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the State Administration of Taxation
Guo Shui Fa [2005] No. 129
Measures for the Administration of Tax
Deduction or Exemption (for Trial Implementation)
Chapter I General Provisions
Article 1 With a view to regulating and intensifying the administration
of tax deduction and exemption, the present
Measures are formulated in accordance with the Law of the People's Republic
of China on Tax Collection and
Administration (hereinafter referred to as the Law on Tax Collection and
Administration) and the Detailed Rules for
Implementation thereof and the provisions of the relevant laws, regulations
and rules on tax deduction or exemption.
Article 2 The term "tax deduction or exemption" as mentioned in the
present Measures refers to the treatment of tax
deduction or tax exemption that is granted to a taxpayer under the laws and
regulations on tax collection and the relevant
provisions of the state on tax collection (hereinafter referred to as the
provisions of tax laws). The term "tax
deduction" refers to the deduction of some amount of tax from the tax
payable; while "tax exemption" refers to the exemption
of tax under a special tax category or item.
Article 3 The tax authorities at various levels shall, in accordance with
the principles of legality, openness,
impartiality, high-efficiency and convenience, standardize the
administration of tax deduction and exemption.
Article 4 The tax deduction or exemption are classified into the tax
deduction or exemption by way of approval and the tax
deduction or exemption by way of archival filing. The term "tax deduction or
exemption by way of approval" refers to the
item of tax deduction or exemption that shall be subject to the examination
and approval of the tax authority. The term
“tax deduction or exemption by way of archival filing" refers to the item of
tax deduction or exemption for which the
formalities of examination and approval have been eliminated and which is
not subject to the examination and approval of
the tax authority.
Article 5 A taxpayer who enjoys the tax deduction or exemption by way of
approval shall submit relevant materials
and file an application for approval. The tax deduction or exemption thereof
is implemented upon the approval and
verification of the tax authority that has the power of examination and
approval (hereinafter referred to as the
competent tax authority), as is prescribed in the present Measures. Where a
taxpayer fails to file an application or
fails to obtain the approval and verification of the competent tax
authority, he may not enjoy any tax deduction or
exemption.
A taxpayer that requests for enjoying the tax deduction or exemption by way
of archival filing shall file an application
for archival filing , the relevant tax deduction or exemption shall be
implemented as of the date when the tax authority has
handled the formalities of registration and record keeping. A taxpayer that
fails to go through the archival filing in
accordance with the relevant provisions may not enjoy any tax deduction or
exemption.
Article 6 For a taxpayer that concurrently engages in
activities under the item of tax deduction or exemption as
well as item of non-tax-deduction or exemption, the tax amount
thereof shall be verified and calculated separately, that is,
the tax-computation base for those activities under the item
of tax deduction or exemption as well as the amounts to be
deducted or exempted shall be separately calculated. If they
cannot be verified and calculated separately, no tax exemption
or reduction is allowed. If they cannot be verified and
calculated in a clear way, the tax authority shall verify and
determine them in a reasonable way.
Article 7 A taxpayer may enjoy the treatment of tax deduction
or exemption under the law. For anyone who fails to enjoy the
said treatment, which result in his overpayment of taxes, if
there is no definite provision that the refund of the overpaid
taxes shall be subject to the examination and approval of the
tax authority or there is no prescribed time limit for filing
an application for such refund, the taxpayer may, within the
time limit as prescribed in Article 51 of the Law on Tax
Collection and Administration, file an application for
refunding the overpaid taxes, but no interest calculated at
the bank deposit rates for the corresponding period of time
will be available.
Article 8 The authority in charge of the examination and
approval of tax deduction or exemption shall be provided for
by laws, regulations and rules on tax collection. Where the
tax deduction or exemption is be subject to the examination
and approval of the State Administration of Taxation, it shall
be reported to the State Administration of Taxation through
the tax authority of the province, autonomous region,
municipality directly under the Central Government or the city
under separate state planning. Where the tax deduction or
exemption is subject to the examination and approval of the
tax authority at or below the provincial level, it shall be
subject to the examination and approval of the tax authority
at the provincial level, which shall determine the power of
examination and approval,, and as is the general principle, it
is subject to the examination and approval of the tax
authority of the county (district) where the taxpayer is
located. For any item with a large sum of tax to be deducted
or exempted or the condition is complicated, the tax authority
of the province, autonomous region, municipality directly
under the Central Government or the city under separate state
planning shall, pursuant to the principles of efficiency and
convenience, supervision and responsibility, define the power
of examination and approval in a proper manner.
The tax authorities at various levels shall carry out the
examination and approval for tax deduction or exemption in
accordance with the prescribed power and procedures and are
not allowed to carry out any examination and approval by
exceeding their power or violating the relevant provisions.
Chapter II Application, Report, Examination and Approval, and
Implementation of Tax Deduction or Exemption
Article 9 A taxpayer who applies for tax deduction or
exemption by way of approval shall, within the period as
prescribed by policies for tax deduction or exemption, file a
written application with the administrative tax authority and
report the following materials:
(1) An application report for tax deduction or exemption,
clearly indicating the reason, basis, scope, period, quantity,
amount, and so on;
(2) The financial statements and a tax return;
(3) The certification materials as issued by the relevant
departments; and
(4) Other material as required by the tax authority.
