Laws of the People's Republic of China

The Ministry of Finance

Circular of the Ministry of Finance Concerning Printing and Distributing the Rules for the Implementation of the Interim Regulations of the People's Republic of China on Business Tax

CaiFaZi [1993] No.40

December 25, 1993

The ministries and directly subordinate institutions of the State Council, the people's governments of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, the departments (bureaus) of finance of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan and the branches of the State Administration of Taxation:

Rules for the Implementation of the Interim Regulations of the People's Republic of China on Business Tax is now issued to you for earnest implementation. Attachment:Rules for the Implementation of the Interim Regulations of the People's Republic of China on Business Tax

Article 1

The Rules have been formulated according to Article 16 of the Interim Regulations of the People's Republic of China on Business Tax (hereinafter referred to as "Regulations" ).

Article 2

The term "taxable labor services" mentioned in Article 1 of the Regulations refers to taxable items of labor services in areas of transport, construction, finance, insurance, posts and telecommunications, cultural and sports, recreation and service.

Labor services involved in processing and repairs do not belong to taxable items (hereinafter referred to as "non-taxable labor services").

Article 3

"Transactions of foreign exchange, negotiable securities and futures" mentioned in Subparagraph 5 of Article 5 of the Regulations refer to the transactions conducted by banks and non-banking financial organizations in foreign exchange, negotiable securities and futures. Business turnover for transactions of foreign exchange, negotiable securities or futures conducted by non-financial organizations or individuals is free from business tax.

The term "futures" mentioned in Subparagraph 5 of Article 5 of the Regulations refer to non-goods futures. The business turnover for transaction of non-goods futures. The business turnover for transaction of non-goods futures is free from business tax.

Article 4

The term "providing taxable labor services, transfer of intangible assets or sales of real assets" as addressed in Article 1 of the Regulations refers to acts of providing taxable labor services, transferring intangible assets or selling real assets for payment. But the taxable labor services provided by employees of units or individual business people for the units and their employers are excluded.

The term "payment" mentioned in the preceding paragraph includes money, goods or other economic interests.

If a unit or an individual builds by own effort a building structure for sale, effort for building the structure is regarded as a kind of taxable labor services.

The transfer of limited equity ownership or permanent right of use of movable property or the donation of movable property by a unit to others are regarded as selling real estate.

Article 5

A sale involving both taxable labor services and goods is regarded as a mixed sale. A mixed sale made by an enterprise, an enterprising unit or an individual engaging in production, wholesale or retail sale is regarded as a sale of goods and is free from business tax. A mixed sale made by other units and individuals is regarded as a provision of taxable labor services and is thus subject to business tax.

Whether a sale of a taxpayer can be regarded as a mixed sale shall be subject to the determination of tax collecting agencies under the State Tax Administration.

The term "goods" mentioned in the first paragraph of this article refers to tangible movable assets, including power, thermal power and gas.

The term "an enterprise, an enterprising unit, a unit or an individual engaging in production, wholesale or retail sales" mentioned in the first paragraph of this article includes enterprises, enterprising units and individuals mainly engaging in production, wholesale or retail sales but also concurrently providing taxable labor services.

Article 6

A taxpayer that engaged concurrently in taxable labor services and goods or non-taxable labor services should keep a separate accounting of the sales volumes of goods or taxable and non-taxable labor services. If the accounting cannot be accurately separated, the value-added tax shall be levied in consolidation on non-taxable labor services and goods or taxable labor services and no business tax is levied.

Whether or not the value-added tax will be levied in consolidation for a taxpayer concurrently engaging in non-taxable labor services shall be determined by the tax collecting organs of the State Tax Administration.

Article 7

Except otherwise provided for in Article 8 of the Rules, one of the following cases is regarded as providing taxable labor services or transferring intangible assets or selling immovable properties within the territory of the People's Republic of China:

1.

Labor services are provided within the territory of China:

2.

Passengers or goods within the territory of China are transported out of the boundaries;

3.

Organizing passengers within the territory of China for foreign tours;

4.

The intangible assets transferred are used within the territory of China;

5.

The immovable properties sold are located inside the territory of China.

Article 8

One of the following cases is regarded as providing insurance labor services within the territory of the People's Republic of China:

1.

Insurance labor services provided by insurance organizations within the territory of China, except the insurance coverage provided by insurance organizations for export goods;

2.

Insurance organizations outside China provide insurance labor services for objects within the territory of China.

Article 9

The term "units" mentioned in Article 1 of the Regulations refers to State owned enterprises, collectively owned enterprises, private enterprises, stockholding enterprises and other enterprises and administrative units, institutional units, military units, social organizations and other units.

The term "individuals" mentioned in Article 1 of the Regulations refers to individual business people and other individual operators.

Article 10

If an enterprise is leased or contracted out for operation by others, the person or persons who lease it or the contractor or contractors are the taxpayers.

