Laws of the People's Republic of China

Circular of the Ministry of Finance and the State Administration of Taxation on Catalogue Change of Preferential Tax Policies for Development of China's Western Regions

Cai Shui [2006] No. 165

Departments (Bureaus) of Finance of all provinces, autonomous regions, municipalities directly under the Central Government and cities specially under designated in the state plan, the State Administration of Taxation, the local tax bureaus, the Bureau of Finance of Xinjiang Production and Construction Corps (XPCC):

In December 2005, with the promulgation of Decision of the State Council on Implementation of Provisional Regulations on Promoting the Industry Restructuring (Guo Fa [2005] No.40), Catalogue of Industries, Products and Technology Currently Particularly Encouraged by the State for Development (2000 revised version) (hereafter referred to as Former Catalogue) printed and distributed by the former State Planning Commission and former State Economic and Trade Commission shall be abolished simultaneously. All preferential policies implemented in accordance with the Former Catalogue now only apply to the encouraged projects under the Guiding Catalogue for Industrial Structure Regulation (2005 Version). For the purpose of carrying out the Document Guo Fa [2005] No. 40, matters related to catalogue change on preferential tax policies for development of China's western regions are hereby notified as follows:

1.

As from January 1, 2006, domestic enterprises of encouraged projects enjoying the preferential tax policies for western region development shall be reexamined to confirm that they fall within the category of encouraged projects under the Guiding Catalogue for Industrial Structure Regulation (2005 Version) (hereafter referred to as New Catalogue). Under the Circular of the Ministry of Finance, the State Administration of Taxation, the General Administration of Customs on Issues of Incentive Policies on Taxation for the Strategy of the Development of the Western Areas (Cai Shui [2001] No. 202), the provision that "Domestic enterprises of encouraged projects refer to those that have the industrial items specified in the Catalogue of Industries, Products and Technology Currently Particularly Encouraged by the State for Development (2000 revised version) as their main business, and whose main business income takes up at least 70% of the total income" shall be suspended.

2.

As regards enterprises that have been examined and approved to enjoy the preferential tax policies according to the Former Catalogue before January 1, 2006, unless listed as restricted and prohibited projects under the New Catalogue, the policies shall not be adjusted and may be implemented continuously till the expiration; As regards enterprises listed as restricted and prohibited projects under the New Catalogue, all preferential tax policies for the western region development shall be suspended.

3.

Enterprises that fall within the category of encouraged projects under the New Catalogue rather than that of the Former Catalogue shall enjoy preferential policies on income tax as from the year 2006.

Ministry of Finance

State Administration of Taxation

November 16, 2006