|
(Effective
Date£º1991.07.01)
Article
1. Income tax shall be paid in accordance with the provisions
of this Law by enterprises with foreign investments within the territory
of the People's Republic of China on their income derived from production,
business operations and other sources.
Income
tax shall be paid in accordance with the provisions of this Law
by foreign enterprises on their income derived from production,
business operations and other sources within the territory of the
People's Republic of China.
Article
2. "Enterprises with foreign investments" referred to
in this Law means Chinese-foreign equity joint ventures. Chinese-foreign contractual joint ventures
and foreign capital enterprises that are established in China.
"Foreign
enterprises" referred to in this Law means foreign companies,
enterprises and other economic organizations which have organizations
or establishments in China and engage in production or business
operations, and which, though without organizations or establishments
in China, have income sources within China.
Article
3. Any enterprise with foreign investments which establishes its
head office in China shall pay its income tax on its income derived
from sources inside and outside China. Any foreign enterprise shall
pay its income tax on its income derived from sources within China.
Article
4. The taxable income of an enterprise with foreign investments
and an organization or establishment set up in China to engage in
production or business operations by a foreign enterprise, shall
be the amount remaining from its gross income in a tax year after
the costs, expenses and losses have been deducted.
Article
5. The income tax on enterprises with foreign investments and
the income tax which shall be paid by foreign enterprises on the
income of their organizations or establishments set up in China
to engage in production or business operations shall be computed
on the taxable income at the rate of thirty percent; local income
tax shall be computed on the taxable income at the rate of three
percent.
Article
6. The state shall, in accordance with the industrial policies,
guide the orientation of foreign investments and encourage the establishment
of enterprises with foreign investments which adopt advanced technology
and equipment and export all or greater part of their products.
Article
7. The income tax on enterprises with foreign investments established
in Special Economic Zones, foreign enterprises which have organizations
or establishments, in Special Economic Zones engaged in production
or business operations, and an enterprise with foreign investments
of a production nature in Economic and Technological Development
Zones, shall be levied at the reduced rate of fifteen percent.
The
income tax on enterprises with foreign investments in other regions
defined by the State Council, within the scope of energy, transportation,
harbour, wharf or other projects encouraged by the state, may be
levied at the reduced rate of fifteen percent. The specific rules
shall be regulated by the State Council.
The
income tax on enterprises with foreign investments of a production
nature established in coastal economic open zones or in the old
urban districts of cities where the Special Economic Zones or the
Economic and Technological Development Zones are located, shall
be levied at the reduced rate of twenty four percent.
Article
8. Any enterprise with foreign investments of a production nature
scheduled in operate for a period of not less than ten years shall,
upon examination and verification by the tax authorities of an application
filed by the enterprise, from the year beginning to make profit,
be exempted from income tax in the first and second years and allowed
a fifty percent reduction in the third to fifth years.
However, the income tax on enterprises with foreign investments
engaged in the exploitation of resources such as petroleum, natural
gas, rare metals, and precious metals shall be regulated separately
by the State Council. Enterprises with foreign investments which have actually operated
for a period less than ten years, shall repay the amount of income
tax exempted or reduced already.
The
relevant regulations, promulgated by the State Council before the
entry into force of this Law, which provide preferential treatment
of exemption from or reduction of income tax on enterprises engaged
in energy, transportation, harbour, wharf and other major projects
of a production nature for a period longer than that specified in
the preceding paragraph, or provide preferential treatment of exemption
from or reduction of income tax on enterprises engaged in major
projects of a non-production nature, shall remain applicable after
this Law enters into force.
Any
enterprise with foreign investments which is engaged in agriculture,
forestry or animal husbandry and any other enterprise with foreign
investments which is located in remote underdeveloped areas may,
upon approval by the competent department for tax affairs under
the State Council of an application filed by the enterprise, be
allowed a fifteen to thirty percent reduction of the amount of income
tax payable for a period of another ten years following the expiration
of the period for tax exemption or reduction as provided for in
the preceding two paragraphs.
