Laws of the People's Republic of China

The Ministry of Finance

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

CaiFaZi [1993] No.39

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 Consumption Tax" is now issued to you, please carry out seriously.

Attachment:Rules for the Implementation of the Interim Regulations of the People's Republic of China on Consumption Tax

Article 1

These Rules are formulated according to Article 18 of the Interim Regulations of the People's Republic of China on Consumption Tax (hereinafter referred to as "Regulations", for the original regulations, pls refer to CEN, No.3, Vl. XV).

Article 2

Any "unit" mentioned in Article 1 of the Regulations means State-owned enterprises, collective-owned enterprises, private enterprises, joint stock enterprises and other businesses, as well as administrative departments, institutions, military units, social groups, and other units.

Any "individual" mentioned in Article 1 of the Regulations means self- employers and other individuals.

"Within the territory of the People's Republic of China" in Article 1 of the Regulations is referred to the fact that all consumer goods on which consumption tax should be imposed (hereafter referred to as "taxable consumer goods") should be produced, consigned for processing in or shipped from the boundaries of China.

Article 3

The taxable consumer goods listed in the "Table of Consumption Tax Items and Rates (Amount)" attached to the Regulations shall be taxed according to special incidence listed in the "Notes on the Levying Scope of Consumption Tax" attached to these Rules.

For cigarettes, those sold at the prices of RMB780 or over for a box (50,000 cigarettes; the same below), the value-added tax should be levied according to the category (1) and those sold at the prices of less than RMB780 for a-box, the value-added tax shall be levied according to the category (2). (Pls refer to the original regulations)

Article 4

"A taxpayer is engaged in more than one kind of taxable consumer goods" in Article 3 of the Regulations means that the taxpayer produces and/or sells two or more than two kinds of taxable consumer goods at the same time.

Article 5

"Selling the goods" as addressed in Article 4 of the Regulations means the paid transferred of the ownership of taxable consumer goods; that is, the goods are transferred on the condition that money, goods, labor service, or other economic benefits being paid by the transferee.

Article 6

"Goods for self-use to continuously produce other taxable consumer goods" in Article 4 of the Regulations mean direct materials that are used for the production of the final taxable consumer goods and eventually make up a part of the finished products.

"Goods used for other purposes" mean taxable consumer goods used for producing non-taxable consumer goods, in construction projects, managerial departments non-production organization or supply of labour services, as well as for donation, sponsorship, raising funds, advertisement, samples, workers' welfare, or awards.

Article 7

"Taxable consumer goods consigned for processing" mentioned in Article 4 of the Regulations mean those taxable consumer goods that are processed with raw material and main semi-finished material provided by the consignor with the consignee only collecting the processing fee and providing on behalf part of the subsidiary material. Goods processed on raw and semi-finished materials provided by the consignee, or firstly sold to the consignor by the consignee, or bought by the consignee in the name of the consignor, no matter they are sold by a taxpayer in a financial process or not, cannot be taken as taxable consumer goods consigned for processing but are imposed with consumption tax as sales of self-produced taxable consumer goods.

For taxable consumer goods sold directly after consigned processing, no collection of consumption tax shall be made.

Article 8

According to Article 4 of the Regulations, times for paying consumption tax are as follows:

1.

In selling taxable consumer goods, consumption tax shall be paid by the taxpayers in the following time limits:

(1)

A taxpayer who makes credit sales or installment sales shall pay tax on the day of payment collection as fixed in the sales contract.

(2)

A taxpayer who collects advances on sales shall pay tax on the day he delivers the taxable consumer goods.

(3)

A taxpayer who makes settlement through collection with the debtor's acceptance and entrusts the bank for the collection shall pay tax on the day he delivers the taxable consumer goods and completes the collection procedures.

(4)

A taxpayer who adopts other ways of settlement shall pay tax on the day he receives the sales income or a voucher for the sales income.

2.

When a taxpayer produces taxable consumer goods for self-use, he shall pay tax on the day he delivers them for use.

3.

A taxpayer who commissions processing of taxable consumer goods shall pay tax on the day he takes the delivery of goods.

4.

A taxpayer importing taxable consumer goods shall pay tax on the day of customs entry.

Article 9

"Sales volume" mentioned in Article 5 of the Regulations means the amount of taxable consumer goods, specified as follows:

1.

For taxable consumer goods for sales, it means the sales amount of the goods.

2.

For taxable consumer goods produced for self-use, it means the amount of the goods delivered for use.

3.

For taxable consumer goods commissioned for processing, it means the amount of goods the taxpayer recovers.

4.

For importing taxable consumer goods, it means the amount of goods on which the Customs imposes import duty.

Article 10

Measuring units for special taxable consumer goods are computed as:

1.

beer: 1 tonne = 988 liters

2.

yellow rice or millet wine: 1 tonne = 962 liters

3.

petrol: 1 tonne = 1,388 liters

4.

diesel oil: 1 tonne = 1,176 liters

Article 11

According to Article 5 of the Regulations, if the taxpayer settles the accounts of the sales of taxable consumer goods in foreign currencies, the sum should be converted into Renminbi according to the exchange rate quoted in the day of settlement or the first day of the month (in medium rate in principle). The exchange rate fixed in advance shall not be changed within one year.

