Article 17 These Regulations shall be implemented as of January 1, 1994. At the same time, the Regulations of the People's Republic of China on Business Tax (Draft) promulgated by the State Council on September 18, 1984 shall be annulled.

Appendix:

Table of Business Tax Items and Rates

Tax item Scope of levy Tax rate

1.Transport industry Transport by land, 3%

transport by water,

transport by air,

transport by pipeline,

and loading, unloading

and handling

2. Construction industry Construction, installation, 3%

renovation, decoration

and other projects

3. Finance and insurance industries 5%

4.Post and telecommunications 3%

5. Culture and sports 3%

6. Entertainment Halls providing 5%--20%

business performance by vocalists,

dance halls, dance halls with

karaoke singing, teahouses where

music is played or performed,

pool, billiards, golf, bowling

and games

7. Service industry Agency, hotel industry, 5%

food and beverage industry,

tourism industry, storage industry,

leasing industry, advertising

industry and other service industries

8. Assignment of Assignment of land-use right 5%

intangible assets patent rights, non-patented

technology, trademark rights,

copyrights and goodwill

9. Sale of immovable Sale of buildings and other 5%

property attachments to land

Appendix 3:

Provisional Regulations of the People's Republic of China on Land Value-added Tax

(Adopted at the 12th Executive Meeting of the State Council on November 26, 1993, promulgated by Decree No.138 of the State Council of the People's Republic of China and effective as of January 1, 1994)

Article 1 These Regulations are formulated to standardize the marketing of land and real estate, reasonably regulate the gains from added value of land and safeguard the rights and interests of the State.

Article 2 Units and individuals that transfer the right to the use of state-owned land, buildings and attached installations thereon and gain incomes shall be payers of the land value-added tax (hereinafter referred to as taxpayers) and shall pay land value-added tax according to these Regulations.

Article 3 The land value-added tax shall be calculated and levied on the basis of the increased values the taxpayers derive from the transference of the real estate and the rates specified in Article 7 of these Regulations.

Article 4 The increased value shall be the balance of the income gained by taxpayers from the transference of real estate less the value that shall be deducted under Article 6 of these Regulations.

Article 5 Taxpayers' gains from his real estate transference shall include incomes in cash, kind and other forms.

Article 6 Deductions to be made in the calculation of land added-value:

1. The price paid for the land-use right;

2. The cost and expenses in the development of the land;

3. The cost and expenses in the construction of new buildings and attached installations, or the evaluated prices of old buildings and structures;

4. Tax payments involved in the real estate transference;

5. Other deductions as prescribed by the Ministry of Finance.

Article 7 Land value-added tax shall be levied in four progressive levels:

The tax rate is 30% for that part of the added value which does not exceed 50% of the deducted amount.

The tax rate is 40% for that part of the added value which is greater than 50% but less than 100% of the deducted amount.

The tax rate is 50% for that part of the added value which is greater than 100% but less than 200% of the deducted amount.

The tax rate is 60% for that part of the added value which exceeds 200% of the deducted amount.

Article 8 Under one of the following circumstances, a taxpayer is exempt from land value-added tax:

1. The taxpayer builds houses of ordinary standard for sale and the added value does not exceed 20% of the deducted amount;

2. Land and properties recalled and requisitioned according to law for State construction purposes.

Article 9 Under one of the following circumstances, the land value-added tax shall be calculated and levied according to the evaluated prices of the real estate:

1. Concealment and falsification in reporting the transaction prices in real estate transference;

2. Untrue reporting of the deducted amount;

3. The transaction prices in the real estate transference are lower than the evaluated prices for no justifiable reasons.

Article 10 A taxpayer shall declare the real estate transaction at the competent tax authorities in the place where the real estate is located within seven days of the signing of the contract for the transference of the real estate and pay the land value-added tax within the time limit ascertained by the tax authorities.

Article 11 The land value-added tax shall be collected by the tax authorities. The land and house property administration departments shall supply the tax authorities with relevant materials and assist them in the levy and collection of the land value-added taxes according to law.

Article 12 Land and house property administration departments shall not perform the procedure for changes in the proprietary rights for the taxpayers who fail to pay the land value-added tax in accordance with these Regulations.

Article 13 The levy and collection of the land value-added tax shall be administered in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the relevant provisions of these Regulations.

Article 14 The Ministry of Finance shall be responsible for the interpretation of these Regulations. Detailed implementing rules shall be formulated by the Ministry of Finance.

Article 15 These Regulations shall come into force as of January 1, 1994. Measures of various localities for the imposition and collection of the land value-added tax that contravene these Regulations shall cease to be effective at the same time.

Appendix 4:

Provisional Regulations of the People's Republic of China on Resource Tax

(Adopted at the 12th Executive Meeting of the State Council on November 26, 1993, promulgated by Decree No.139 of the State Council of the People's Republic of China and effective as of January 1, 1994)

Article 1 Units and individuals engaged in the exploitation of mineral products specified in these Regulations or production of salt within the territory of the People's Republic of China (hereinafter referred to as exploiting or producing taxable products) are taxpayers of resource tax (hereinafter referred to as taxpayers) and shall pay resource tax in accordance with these Regulations.

