Laws of the People's Republic of China

the Ministry of Finance, the State Administration of Taxation, the People's Bank of China

Circular of MOF, SAT, and PBC on the Issues concerning the Relevant Budget Management after the Adjustment of Export Tax Refund Bearing Mechanism

Cai Yu [2005] No.438

The finance offices or bureaus, state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning, all branches and business administration departments of the People's Bank of China as well as central sub-branches thereof in capital cities and in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, the finance bureau of Xinjiang Production and Construction Corps,

With a view to implementing the Circular of the State Council on Improving Central and Local Export Tax Refund Bearing Mechanism (Guo Fa [2005] No.25) and ensuring that the all kinds of work for export tax refund progress smoothly, you are hereby notified of the relevant matters on budget management after the adjustment of export tax refund bearing mechanism:

I.

Since January 1st, 2005 (the date of examination and approval of tax refund shall be referred to, the same hereinafter), the amount of value added tax refund for export goods calculated within the tax base(including the amount of export value-added tax that is exempted or offset, the same hereinafter) of all regions shall continue to be borne by the state treasury; the amount of tax refund calculated beyond the tax base shall be shared by central and local treasuries according to the proportion of 92.5 to 7.5 instead of the former proportion of 75 to 25. The base of export tax refund of every region as approved and verified by the State Council shall remain unchanged.

II.

Since January 1st, 2005, the value-added tax refund for export goods shall be handled in the following ways:

1.

Since September 1st, 2005, the value-added tax refund for export goods to be paid by the state treasury shall be paid uniformly from the central revenue; the value-added tax exempted and offset shall be adjusted in the item of "increased value-added tax from tax exemption and offset"(Code 010151) for the central and local treasuries respectively according to the proportion of 75 to 25, and the item of "decreased value-added tax from tax exemption and deduction"(Code 010302) of the central treasury shall be adjusted according to the amount of tax exemption and offset. And meanwhile, the part of 25% of the value-added tax increased from exemption and offset shall be transferred to local treasuries from the central treasury. Other measures for adjusting the state treasury for tax offset and exemption shall be implemented continuously in light of the Circular on the Relevant Issues concerning the Budget Management for the Implementation of the Measures for Tax Offset, Exemption and Refund as promulgated by the Ministry of Finance, State Administration of Taxation and the People's Bank of China (Cai Yu Zi [1998] No.242).

2.

For the value-added tax refund which has been handled for export goods before September 1st, 2005, the departments of finance, bureaus of state taxation and the .state treasury departments of the people's bank at all levels shall have the related accounts adjusted. The concrete measures for account adjustment shall be separately formulated by the Ministry of Finance, State Administration of Taxation and the People's Bank of China.

III.

The part of value-added tax refund, which shall be borne by the local treasuries for export goods in 2005 and the following years, shall be specially turned in to the central treasury by the local treasuries at the year end.

IV.

In order to reflect the changes of export tax refund, the following adjustments are made to the Subjects of Government Budget Revenue and Expenditure in 2005 and the Subjects of Government Budget Revenue and Expenditure in 2006:

1.

The item of "value-added tax refund for export goods"(Code 010301) under the subject of general budget revenue shall be changed into the subject of withdrawal of central revenue, which shall reflect the value-added tax refund for export goods returned by the central treasury. The item of "decreased value-added tax after tax exemption and offset" (Code 010302) shall be changed into the subject exclusively used by the central treasury, which shall reflect the value-added tax decreased according to the amount of tax exemption and offset.

2.

The item of "revenue from the return of export tax refund base" (Code 720110) under the subject of general budget revenue and the item of "expenditure from the return of export tax refund base" (Code 660110) under the subject of general budget expenditure shall be cancelled.

3.

The item "special revenue turned in from export tax refund" (Code 720203) shall be added to the general item of "revenue turned in from general budget" (Code 7202) under the subject of general budget revenue, and shall reflect the export tax refund revenue turned in to the central treasury by the local treasuries. The item of "special expenditure turned in from export tax refund" (Code 660203) shall be added to the general item of "expenditure turned in from general budget" (Code 6602) under the subject of general budget expenditure, and shall reflect the expenditure of export tax refund turned in to the central treasury by local treasuries.

V.

The local budget revenue and expenditure shall be adjusted according to the relevant adjustments of the export tax refund bearing mechanism. The public finance department at the provincial level shall report the relevant adjustment information to the government at the corresponding level, and shall, in light of the conditions of the export tax refund work of their own regions, formulate corresponding management measures so as to ensure the smooth progress of all kinds of work.

the Ministry of Finance

the State Administration of Taxation

the People's Bank of China

August 22nd, 2005