The materials reported by a taxpayer shall be authentic,
accurate and complete. The tax authority may not require a
taxpayer to submit any technical material or any other
material that is irrelevant to the tax deduction or exemption
item it applies for.
Article 10 A taxpayer may apply to the administrative tax
authority for tax deduction or exemption or may apply to the
competent tax authority directly.
For any application that is accepted by the administrative
tax authority where the relevant taxpayer is located and shall
be subject to the examination and approval of the tax
authority at a higher level, the administrative tax authority
shall, within 10 workdays as of acceptance of the application,
directly report it to the tax authority at a higher level that
has the power of examination and approval.
Article 11 The tax authority shall handle the applications
for tax deduction or exemption in light of the following
circumstances:
(1) If the tax deduction or exemption item as applied for is
not subject to the examination of the tax authority before
implementation, the taxpayer shall be informed of the
non-acceptance in a timely manner;
(2) If the application material concerning tax deduction or
exemption is not detailed enough or has any mistake, the
taxpayer shall be informed of it and allowed to correct it.
(3) If the application material concerning tax deduction or
exemption is incomplete or out of line with the statutory
form, the taxpayer shall be informed of all the content that
needs to be supplemented and corrected in a one-off manner
within 5 workdays; and
(4) If the application material concerning tax deduction or
exemption is complete and complies with the legal form, or the
taxpayer has submitted all the tax deduction or exemption
materials as is required to be supplemented or corrected by
the tax authority, the application thereof shall be accepted.
Article 12 When the tax authority accepts or refuses to
accept an application for tax deduction or exemption, it shall
issue a written certification affixed with the special seal
thereof and indicated with the date as well.
Article 13 The examination and approval for tax deduction or
exemption is an examination on the situation whether the
materials provided by the relevant taxpayer is pertinent to
the statutory requirements of tax deduction or exemption. It
does not change the responsibility of a taxpayer to file tax
returns in a faithful manner.
Where it is necessary for the tax authority to carry out an
on-the-spot verification of the contents of the application
materials, it shall assign 2 or more working staff to conduct
the on-the-spot verification according to the prescribed
procedures and put the verification on record. Where it is
both heavy and time-consuming for a superior tax authority to
carry out on-the-spot verification regarding tax deduction or
exemption, it may entrust the tax authority at the county
level where the enterprise is located to conduct the
verification.
Article 14 Where the period for tax deduction or exemption
exceeds 1 tax year, the examination and approval shall be
carried out in a one-off way.
Where the condition for a taxpayer to enjoy the tax deduction
or exemption changes, it shall be reported to the tax
authority within 15 workdays as of the change, and the tax
deduction or exemption shall be terminated after the
examination of the tax authority.
Article 15 The tax authority that has the power to examine
and approve an application of a taxpayer for tax deduction or
exemption shall complete the examination and approval within
the time limit provided for as follows in a timely manner and
make a decision thereon:
The tax authority at the county or district level in charge
of the examination and approval of tax deduction or exemption
shall, within 20 workdays, make a decision on the examination
and approval. The tax authority at the prefectural or
municipal level in charge of the examination and approval of
tax deduction or exemption shall, within 30 workdays, make a
decision on the examination and approval. The tax authority at
the provincial level in charge of the examination and approval
of tax deduction or exemption shall, within 60 workdays, make
a decision on the examination and approval. In case an
authority fails to make the relevant decision within the
prescribed time limit may, upon the approval of the principal
of the tax authority at the same level, the period for
examination and approval may be extended for another 10
workdays and the taxpayer concerned shall be informed of the
reason for the extension.
Article 16 Where an application for tax deduction or
exemption satisfies the statutory requirements and standards,
the competent tax authority shall, within the prescribed time
limit, make a written decision on granting the approval. In
the case of disapproval for the tax deduction or exemption, an
explanation shall be given and the taxpayer concerned shall be
informed of the right to apply for administrative
reconsideration or file an administrative lawsuit according to
law.
Article 17 Where the tax authority makes a decision on
examination and approval of tax deduction or exemption, it
shall, within 10 workdays as of the day when the decision is
made, serve the taxpayer with the written decision of
examination and approval of tax deduction and exemption.
Article 18 Prior to the service of the reply for tax
deduction or exemption, the relevant taxpayer shall file tax
returns and pay taxes in accordance with the relevant
provisions.
Article 19 Prior to the implementation of the tax deduction
or exemption by way of archival filing, a taxpayer shall file
the following materials with the administrative tax authority
for record:
(1) The implementation of the policies for tax deduction or
exemption; and
(2) Relevant materials as required by the administrative tax
authority.
The administrative tax authority shall, within 7 workdays as
of the date of filing of the taxpayer’s application, complete
the work of registration and archival filing and inform the
taxpayer to implement.
Chapter III Administration and Supervision of Tax Deduction
and Exemption
Article 20 The tax deduction or exemption enjoyed by a
taxpayer shall be incorporated into the normal tax return to
apply for the tax deduction or exemption.
Upon the expiration of the period for tax deduction or
exemption, a taxpayer shall file relevant tax returns and pay
taxes.
The tax authority and tax administrators shall strengthen the
administration of and supervision over tax deduction and
exemption.