Article 2 The resource tax items and amounts shall be governed by the Table of Resource Tax Taxable Items and Amount Range attached to these Regulations as well as the relevant provisions of the Ministry of Finance.

Any adjustments to the tax items and tax amount range shall be decided upon by the State Council.

Article 3 The specific tax amount applicable to taxpayers shall be determined, within a prescribed tax amount range, by the Ministry of Finance in consultation with the relevant departments of the State Council in accordance with the resource situation of the taxable products exploited or produced by taxpayers.

Article 4 Where taxpayers exploit or produce taxable products under different taxable items, the taxable volume of the taxable products under different taxable items shall be accounted separately. If the taxable volume of the taxable products under different taxable items is not accounted separately or cannot be accurately provided, the highest tax amount shall be applied.

Article 5 The tax payable for resource tax shall be calculated in accordance with the taxable volume of the taxable products and the prescribed unit tax amount. The formula for calculation of the tax payable is as follows:

Tax payable = taxable volume × unit tax amount

Article 6 The taxable volume of resource tax is as follows:

(1) Where taxpayers exploit or produce taxable products for sale, the sales volume shall be the taxable volume.

(2) Where taxpayers exploit or produce taxable products for their own use, the self-used volume shall be the taxable volume.

Article 7 Under any of the following circumstances, taxpayers shall be exempted from or liable for resource tax at a reduced rate.

(1) Crude oil used for heating or repairing wells in the course of exploiting crude oil shall be exempted.

(2) Where taxpayers suffered great losses due to such reasons as accidents or natural disasters in the course of exploiting or producing taxable products, tax reduction or exemption shall be determined in light of the circumstances by the people's governments of the provinces, autonomous regions or municipalities directly under the Central Government.

(3) Other items for tax reduction or exemption prescribed by the State Council.

Article 8 Taxpayers' taxable volumes of items for tax reduction or exemption shall be accounted separately. If the taxable volume is not accounted separately or cannot be accurately provided, no tax reduction or exemption shall be granted.

Article 9 Where taxpayers sell taxable products, the obligation to pay tax arises on the day when the taxpayer receives payment of the sales sum or obtains a voucher on the basis of which he can demand payment of the sales sum. In the case of self-produced taxable products for their own use, the obligation to pay tax arises on the day when the products are delivered for use.

Article 10 Resource tax shall be levied and collected by the tax authorities.

Article 11 Units purchasing untaxed mineral products shall be the resource tax withholding agents.

Article 12 The resource tax payable by taxpayers shall be paid to the competent tax authorities in the place where the taxable products are exploited or produced. Where taxpayers exploiting or producing taxable products within the boundaries of their own provinces, autonomous regions or municipalities directly under the Central Government, any adjustments to the location of tax payment shall be determined by the tax authorities of the provinces, autonomous regions or municipalities directly under the Central Government.

Article 13 The terms for payment of tax by taxpayers shall be one day, three days, five days, ten days, fifteen days or one month which shall be determined by the competent tax authorities according to the actual circumstances; taxpayers that cannot pay tax according to fixed terms may pay tax each time the liability to pay tax arises. Taxpayers whose term of tax payment is one month shall submit a tax return and pay tax within a period of ten days commencing from the date of expiration of the term. Taxpayers whose term of tax payment is one day, three, five, ten or fifteen days shall prepay the tax within a period of five days commencing from the date of expiration of the term and, within a period of ten days commencing from the first day of the next month, submit a tax return and pay tax and settle in full the amount of tax payable for the preceding month.

The term for withholding agents to turn over tax payment shall be set forth by reference to the stipulations of the preceding two paragraphs.

Article 14 The levy and collection of resource tax shall be administered in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the relevant provisions of these Regulations.

Article 15 The Ministry of Finance shall be responsible for the interpretation of these Regulations and for the formulation of the detailed rules for the implementation of these Regulations.

Article 16 These Regulations shall come into effect as of January 1, 1994. The Regulations of the People's Republic of China on Resource Tax (Draft) and the Regulations of the People's Republic of China on Salt Tax(Draft) promulgated by the State Council on September 18, 1984 shall be annulled therefrom.

Appendix 5:

Table of Resource Tax Items and Amount Range

Tax Items                          Tax amount range

1.Crude oil                        8-30 yuan/ton

2.Natural gas                    2-15 yuan/1,000 cubic meters

3.Coal                                0.3-5 yuan/ton

4.Other non-metal ores   0.5-20 yuan/ton or cubic meter

5.Ferrous metal ores       2-30 yuan/ton

6.Non-ferrous metal ores 0.4-30 yuan/ton

 7.Salt

          Solid salt                 10-60 yuan/ton

          Liquid salt                2-10 yuan/ton