Article 12

The "sales value" mentioned in Article 6 of the Regulations does not include the value-added tax imposed on the buyers. If the taxpayer collects prices and value-added tax at the same time without deducting the value-added tax from the sales value of giving out a separate value-added tax invoice, he shall calculate the consumption tax on the sales value excluding the value-added tax. The conversion formula is as follows:

Sales value of taxable consumer goods = Sales value including value- added tax !B (1 + value-added tax rate or collection rate)

Article 13

When the tax on taxable consumer goods sold with package is calculated by the advalorem method, no matter whether the package is priced separately or not, and no matter how accounts are kept, the package shall be included in the sales value of taxable consumer goods in computing consumption tax. If the package is not priced but a guarantee deposit is imposed when sold with the products, this guarantee deposit should not be included in the sales value of taxable consumer goods in computing consumption tax. Nevertheless, if the deposit has not been refunded as the keeping of the package beyond the time limit or more than one year, it should be included in the sales value of taxable consumer goods for computing consumption tax at the applied rate.

If the package is priced and sold with the taxable consumer goods while a guarantee deposit is collected at the same time and the taxpayer does not return the deposit within the specified time limit, the deposit shall be included in the sales value of the taxable consumer goods for computing the consumption tax at the applied rate.

Article 14

"Non-price charges" mentioned in Article 6 of the Regulations mean funds, raising-fund fees, returned profit, subsidies, penalty (interest on deferred payment), commissions, packaging fees, reserve funds, quality charges, charges for transportation, loading and unloading, bill receivable for collection, advanced money, as well as other kinds of non-price charges. But the following cases are not included:

1.

Invoice of transportation fee issued by transportation department to the buyer.

2.

Such invoices transferred to the buyer by the taxpayer.

Other non-price charges, whether they make up part of the taxpayer's income or not, shall be included in the sales value for computing consumption tax.

Article 15

"Selling prices of similar consumer goods" mentioned in Articles 7 and 8 mean the selling prices of similar consumer goods sold in the same month by the taxpayer or an agent who collects income and pays tax for the taxpayer. If similar consumer goods are different in prices periodically in the same month, the price should be computed as the weighted average according to sales amount. But no weighted averages should be computed in the following circumstances:

1.

The selling price is obviously too low without a proper reason.

2.

There is no selling price.

If there are no sales or sales are not completed in the month, the tax amount should be computed according to the selling prices of similar consumer goods in last or recent months.

Article 16

The "cost" mentioned in Article 7 of the Regulations means the production cost of the taxable consumer goods.

Article 17

The "profit" mentioned in Article 7 of the Regulations is computed according to the national averaged cost/profit rate, which shall be fixed by the State Administration of Taxation.

Article 18

The "cost of materials" mentioned in Article 8 of the Regulations means the actual cost of the materials that the consignor provides for processing.

The taxpayer who consigns for processing of taxable consumer goods must indicate the cost of materials in the processing contract (or provide it in other ways). If the cost of materials is not provided for, the local taxation organ of the place where the consignee is located has the right to determine the cost of the materials.

Article 19

The "processing charges" mentioned in Article 8 of the Regulations mean all the charges the consignee receives from the consignor for processing the taxable consumer goods (including the actual cost of the subsidiary materials provided by the consignee).

Article 20

The "dutiable price" mentioned in Article 9 of the Regulations means the taxable value fixed by the Customs.

Article 21

According to Article 10 of the Regulations, the following organs are authorized to determine the taxable value of taxable consumer goods:

1.

The State Administration of Taxation shall fixed the taxable value of category (1) cigarettes and spirits distilled from grain.

2.

Tax bureaus under the State Administration of Taxation shall fix the taxable value of other taxable consumer goods.

3.

The Customs shall fix the taxable value of imported taxable consumer goods.

Article 22

Taxable consumer goods "governed by regulations of the State Council" as mentioned in Article 11 of the Regulations indicate those taxable consumer goods that are imposed of export restriction by State.

Article 23

Whenever taxable consumer goods exported with a refund of consumption tax meet a shutdown by the customs or are reimported duty free due to a rejection from abroad, the original exporter should report and turn over the refunded tax to the local taxation organs in charge in time.

But if such goods are directly exported by the taxpayer, the repayment of tax may be delayed upon an approval by the local taxation organ in charge. Later when the taxpayer concerned sells the goods on the domestic market, a report and a repayment of the consumption tax should be made to the local taxation organ in charge.

Article 24

If taxable consumer goods sold by the taxpayer are rejected by the buyer because of poor quality or other reasons, the taxpayer can have the consumption tax refunded with the approval of the local taxation organ in charge.

Article 25

According to Article 13 of the Regulations, if a taxpayer sells or entrusts others to sell self-produced consumer taxable goods in another county (city), the consumption tax upon the sales of the goods should be paid at the same accounting or original place.

If the headquarters and branches of the taxpayer are not located in the same county (city), the consumption tax should be paid at the locality where the branch which produces the taxable consumer goods is located. However, with the approval of the State Administration of Taxation or tax bureaus under it, consumption tax which should be paid by the branch can also be paid by the headquarters to the taxation organ in charge in the locality where the headquarters located.

Article 26

These Rules shall be interpreted by the Ministry of Finance or by the State Administration of Taxation.

Article 27

These Rules shall enter into force as of the date of promulgation.