Article 21 The tax authority shall combine the inspection of
tax return, law enforcement and other specific inspections
with the through investigation and rectification on the of tax
deduction or exemption items on a periodical basis every year
to intensify its supervision and examination. The major
contents shall include:
(1) Whether or not a taxpayer satisfies the qualifications
for tax deduction or exemption; whether or not the taxpayer
cheats for tax deduction or exemption by means of concealing
the relevant information or providing any false material;
(2) If the condition for a taxpayer to enjoy tax deduction or
exemption changes, whether or not he has gone through the
formalities for tax deduction or exemption in light of the
change after the tax authority has made a second examination;
(3) If the amount of tax deduction or exemption is granted
for a special purpose, whether or not the taxpayer has used
the tax deduction or exemption for the prescribed purpose;
where a time period is prescribed for tax deduction or
exemption, whether or not the taxpayer have resumed the tax
payment since the expiration;
(4) Whether or not a taxpayer unlawfully has enjoyed any tax
deduction or exemption without the examination and approval of
the tax authority; or
(5) Whether or not any tax deduction or exemption that a
taxpayer has enjoyed fails to be reported.
Article 22 A responsibility system of "he who carries out the
examination and approval shall take the responsibility" shall
be adopted for the examination and approval of tax deduction
or exemption. The tax authorities at various levels shall
incorporate the examination and approval of tax deduction or
exemption into the post responsibility assessment system and
establish a system of investigating into the responsibility of
administrative law enforcement of tax collection.
(1) Establishing and improving the system of examination and
approval, track-down and feedback. The tax authorities at
various levels shall carry out the track-down and feedback on
the examination and approval work on a periodical basis and
duly improve the working mechanism of examination and
approval.
(2) Establishing an appraisal and examination system for
examination and approval files. The examination and approval
authority at various levels shall establish all categories of
files for examination and approval and keep them in a proper
manner. The superior tax authority shall assess and examine
the archived materials on a periodical basis.
(3) Establishing a hierarchical supervision system. The
superior tax authority shall establish a frequent supervision
system so as to strengthen the supervision of the examination
and approval work of the tax authority at lower levels,
including whether or not the tax deduction or exemption has
been examined and approved according to the capacity,
requirements and the time limit as prescribed in the present
Measures.
Article 23 The tax authority shall, according to the time and
procedures as prescribed in the present Measures and pursuant
to the principles of fairness, transparency, honesty, high
efficiency and convenience, accept the application that is
filed by a taxpayer for tax deduction or exemption and carry
out the relevant examination and approval in a timely manner.
Where the tax authority fails to accept or carry out the
relevant examination and approval in a timely manner without
any objective causes, or a mistake is resulted in the
examination and approval and verification it carries out due
to its failure to comply with the prescribed procedures, it
shall be subject to relevant liabilities in accordance with
the relevant provisions of the Law on Tax Collection and
Administration and the tax law enforcement responsibility
system.
Article 24 Where the business situation of a taxpayer does
not meet the requirements of tax deduction or exemption, or a
taxpayer obtains the treatment of tax deduction or exemption
by fraudulent means, or where there is a change in the
condition for enjoying the tax deduction or exemption and the
taxpayer concerned fails to report it to the tax authority, or
a taxpayer deducts or exempts his taxes without applying for
approval in accordance with the procedures as prescribed by
the present Measures, the tax authority shall deal with it in
accordance with the relevant provisions of the Law on Tax
Collection and Administration.
In case an enterprise fails to pay taxes or fails to underpay
tax as a result of a mistake as incurred by the tax authority
in the process of examination and approval or verification, it
shall be dealt with in accordance with Article 52 of the Law
on Tax Collection and Administration.
Any tax authority that exceeds its power to approve any tax
deduction or exemption shall be dealt with in accordance with
the provisions of Article 84 of the Law on Tax Collection and
Administration.
Article 25 The tax authority shall, in accordance with the
principle of “substance over form", carry out a post
supervision and examination over the business situation of
enterprises. In the process of examination, where finding any
mistake in an appraisal as committed by the relevant
department of professional or economic appraisal, it shall
coordinate and communicate with the relevant departments for
correction, disqualify the relevant taxpayer for preferential
treatments in a timely manner, and urge to take legal actions
against the relevant persons responsible. In case a relevant
department unlawfully provides certification documents to a
taxpayer resulting in the non-payment or underpayment of tax
payable, it shall be dealt with in accordance with the
provisions of Article 93 of the Detailed Rules for
Implementing the Law of the People's Republic of China on Tax
Collection and Administration.
Chapter IV Archival Filing of Tax Deduction or Exemption
Article 26 The administrative tax authority shall establish a
management account of tax deduction or exemption for
taxpayers, which registers the approval time, item, maximum
years, amount of tax deduction or exemption in details and
establish a dynamic administration and supervision mechanism
of tax deduction or exemption.
Article 27 For the annual tax deduction or exemption of a
newly-established enterprise that has suffered a serious
natural disasters such as hurricane, fire, flood or
earthquake, etc., or that is located in former revolutionary
base areas, areas inhabited by minority ethnic groups, remote
or border areas, or poverty-stricken areas or in the western
regions, whose deducted or exempted share of tax belonging to
the central revenue reaches 1 million Yuan or more, it is no
longer subject to the examination and approval of the State
Administration of Taxation; instead, the authority of
examination and approval shall be specified by the tax
authority at the provincial level. The tax authority in charge
of examination and approval shall report the information on
tax deduction and exemption by taxpayer (including the item,
base and amount of tax deduction or exemption) to the tax
authority at the provincial level for archival filing on the
basis of households.