After
this Law enters into force, any modification to the provisions on
the exemption or reduction of income tax on enterprises of the preceding
three paragraphs of this Article shall be submitted by the State
Council to the Standing Committee of the National People's Congress
for decision.
Article
9. The exemption or reduction of local income tax on any enterprise
with foreign investments which operates in an industry or undertakes
a project encouraged by the state shall, in accordance with the
actual situation, be at the discretion of the people's government
of the province, autonomous region or municipality directly under
the Central Government.
Article
10. Any foreign investor of an enterprise with foreign investments
which reinvests its share of profit obtained from the enterprise
directly into that enterprise by increasing its registered capital,
or by making the profit as capital investment to establish other
enterprises with foreign investments to operate for a period of
not less than five years shall, upon approval by the tax authorities
of an application filed by the investor, be refunded forty percent
of the income tax already paid on the reinvested amount.
Where other preferential provisions are provided by the State
Council, such provisions shall apply. If the investor withdraws its reinvestment
before the expiration of five years, it shall repay the refunded
tax.
Article
11. Losses incurred by any enterprise with foreign investments
and by an organization or establishment set up in China by a foreign
enterprise to engage in production or business operations in a tax
year may be made up by the income of the following tax year.
Should the income of the following tax year be insufficient
to make up for the said losses, the balance may be made up by its
income of the further subsequent year, and so on, over a period
not exceeding five years.
Article
12. Any enterprise with foreign investments shall be allowed to
deduct from the amount of tax payable the foreign income tax already
paid abroad in respect of the income derived from sources outside
China when filing a consolidated income tax return.
The deductible amount shall, however, not exceed the amount
of income tax otherwise payable under this Law in respect of the
income derived from sources outside China.
Article
13. The payment or receipt of money or fees in business transactions
between an enterprise with foreign investments or, an organization
or establishment set up in China by a foreign enterprise to engage
in production or business operations, and its associated enterprises,
shall be made in the same way as the payment or receipt of money
or fees in business transactions between independent enterprises. Where the payment or receipt of money or fees in not made in
the same way as that in business transactions between independent
enterprises and results in a reduction of the taxable income, the
tax authorities shall have the right to make reasonable adjustment.
Article
14. Where an enterprise with foreign investments and an organization
or establishment set up in China by a foreign enterprise to engage
in production or business operations is established, moves to a
new site, merges with another enterprise, breaks up, winds up or
makes a change in any of the main entries of registration, it shall
present the relevant documents to and go through tax registration
with, the local tax authorities within thirty days after the relevant
event is registered with or a change or cancellation in registration
in made by the administrative agency for industry and commerce.
Article
15. Income tax on enterprises and local income tax shall be computed
on an annual basis and paid in advance in quarterly installments. Such payments shall be made within fifteen
days from the end of each quarter and the final settlement shall
be made within five months from the end of each tax year. Any excess payment shall be refunded and
any deficiency shall be repaid.
Article
16. Any enterprise with foreign investments and any organization
or establishment set up in China by a foreign enterprise to engage
in production or business operations shall file its quarterly provisional
income tax return in respect of advance payments with the local
tax authorities within the period of each advance payment of tax,
and it shall file an annual income tax return together with the
statement of final accounts within four months from the end of the
tax year.
Article
17. Any enterprise with foreign investments and any organization
or establishment set up in China by a foreign enterprise to engage
in production or business operations shall submit a report on its
financial and accounting systems to the local tax authorities for
reference. All accounting records must be complete
and accurate, with legitimate vouchers as the basis for entries.
If
the procedures for financial management and accounting of an enterprise
with foreign investments and an organization or establishment set
up in China by a foreign enterprise to engage in production or business
operations contradict the relevant tax provisions of the State Council,
tax payment shall be computed in accordance with the relevant tax
provisions of the State Council.
Article
18. When any enterprise with foreign investments goes into liquidation,
and if the balance of its net assets or the balance of its remaining
property after deduction of the enterprise's undistributed profit,
various funds and liquidation expenses exceeds the enterprise's
actually paid capital, the excess portion shall be income from liquidation
on which income tax shall be paid in accordance with the provisions
of this Law.