Article 11

Except otherwise provided for in Article 12 of the Rules, units with obligations of business tax are units which have taxable acts and collected money, goods or other economic interests from others, including both units practising independent accounting or not practising independent accounting.

Article 12

For operation of central railways, the taxpayer shall be the Ministry of Railways. For operation of joint venture railways, the taxpayers shall be joint railway ventures. For operation of local railways, the taxpayers shall be the local railway management organizations. The taxpayers of feeder lines for capital construction are the organizations in charge of the feeder lines.

Units engaging in waterway shipping, air transport, pipeline transport or other land transportation operations and bearing the business tax obligations are transport units with gains and losses computed.

Article 13

Fees collected by legislative organs, judicial organs and administrative organs are not subject to business taxes if the following requirements are met:

1.

Fees collected under the permission and conforming to standards as set in official documents issued by State Council and provincial people's governments and the financial and pricing departments;

2.

Fees are directly collected by legislative organs, judicial organs and administrative organs.

Article 14

The term "additional expenses" mentioned in Article 5 of the Regulations refers to money collected as commissions, fund, fees for raising funds, payment for others, advance payments and other extra- price collections.

All the expenses in addition to prices, irrespective of the methods of accounting, shall be included in the business turnover and taxed accordingly.

Article 15

If a taxpayer is found to have provided taxable labor services, transferred intangible assets or sold immovable properties at prices obviously on the low side without justifiable reasons, the tax authorities in charge shall determine the business turnover according to the following sequence of order:

1.

It shall be determined according to the averaged prices of similar taxable labor services or similar immovable properties sold in the same month by the taxpayer;

2.

It shall be determined according to the averaged prices of similar taxable labor services provided or similar immovable properties sold in the latest period by the taxpayer;

3.

The formula for tax assessment price is:

Tax assessment price = Cost of business operations or cost of projects * (1 + profit rate on costs)/ (1 - business tax rate)

The profit rate on costs in the formula shall be determined by the tax authorities of the people's governments of various provinces, autonomous regions and municipalities directly under the Central Government.

Article 16

If a taxpayer settles its business turnover in foreign currencies according to the provisions of Article 4 of the Regulations, the conversion of the amount into Renminbi shall be made according to the exchange rate (usually the medium rate) quoted by the State in the day when the sales occur or on the first day of the month. But for conversions made for the business turnover of financial and insurance enterprises, the exchange rate fixed in the final account statement of the preceding year shall be used.

The taxpayer should decide which conversion rate is to be adopted in advance and the corresponding rate decided upon shall remain unchanged within a year.

Article 17

The business turnover of transport enterprises in carrying out through transport shall be the turnover actually obtained.

"Other cases" referred to in Subparagraph 6 of Article 5 of the Regulations include tourism enterprises organizing China tours. For which the business turnover shall be the tourism fees collected minus the fees for hotel rooms, food, transport, tickets and other expenses paid to other units concerned for the tourists.

Article 18

In building, repairing and decoration businesses, the business turnovers of taxpayers shall include, irrespective of its method of settlement, the price value of the raw materials and other materials and power needed in the projects.

For installation operations, the business turnover of a taxpayer shall include the price value of equipment if the value of the equipment installed includes the output value of the installed project.

Article 19

Business turnovers for projects built by one's own effort as provided for in Article 4 of the Rules shall be fixed according to the provisions of Article 15 of the Rules.

Article 20

The term "transference of credit" mentioned in Subparagraph 4 of Article 5 of the Regulations refers to the lending to others of money borrowed from other sources. The lending of deposits by individuals or units or capital fund to others do not fall into the kind.

Article 21

For re-insurance, the business turnover of the primary insurance is the total premium minus premium for re-insurers.

Article 22

In organizing art performances, the business turnover of a unit or an individual shall be the total box-office income or total contract income minus the fees paid to units or producing companies who own the performing sites or brokers.

Article 23

The business turnover of recreational industry is all the charges collected from customers, including ticket fees, table fees, fees for naming songs, fees for cigarettes, wines and soft drinks and other fees.

Article 24

The business turnover of a tourism unit shall be the total collection of fees minus the fees on food, lodging and transport paid to other units concerned for the tourists.

If a tourism enterprise organizes a tour within the territory and hands it over to another tourism enterprise half way through, its business turnover shall be determined in reference to the provisions of Subparagraph 2 of Article 5 of the Regulations.

Article 25

In donation of immovable properties gratis to others, the business turnover of the unit shall be fixed according to the provisions of Article 15 of the Rules.

Article 26

The items of partly credit of taxes as provided for in Article 6 of the Regulations shall be limited to the following:

1.

The labor services provided by handicapped persons mentioned in Subparagraph 2 of Article 1 of the Regulations refer to the labor services provided to the society by the handicapped persons themselves.

2.