Article 28 The tax authorities of all provinces, autonomous
regions, municipalities directly under the Central Government
and the cities under separate state planning shall, prior to
the end of June each year, report in writing the information
on tax deduction and exemption and submit a summary report of
the previous year to the State Administration of Taxation. The
fulfillment of tax deduction or exemption items that are
subject to the examination and approval of the State
Administration of Taxation shall be reported in writing by the
tax authorities at the provincial level.
The summary report on tax deduction or exemption shall
include the following contents: the basic information and
analysis of tax deduction or exemption; the implementation of
the policies for tax deduction or exemption as well as the
existing problems; the experiences in the administration of
tax deduction and exemption, and relevant suggestions.
Article 29 The measures for the accounting and statistics of
tax deduction or exemption shall be separately formulated and
distributed.
Chapter V Supplementary Provisions
Article 30 The present Measures shall go into effect as of
October 1, 2005. In case of any discrepancy between previous
provisions and the present Measures, the present Measures
shall prevail.
Article 31 The state and local taxation bureaus of all
provinces, autonomous regions, municipalities directly under
the Central Government and the cities under separate state
planning may formulate specific implementation plans in
accordance with the present Measures.
Annex:
Examination and Approval Requirements of the Deduction or
Exemption of Enterprise Income Tax
I. Preferential Policies for the Income Tax of Software
Development Enterprises or Integrated Circuit Design
Enterprises:
1. A software development enterprise shall concurrently
satisfy the following requirements:
(1) Having obtained the Ascertainment Certificate of Software
Enterprises as issued by the administrative department of
information industry at the provincial level;
(2) Undertaking the development and production of computer
software, system integration, application services and other
corresponding technical services as main business, with the
exception of those enterprises that only engage in software
trade who may not enjoy the preferential tax policy;
(3) Having more than one software product that are developed
by the enterprise or whose intellectual property right is
owned by the enterprise, or providing such services as the
system integration of computer information that has passed the
qualification grade accreditation;
(4) Having the technical equipment and business place that
are necessary for software development and relevant technical
services.
(5) The technical personnel that engage in the development of
software products and technical services occupying no less
than 50 % of the total number of its employees.
(6) The funds for the research and development of software
techniques and products constituting more than 8% of its
income as generated from software. and
(7) The annual sales income from software constituting more
than 35% of its total annual income. In particular, the sales
income from self-produced software accounts for more than 50 %
of its total sales income from software.
2. An integrated circuit design enterprise shall concurrently
satisfy the following requirements:
(1) Having acquired the relevant certificates and
certification documents as issued by an accreditation
institution under the entrustment of the Ministry of
Information Industry;
(2) Undertaking the integrated circuit design as its main
business;
(3) Having the basic conditions, such as the business place,
software and hardware facilities and personnel and so on, that
comply with the design and development of integrated circuits,
having standardized management on working procedures and
integrated circuit design and having the means and capability
to guarantee the quality of its design products; and
(4) The income from self-designed integrated circuit products
and the income from entrusted designing products taking up
more than 30% of its total annual income.
3. The key software enterprise under the state planning shall
be the enterprise that is included in the list of key software
enterprises , which are jointly determined by the National
Reform and Development Commission, the Ministry of Commerce,
the Ministry of Information Industry, and the State
Administration of Taxation, and shall have obtained the
Certificate of Key Software Enterprises under the state
planning as accredited by the China Software Industry
Association.
4. The term "newly established software enterprise or
integrated circuit enterprise" refers to an enterprise that is
newly established after July 1, 2000. The term "profit-making
year" refers to the first tax year, in which an enterprise is
profitable since the start of production and business
operations. Where an enterprise runs at a loss at the initial
stage of its establishment, it may carry forward the losses to
subsequent years in accordance with the provisions of tax law
and the year when all the losses have been made up (the
enterprise may exceed the prescribed makeup year) and there
are still taxable incomes shall be deemed as the first
profit-making year. The period for the income tax deduction or
exemption shall be calculated as of the profit-making year in
a consecutive manner and may not be extended due to any loss
that occurs in the course.
II. Preferential Policies for the Income Tax of Enterprises
that Employ Laid-off Workers
1. Scope of Laid-off Workers
Specifically including:
1. laid-off workers of state-owned enterprises;
2. unemployed workers of state-owned enterprises;
3. workers for whom other positions shall be found for due to
bankruptcy of a state-owned enterprise;
4. other unemployed persons in the urban or suburban areas
that receive the minimum living allowance and have been out of
work for 1 year or more.
A laid-off worker an enterprise employs shall hold the
Preferential Re-employment Certificate as issued by the
administrative department of labor and securities.
2. Specific Requirements for Commercial Enterprises
(1) The term "commercial enterprise" refers to an enterprise
that is involved in the retail industry (excluding the retail
of tobacco products), or in the accommodation and catering
industry (excluding tourist hotel). The term "commercial
retail enterprise" refers to an retail enterprise that has its
business place and counters for the sale of products and that
doesn't produce any product by itself and directly supplies
product to ultimate consumers, including department stores,
supermarkets and retail stores engaging in the sale of various
commodities, etc.