Article
19. Any foreign enterprise which has no organization or establishment
in China but has gained dividend, interest, rental, royalty and
other income from sources in China, or though it has organizations
or establishments in China, the said income is not actually connected
with any of its organizations or establishments, shall pay an income
tax of twenty percent on such income.
For
the payment of income tax in accordance with the provisions of the
preceding paragraph, the income receiver shall be the taxpayer and
the payor shall be the withholding agent. The tax shall be withheld
from the amount of each payment by the payor. The withholding agent
shall, within five days, turn the amount of taxes withheld on each
payment over to the State Treasury and submit a withholding income
tax return to the local tax authorities.
Income
tax shall be reduced or exempted on the following income:
(1)
the profit derived by a foreign investor from an enterprise with
foreign investments shall be exempted from income tax;
(2)
income from interest on loans made to the Chinese government or
Chinese state banks by international financial organizations shall
be exempted from income tax;
(3)
income from interest on loans made at a preferential interest rate
to Chinese state banks by foreign banks shall be exempted from income
tax; and
(4)
income tax of the royalty received for the supply of technical know-how
in scientific research, exploitation of energy resources, development
of the communications industries, agricultural, forestry and animal
husbandry production, and the development of important technologies
may, upon approval by the competent department for tax affairs under
the State Council, be levied at the reduced rate of ten percent. Where the technology supplied is advanced
or the terms are preferential, exemption from income tax may be
allowed.
Where,
the preferential treatment of reduction and exemption of income
tax on dividend, interest, rental, royalty and other income other
than those provided for in this Article is required, it shall be
regulated by the State Council.
Article
20. The tax authorities shall have the right to inspect the financial,
accounting and tax affairs of enterprises with foreign investments
and organizations or establishments set up in China by foreign enterprises
to engage in production or business operations, and have the right
to inspect tax withholding of the withholding agent and its payment
of the withheld tax into the State Treasury. The entities inspected
must report the facts and provide relevant information. They may
not refuse to report or conceal any facts.
When
making an inspection, the tax officials shall produce their identity
documents and keep the inspection secret.
Article
21. Income tax payable according to this Law shall be computed
in terms of Renminbi (RMB). Income in foreign currency shall be
taxed on the equivalent amount converted into Renminbi according
to the exchange rate quoted by the State Administration of Exchange
Control.
Article
22. If any taxpayer fails to pay tax within the prescribed time
limit, or if the withholding agent fails to turn over the tax withheld
within the prescribed time limit, the tax authorities shall, in
addition to setting a new time limit for tax payment, impose a surcharge
for overdue payment, equal to 0.2 percent of the overdue tax for
each day in arrears, starting from the first day payment becomes
overdue.
Article
23. The tax authorities shall set a new time limit for registration
or submission of documents and may impose a fine of five thousand
Yuan or less on any taxpayer or withholding agent which, in violation
of the provisions of this Law, fails to go through tax registration
or make a change or cancellation in registration before the tax
authorities within the prescribed time limit, fails to submit income
tax return, statement of final accounts or statement of income tax
withheld to the tax authorities within the prescribed time limit,
or fails to submit statement of its financial and accounting systems
to the tax authorities for reference.
Where
the tax authorities has set a new time limit for registration or
submission of documents, they shall impose a fine of ten thousand
Yuan or less on the taxpayer or withholding agent which fails to
meet the time limit for going through registration or making a change
in registration before the tax authorities, or for submitting income
tax return and statement of final account or statement of income
tax withheld to the tax authorities; if the circumstances are serious,
the legal representative and the person directly responsible shall
be prosecuted for their criminal liability, by applying mutatis
mutandis the provisions of Article 121 of the Criminal Law.
Article
24. Where the withholding agent fails to fulfill its obligation
to withhold tax as provided in this Law, does not withhold or withholds
an amount less than that should have been withheld, the tax authorities
shall set a time limit for the payment of the amount of tax that
should have been withheld, and may impose a fine up to but not exceeding
100 percent of the amount of tax that should have been withheld.