The term "the medical services provided by hospital, clinics and other medical organization" mentioned in Subparagraph 3 of Article 1 of the Regulations refers to services provided to patients in diagnosis, treatment, prevention against diseases, birth delivery and family planning and the medicines, medical instruments, wards and food provided in association with these services.

3.

The term "schools and other educational organizations" mentioned in Subparagraph 4 of Article 1 of the Regulations refers to regular schools and schools set up with the approval of the people's governments at and above the prefectural and country levels or of education administrative departments at the same levels with the State recognizing the schooling of the students therein.

4.

The term "ploughing by machines in agriculture" mentioned in Subparagraph 5 of Article 1 of the Regulations refers to operations (including ploughing, planting, harvesting, threshing and plant protection) done by machines in agriculture, forestry and livestock breeding.

Drainage and irrigation refer to the operations of draining and irrigating the cropfields.

Pest prevention and control refer to the prediction, prevention and control of pests in agriculture, forestry, livestock breeding and fisheries.

Agriculture insurance refers to providing insurance for plant culture, breeding and the culture and breeding of animals and plants.

Training in related technology refers to technical training in ploughing, draining and irrigation by machines, pest prevention and control and plant protection as well as knowledge on insurance of agriculture and animal husbandry for peasants.

Tax credit for the mating and disease control of poultry, livestock and aquatic animals covers the provision of medicine and medical instruments associated with the related labor service.

5.

"Cultural activities conducted by memorials, museums, cultural palaces, art galleries, exhibition centers, calligraphy and arts academies, libraries and cultural relics protection units" mentioned in Subparagraph 6 of Article 1 refer to cultural and sports activities subject to taxation held in their own sites. The box-office income refers to the income from the tickets sold at the first front gates.

Box-office income from the cultural and religious activities held in religious sites refers to income from selling tickets for cultural and religious activities held in temples, mosques and churches.

Article 27

Starting point for levying business tax as mentioned in Article 8 of the Regulations applies to individuals only.

The starting point for levying business tax is as follows:

Starting point for taxes levied in periods shall be for monthly turnover of RMB 200-800;

Starting point for taxes levied in installments shall be for daily turnover of RMB 50;

When the business turnover of a taxpayer has reached the starting point, the taxable amount shall be computed according to the full business turnover.

The tax collecting bureaus under the people's governments of various provinces, autonomous regions and municipalities directly under the Central Government shall fix the starting points within the stipulated range for levying business tax for their own areas in line with actual circumstances and submit them to the State Tax Administration for the record.

Article 28

The time for the tax obligations to occur in transferring and use rights or selling immovable properties under an advance payment is the very day when the advance payment is received.

The times for tax obligations for whom who engages in building projects in own efforts as mentioned in Article 4 of the Rules is the very day when the building structure is sold and business turnover is received or the document for collecting the business turnover is received.

The time for tax obligations of a taxpayer who donates immovable properties to others is the day when the ownership of the immovable properties is transferred.

Article 29

The other withholding agents mentioned in Article 11 of the Regulations are:

1.

For a unit or individual outside China that has committed taxable acts but has not operating organizations inside China, the entrusted agent will be the withholding agent but when there is not an entrusted agent, the buyer or the consignee will be the withholding agent.

2.

For units or individuals that organize art performances with the tickets being sold by others, the ticket sellers shall be the withholding agents.

3.

If the broker for the performance is an individual, the ticket seller shall be the withholding agent.

4.

For re-insurance business, the primary insurer shall be withholding agent.

5.

For an individual who transfers other intangible assets mentioned in Subparagraph 2 of Article 12 of the Regulations, the consignee shall be the withholding agent.

Article 30

When providing taxable labor services in other counties (cities), the taxpayers should file tax returns with the tax authorities of the localities. If the taxpayers fail to file tax returns there, the tax authorities of the places where their organizations are located or the place of their residence shall levy the tax in retrospect.

Article 31

When contracting for a project which concerns more than one province, autonomous region or municipality directly under the Central Government, the taxpayer should file tax returns with the tax authorities in place where the organization of the taxpayer is located.

Article 32

If a taxpayer has committed taxable acts within its own province, autonomous region or municipality but wants to change the place of tax payment, the case shall be determined by the tax authorities of the people's government of its province, autonomous region or municipality directly under the Central Government.

Article 33

The term of tax payment for enterprises of the financial industry (not including pawn shops) is three months.

The term of tax payment for insurance firms is one month.

Article 34

The terms "more than" or "less than" mentioned in the Rules all include the base figure.

Article 35

The power of interpreting the Rules rests with the Ministry of Finance or the State Tax Administration.

Article 36

The Rules shall enter into force as of the date of promulgation of the Regulations. At the same time, the Rules for the Implementation of the Regulations (draft) of the People's Republic of China on Business Taxissued by the Ministry of Finance on September 28, 1984 shall be nullified.