(2) A newly established commercial enterprise shall have
obtained a Certification of Reemployment of Laid-off Workers
By A Newly-established Commercial Enterprise as approved and
issued by the administrative department of labor and social
security. An established commercial enterprise shall have
obtained the Certification of Reemployment of Laid-off Workers
By An Established Commercial Enterprise as approved and issued
by the administrative department of labor and social security.
(3) The number of laid-off personnel as employed in the
current year shall comply with the required proportion.
(4) The enterprise shall establish a stable labor
relationship with laid-off workers by concluding labor
contracts or agreements for a term of 1 year or more and
purchase endowment insurance for the resettled laid-off
workers.
3. Specific Requirements for Service Enterprises
(1) The term "service enterprise" refers to an enterprise
that engages in the business operations as prescribed in the
tax items of "service industry" under business tax and
excludes such service enterprises that engage in advertising,
sauna bath, massage, Internet bar, or oxygen bar.
(2) A newly established service enterprise shall have
obtained a Certification of Reemployment of Laid-off Personnel
By A Newly-established Service Enterprise as approved and
issued by the administrative department of labor and social
security. An established service enterprise shall have
obtained the Certification of Reemployment of Laid-off
Personnel By An Established Service Enterprise as approved and
issued by the department of labor and social security.
(3) For other requirements, it shall be implemented by
applying mutatis mutandis the requirements for commercial
enterprises .
4. An Economic Entity which is Established by a Medium and
Large-sized State-owned Enterprise through Segmentation of the
Primary Business from the Sideline Ones and Restructuring of
the Sideline Ones and Resettlement of Redundant Personnel
(1) An economic entity shall satisfy the following
requirements:
(a) Using non-core assets and idle assets of the former
enterprise as well as the efficient assets of a policy-related
bankrupt enterprise (hereinafter referred to as the
"three-type assets");
(b) Conducting independent accounting, having defined
property rights clearly and realizing the pluralistic
ownership of property rights;
(c) Employing more than 30% of redundant workers of the
former enterprise; and
(d) Making amendment to labor contracts or concluding new
labor contracts with the resettled personnel.
In particular, the department of public finance or the
administrative department of stat-owned assets as authorized
by the department of public finance shall issue relevant
certification documents certifying the confirmation of the
"three-type assets" of a local enterprise. The department of
economy and trade shall issue relevant certification documents
certifying the separation of the primary business from the
secondary ones and the restructuring of the secondary ones as
well as the pluralistic ownership of property rights. The
administrative department of labor and social security shall
issue the relevant certification documents certifying the
determination of redundant workers and the conclusion of labor
contracts with them and their employment proportion. A central
enterprise shall produce the joint reply of the State Economic
and Trade Commission, the Ministry of Finance and the Ministry
of Labor and Social Security and the ascertainment certificate
as issued by the group enterprise (parent company).
(2) For the scope of separation of the primary business from
the secondary ones, restructuring of the secondary ones of
medium and large-sized state-owned enterprises (hereinafter
referred to as enterprises), it shall be a medium and
large-sized state-owned or state-owned holding enterprise. In
particular, the term "state-owned holding" refers to the
exclusive state-owned holding, which means that the
state-owned capital (stock) takes up more than 50% of the
total asset of the enterprise.
(3) The standards for the classification of state-owned
enterprises shall be implemented in light of the Circular on
Printing and Distributing the Interim Provisions on the
Standards of Medium and Small Enterprises as jointly issued by
the former State Economic and Trade Commission, the former
State Planning Commission, the Ministry of Finance and
National Bureau of Statistics of China (Guo Jing Mao Zhong
Xiao Qi [2003] No. 143).
(4) The determination scope for non-core assets of an
enterprise: The term "non-core assets" refers to the business
entity that is not closely related to the major business
operations of the principal enterprise and has certain
survival and development potential as well as the relevant
assets, mainly including entities engaged in component and
part processing, repair and maintenance, transportation,
design, consultation and scientific research institutions that
serve the major business.
(5) The service enterprises for processing labor and
employment and the small community processing enterprises have
obtained an Ascertainment Certification of Admitting Laid-off
Personnel By A Service Enterprise for Processing Labor and
Employment or an Ascertainment Certification of Admitting
Laid-off Personnel By A Small-sized Community Processing
Enterprise. The other requirements shall be implemented by
applying mutatis mutandis the aforesaid standards;
(6) The term "a newly-established enterprise that resettles
laid-off workers" refers to an enterprise that is newly
established after September 30, 2002.
III. Preferential Policies for the Income Tax of Enterprises
that Resettle Ex-servicemen in Towns and Cities Seeking Jobs
by Themselves
(1) The term " ex-servicemen in towns and cities seeking jobs
by themselves" refers to the officers and compulsory
servicemen that satisfy the requirements of resettlement in
towns and cities, have concluded an Agreement on
Self-Employment By Retired Soldiers with the civil affairs
department in the resettlement place and obtained a
Certificate of Self-Employment by Ex-serviceman in Towns and
Cities;
(2) The taxpayer is a newly established service enterprise
(excluding an enterprise that engages in advertising, sauna
bath, massage, internet bar or oxygen bar) or a commercial
enterprise (excluding a commercial enterprise that engages in
the wholesale business, both wholesale and retail business or
other non-retail business) where the aforesaid ex-servicemen
are employed. In particular, the term "service enterprise"
refers to an enterprise that engages in the business
operations set forth in the tax item of "service industry"
under the business tax.