Where
the withholding agent fails to turn the tax withheld over to the
State Treasury within the prescribed time limit, the tax authorities
shall set a time limit for turning over the taxes and may impose
a fine of five thousand Yuan or less on the withholding agent; if
the withholding agent fails to meet the time limit again, the tax
authorities shall pursue the taxes according to law and may impose
a fine of ten thousand Yuan or less on the withholding agent.
If the circumstances are serious. the legal representative
and the person directly responsible shall be prosecuted for their
criminal liability by applying mutatis mutandis the provisions of
Article 121 of the Criminal Law.
Article
25. Where any person, in violation of this Law, evades tax by deception
or concealment or fails to pay tax within the time limit prescribed
by this Law and, after the tax authorities pursued the payment of
tax, fails again to pay it within the prescribed time limit, the
tax authorities shall pursue payment of the tax which should have
been paid and may impose a fine up to but not exceeding five hundred
percent of the amount of tax which should have been paid; if the
circumstances are serious, the legal representative and the person
directly responsible shall be prosecuted for their criminal liability
by applying mutatis mutandis the provisions of Article 121 of the
Criminal Law.
Article
26. Any enterprise with foreign investments, foreign enterprise
or withholding agent, in case of a dispute with the tax authorities
on payment of tax, the taxpayer or withholding agent must pay tax
according to the relevant regulations first.
Thereafter, the taxpayer or withholding agent may, within
sixty days from the date of receipt of the tax payment voucher issued
by the tax authorities, apply to the higher tax authorities for
reconsideration. The higher tax authorities shall make
a decision within sixty days after receipt of the application for
reconsideration. If
the taxpayer or withholding agent is not satisfied with the decision,
it may institute legal proceedings in the people's court within
fifteen days from the date of receipt of the notification on decision
made after reconsideration.
If
the party concerned is not satisfied with the decision on punishment
by the tax authorities, it may, within fifteen days from the date
of receipt of the notification on punishment, apply for reconsideration
to the tax authorities at the next higher level than that which
made the decision on punishment.
Where the party is not satisfied with the decision made after
reconsideration, it may institute legal proceedings in the people's
court within fifteen days from the date of receipt of the decision
made after reconsideration.
The party concerned may, however, directly institute legal
proceedings in the people's court within fifteen days from the date
of receipt of the notification on punishment.
If the party concerned does not apply for reconsideration
to the higher tax authorities or institute legal proceedings in
the people's court within the time limit, and if the decision on
punishment is not fulfilled, the tax authorities which made the
decision on punishment may apply to the people's court for compulsory
execution.
Article
27. Where any enterprise with foreign investments which was established
before the promulgation of this Law would, in accordance with the
provisions of this Law, otherwise be subject to higher tax rates
or enjoy less preferential treatment of tax exemption or reduction
than before the entry into force of this Law, in respect to such
enterprise, within its approved period of operation, the laws and
relevant regulations of the State Council in effect before the entry
into force of this Law shall apply. If any such enterprise has no period of operation, the laws
and relevant regulations of the State Council in effect before the
entry into force of this Law shall apply within the period prescribed
by the State Council. Specific
rules shall be regulated by the State Council.
Article
28. Where the provisions of the tax agreement concluded between
the government of the People's Republic of China and foreign governments
are different from the provisions of this Law, the provisions of
the respective agreement shall apply.
Article
29. Rules for implementation shall be formulated by the State Council
in accordance with this Law.
Article
30. This Law shall enter into force on July 1, 1991. The Income
Tax Law of the People's Republic of China for Chinese-Foreign Equity
Joint Ventures and the Income Tax Law of the People's Republic of
China for Foreign Enterprises shall be annulled on the same date.
Appendix:
Article
of the Criminal Law Affected by This Law
Article
121. In cases of tax evasion or refusal to pay taxes in violation
of tax laws and regulations, if the circumstances are serious, the
taxpayer shall be ordered to pay the tax due and may be fined in
accordance with the tax laws and regulations; the person directly
responsible shall also be sentenced to fixed-term imprisonment of
not more than three years or criminal detention.
|