(3) The enterprise has obtained an ascertainment certificate
of employment of the aforesaid ex-servicemen by a
newly-established service enterprise or commercial retail
enterprise;
(4) The number of aforesaid ex-servicemen who are newly
employed in the current year comes up to the prescribed
proportion; and
(5) The enterprise have concluded labor contracts with
aforesaid ex-servicemen for a term of 1 year or more and have
purchased social insurance for them.
IV. Preferential Policies for the Income Tax on Transfer of
Technical Achievements that Serve in all Industries by
Scientific Research Entities and Colleges and Universities
1. Scientific research institutes under the ownership by the
whole people and with an independent accounting system, which
have been recognized by the science and technology committee
of the province, autonomous region, municipality directly
under the Central Government or the city under separate state
planning and has passed the examination of the tax authority
at the same level, with the exception of one subordinate to a
enterprise or public institution and any organization engaging
in technical development, consultation, or service agency.
2. Colleges and universities that have been approved by the
people's government above the provincial level or by the state
administrative department of education and whose academic
credential are recognized by the state, as well as the design
and research institutes and scientific research institutes as
established by colleges and universities for integration of
scientific research, , production and education and study.
3. Having obtained the effective certification document or
instrument on sponsoring the educational institution from the
sponsor (namely, the government or educational department) and
the technology contract that has been recognized and
registered, and being able to provide the itemized schedules
concerning the actual income as derived from technical
services.
V. Preferential Policies for the Transfer of Technical
Achievements, etc by Enterprises or Public Institutions.
1. It shall be an institution that engages in the scientific
and technical development subordinate to a public institution
owned by the whole people, a privately-run scientific and
technical institution or a public institution that is
established by a medium and large-sized state-owned enterprise
for scientific and technical development; and
2. It shall have obtained a technical contract that has been
recognized by and registered with a competent accreditation
institution and shall be able to provide the itemized
schedules concerning the actual income as derived from
technical services.
VI. Preferential Policies for the Income Tax of Logistics
Entities of Colleges and Universities
1. The colleges and universities which logistics entities
belong to shall be institutions of higher learning that have
been approved by the people's government above the provincial
level or by the state administrative department of education
and whose academic credentials are recognized by the state.
2. A logistics entity shall be an establishment with legal
personality as well as independent accounting system that is
separated from the former logistics department in a college or
university, and has its major income derived from providing
services chiefly for the relevant college or university.
Any other entity as established beyond the College Logistics
Reform may not enjoy any tax exemption policy as the
"logistics entity of a college or university".
3. For the part of income that is rent and service income as
derived from providing logistic services to students, teachers
and teaching, a logistics entity may enjoy the preferential
policy of tax deduction or exemption; for any other part, it
may not enjoy any preferential tax policy.
4. A logistics entity shall have the certification document
regarding the logistics reform of the college and university.
VII. Preferential Policies for the Income Tax of Transformed
Scientific Research Institutes
1. It shall be one of the 242 scientific research institutes
that are subordinate to any of the 10 state bureaus under the
former State Economic and Trade Commission or one of the 134
scientific research institutes that are subordinate to any of
the 11 departments (entities), such as the Ministry of
Construction, etc., upon the approval of the State Council,
which have been transformed into an enterprise or that has
been incorporated into an enterprise. A scientific research
institute which, upon the approval by the Ministry of Science,
the Ministry of Finance, and the General Office of the Central
Organization & Staffing Committee, has been transformed into
an enterprise or has been incorporated into an enterprise,
from a public scientific research institute subordinate to the
department (entity) under the State Council, may enjoy the
aforesaid preferential policies.
2. The starting time of enjoying the relevant tax preference
shall be the registration day of the transformation.
3. The stock right owned by the former scientific research
institute shall come up to the prescribed standard;
4. It shall have obtained the reply of the relevant
department on system reform and the reform scheme as approved;
and
5. The stock right owned by the scientific research
institution after an overall reform shall take up more than
50% of the stock right of the new enterprise.
VIII. Preferential Policies for the Tax Policies of Service
Centers of All Departments and Organs under the CPC Central
Committee and the State Council
1. It shall be an office service center of any department of
the Central Government, ministry or affiliated institution of
the State Council after the logistics system reform, which has
been approved by the General Office of the Central
Organization & Staffing Committee, including the office
service entities without an independent accounting system that
provide logistics services for office work or living of the
staff, such as, the dining room, transportation team, medical
office, kindergarten, barber's room, laundry room, bath room,
the subsidiary foodstuff base (forestation base), etc. of an
organ.
2. It shall conduct independent accounting with legal
personality of a public institution or enterprise and shall
have gone through the formalities of tax registration.
3. The income shall be generated from the logistic services
as provided within the organ, which is the income from all
kinds of labor and technical services that are provided
according to the work requirements of the departments and
organs whose administrative office funds are fully
appropriated by the public finance of the state.
4. An office service center that has gone through the reform
shall verify and calculate the income from providing logistic
services within an organ and the income from providing
services to outsiders in a separate manner. Any center that
cannot verify and calculate the aforesaid incomes separately
may not enjoy any preferential tax policy.
5. For an enterprise as newly established by an office
service center that mainly engages in business operations and
services for the purpose of resettling reassigned personnel,
the specific examination and approval requirements for income
tax preference are as follows:
(1) Where the number of reassigned workers in the current
year exceeds 60% of the total number of employees of an
enterprise, the enterprise may be exempted from income tax for
3 years. After the tax exemption period has expired, where the
number of newly reassigned workers in the current year exceeds
more than 30% of the total personnel that are originally
employed, the enterprise income tax may be collected at a
reduced rate of 50% for 2 years.
(2) The total number of employees in an enterprise comprises
all kinds of personnel that work in the enterprise, including
the temporary workers it employs, contract workers, and
retirees..
(3) The relevant enterprise shall establish a stable labor
relationship with the reassigned workers by concluding labor
contracts or agreements for a term of 1 year or more.
(4) The labor relationship between reassigned workers and
their former entities has terminated, and the new entity has
bought endowment insurance for reassigned workers.
6. For the office service centers that have gone through the
official logistic reform as carried out by the local party
committees or governments at the provincial level, it shall be
implemented by applying mutatis mutandis the aforesaid
requirements.
IX. Preferential Policies for the Income Tax of Enterprises
that Specially Engage in Producing Products That Fall into the
Catalogue of the Equipment (Products) in the Environmental
Protection Industry as Encouraged by the State at Present
1. The enterprise shall produce equipment (products) that
fall into the Catalogue of the Equipment (Products) in the
Environmental Protection Industry as Encouraged by the State
at Present (first batch);
2. The enterprise shall be capable of conducting independent
accounting and dependently calculating its profits and losses.
3. The enterprise shall have obtained the certification of
environmental equipment (product) production enterprises as
issued by the former economic and trade commission (the
development and reform commission) at or above the prefectural
level.
X. Preferential Policies for the Income Tax of Forestry
Enterprises
(1) The subject to enjoy the tax preference includes all the
enterprises and public institutions that engage in tree
planting, forest tree seeds and nursery stock and the
preliminary processing of forest products.
(2) The income thereof shall be derived from the planting of
trees, forest tree seeds and nursery stock and the preliminary
processing of forest products. The scope of the planting of
trees, forest tree seeds and nursery stock and the preliminary
processing of forest products shall be implemented by applying
mutatis mutandis the provisions of the Circular of the
Ministry of Finance and the State Administration of Taxation
on the Enterprise Income Tax of Agricultural Enterprises and
Institutions (Cai Shui Zi [1997] No. 49). and
(3) The planting of trees, forest tree seeds and nursery
stock and the preliminary processing of forest products that
are exempted from taxes shall be calculated respectively from
any other business operation, and the information thereof
shall be provided in an accurate manner.
XI. Preferential Policies for the Income Tax of Fishery
Enterprises
1. A pelagic fishery enterprise shall satisfy the following
requirements for tax deduction or exemption:
(1) It shall have obtained a Qualification Certificate of
Pelagic Fishery Enterprises as issued by the Ministry of
Agriculture, which is still within the period of validity.
(2) The income thereof shall be derived from the business
operations of pelagic fishery.
2. A fishery enterprise shall satisfy the following
requirements for tax deduction or exemption:
(1) It shall have obtained a "Fishing License of the Fishery
Industry", which is still within the period of validity.
(2) The income shall be derived from the fishery operations
in the open seas or pelagic fishery. The income that is
derived from the fishery operations in near seas and inland
rivers may not be qualified for any tax preference.
3. For the income of a state-owned agricultural pelagic
fishery enterprise and other state-owned agricultural fishery
enterprise that is derived from the preliminary processing in
the fishery industry, the enterprise income thereof may be
exempted from tax according to the Circular of the Ministry of
Finance and the State Administration of Taxation on the Income
Tax of State-owned Agricultural Enterprises and Institutions
(Cai Shui Zi [1997] No. 49).
4. The fishery enterprises shall be able to carry out
verification and calculation on their tax-free business
separately from the taxable business.
XII. Preferential Policies for the Income Tax Concerning
Western Development
(1) Enterprises that enjoy preferential tax policies for
participation in the Western Development shall be
Chinese-funded enterprises locating in the western regions in
the Catalogue of Encouraged Industries of the state. The
aforesaid western regions comprise the Municipality of
Chongqing, Sichuan Province, Guizhou Province, Yunnan
Province, Shaanxi Province, Gansu Province, Qinghai Province,
Tibet Autonomous Region, Ningxia Hui Autonomous Region,
Xinjiang Uygur Autonomous Region, Xinjiang Production and
Construction Corps, Inner Mongolia Autonomous Region, and
Guangxi Zhuang Autonomous Region. For Xiangxi Tujia and Miao
Autonomous Prefecture of Hunan Province, Enshi Tujia
Autonomous Prefecture of Hubei Province, Yanbian Korean
Autonomous Prefecture of Jilin Province, the preferential tax
policies shall be implemented in light of those for the
western regions.
(2) It shall be an enterprise that is established and
operated by an investor himself that may enjoy the tax
preference. Any construction enterprise that only undertakes
project construction may not enjoy the tax preferential
treatment.
(3) It shall be able to provide the itemized schedules on the
total income of project operations as well as on its total
income.
(4) An enterprise that enjoys a tax preference at reduced tax
rate of 15% shall satisfy the following requirements:
(a) It shall undertake the industrial projects as prescribed
in the Catalog of Industries, Products and Technologies That
Are Encouraged by the State at Present (Revised 2000) as the
major business operations.
(b) The income as derived from its main business shall take
up more than 70% of its total income.t (c) It has obtained the
certification documents regarding the key industries, products
and technologies that are encouraged by the state, which are
issued by the competent department of the industry at or above
the provincial level.
(5) An enterprise that engages in transportation, electric
power, water conservancy, post service, and broadcasting and
television shall satisfy the following requirements for the
tax preferential treatment of "two-year exemption and
three-year half-payment":
(a) The income thereof as derived from its main business
shall take up more than 70% of the total income.
(b) The term "transportation enterprise" refers to an
enterprise that is newly established by investment to engage
in the operation of road, railway, aviation, port and wharf as
well as pipeline transportation. The term "newly-established
power enterprise" refers to an enterprise that is newly
established with investment to engage in the power operation.
The term "newly-established water conservancy enterprise"
refers to an enterprise that is newly established with
investment to engage in water resource development as well as
prevention and control of flooding damages in respect of
comprehensive harnessing of rivers and lakes, flood prevention
and control, irrigation, water supply, water resources
protection, hydraulic power generation, soil and water
conservation, river dredging, construction of dike and levee.
The term "newly-established postal enterprises" refers to an
enterprise that is newly established by investment to
undertake postal operations. The term "newly-established
broadcasting and television enterprise" refers to an
enterprise that is newly established to engage in the business
operations of broadcasting and television.
(6) The national autonomous areas shall provide the approval
document of the corresponding people's government at the
provincial level for tax deduction or exemption on a
periodical basis.
(7) Where it is hard to determine whether an investment
project falls into the catalogue of encouraged projects, the
tax authority shall require the enterprise to provide the
certification documents as issued by the competent department
of the industry at or above the provincial level and, in
conjunction with other relevant materials, carry out the
examination and verification.
XIII. Preferential Policies for the Income Tax of Juvenile
Activity Places
(1) It shall be the public places for extramural activities,
such as the juvenile's or children's palace and juvenile
activity center that carry out education in science and
technology, culture, moral and patriotism as well as physical
activities especially for young students;
(2) It shall have obtained the certification materials as
issued by the communist youth league at or above the county
level certifying that it exclusively engages in public
activities for young students; and
(3) It shall have obtained the business license as issued by
the administrative departments of culture or physical
education.
XIV. Preferential Policies for the Income Tax of Enterprises
That Produce and Assemble Special Articles for the Wounded and
Disabled
1. The enterprise shall be an enterprise that produces and
assembles special articles for the wounded and disabled within
the scope of the Catalogue of Special Articles for the Wounded
and Disabled in China (first batch).
2. The annual sales income as derived from the sale of
special articles that are produced or assembled for the
wounded and disabled shall take up more than 50% of its total
income (excluding the export income).
3. It shall have complete accounting books and documents and
be able to provide accurate and complete taxation materials to
the competent tax authority. The income thereof as derived
from the production and assembling of special articles for the
wounded and disabled may be verified and calculated
independently and accurately.
4. It shall have good conditions for its production and
assembling and other supplementary conditions that are helpful
for the recovery of the wounded and disabled. In particular:
(1) The enterprise shall have no less than 2 specialized
technical personnel who have acquired the qualification
certificate of manufacture of artificial limbs and orthopedic
appliances. Where the production personnel of an enterprise
exceed 20, the specialized technical personnel who have
acquired the qualification certificate of manufacture of
artificial limbs and orthopedic machines shall take up no less
than 1/6 of the total production personnel.
(2) It shall have such special equipment and tools for
measurement and modeling, gypsum processing, vacuum forming,
burnishing and decorating, bench-work and assembly, alignment,
thermoforming and artificial limb training.
(3) The reception room for the wounded and disabled shall be
no less than 15 sq meters, the room for the manufacture of
artificial limbs and orthopedic machines shall be no less than
20 sq meters, and the room for artificial limb training shall
be no less than 80 sq meters.
5. The enterprise shall provide the roster of the
manufacturers of special articles for the wounded and disabled
and the relevant Practitioners' Certificate (photocopy).
XV. The starting time for tax exemption and deduction shall be implemented
in accordance with the following provisions:
1. If it's provided for by any law, regulation or any
relevant tax policy of the state, it shall be implemented in
line with the relevant provisions.
2. The first day of production and operation when the tax
deduction or exemption treatment for a newly-established
enterprise is implemented refers to the day when the taxpayer
earns its first income.
3. If it's prescribed that the aptitude certificate or other
qualification certificate shall be issued by the relevant
governmental department or industrial association, which is
regarded as the requirement for the deduction or exemption of
enterprise income tax, the newly-established enterprise may,
from the day when the relevant department has verified its
aptitude or qualification, enjoy the enterprise income tax
deduction or exemption within the remnant period of tax
deduction or exemption in accordance with Item 2 of this
Article.
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