Laws of the People's Republic of China

The Ministry of Finance, the State Administration of Taxation, the Ministry of Foreign Trade and Economic Cooperation

Circular of the Ministry of Finance, the State Administration of Taxation and the Ministry of Foreign Trade and Economic Cooperation on the Issues of Exempting the Value-Added Tax for the Purchase of Goods in China by Gratuitous Aid Projects of Foreign Governments and International Organizations

CaiShui [2002] No.2

January 11,2002

The departments (bureaus) of finance and the state taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, and the bureau of finance of Sinkiang Production and Construction Corps:

In order to promote China's acceptance of gratuitous aids from foreign governments and international organizations and to guarantee the successful implementation of the aid projects, the goods purchased in China by gratuitous aid projects of foreign governments and international organizations shall, upon the approval of the State Council, be exempted from value-added tax from Aug.1, 2001, and the units that sell the tax-free goods are allowed to offset the income tax of the tax-free goods with the sale tax of other goods sold on domestic market.

The Measures for the Administration of Exempting Value-Added Tax for Purchase of Goods in China by Gratuitous Aid Projects of Foreign Governments and International Organizations are hereby printed and distributed to you, please carry them out accordingly.

Attachment: Measures for the Administration of Exempting Value-Added Tax for Purchase of Goods in China by Gratuitous Aid Projects of Foreign Governments and International Organizations (for trail implementation)

Attachment:Interim Measures for the Administration of Exempting Value-Added Tax for Purchase of Goods in China by Gratuitous Aid Projects of Foreign Governments and International Organizations (for trail implementation)

Article 1

These Measures are hereby formulated in order to promote China's acceptance of gratuitous aids from foreign governments and international organizations and to do a good job in exempting the value-added tax for the purchase of goods in China by gratuitous aid projects of foreign governments and international organizations.

Article 2

These Measures shall apply to the goods purchased within the territory of China by the gratuitous aid projects provided to China by foreign governments and international organizations (see attachment 1 for the specific list), and apply to the domestic enterprises that supply goods for the projects (hereinafter referred to as the supplier).

Article 3

After a gratuitous aid project is established, the purchaser of the goods needed by the aid project (hereinafter referred to as the purchaser) shall, through the project unit, file the application for tax exemption both with the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as MOFTEC) and the State Administration of Taxation, and the contents of the application shall include: name of the aid project, aid provider, unit receiving the aid, sale contract (copy) signed by the purchaser and the supplier, etc., and shall fill in and submit the Particular Sheet of Goods Purchased in China by Gratuitous Aid Projects of Foreign Governments and International Organizations (see attachment 2). Where the purchase is entrusted to others, it is required to submit the agreement on entrustment and the information about the actual purchaser, including the unit name of the purchaser, the address, contact person and contact phone number, etc.

The supplier shall, after signing the sale contract, submit the contract (copy) to the taxation organ of the place where the enterprise is located for record.

Article 4

The MOFTEC shall, after receiving the application for tax exemption for purchase by the supplier and the project unit, examine the truthfulness of the relevant project contents, and whether the goods purchased are needed for the aid project, etc. If no error has been found after the examination, the MOFTEC shall issue the certifications for inerrability of the application to the State Administration of Taxation.

Article 5

The State Administration of Taxation shall, after receiving the application for tax exemption of purchase by the supplier and the project unit and the certifications issued by the MOFTEC, verify the relevant information about the goods purchased, for which the application for tax exemption is filed, through the department in charge of taxation of the place where the supplier is located. Given that the certifications issued by the department in charge of taxation are consistent with the relevant contents of the certifications issued by the MOFTEC, the State Administration of Taxation shall grant the documents for tax exemption for sale of the relevant goods by the supplier, and shall send copies to the Ministry of Finance, the MOFTEC and the purchaser at the same time.

Article 6

The supplier shall, on the basis of the tax exemption documents presented by the purchaser and according to the provisions of the documents, sell goods to the purchaser at the price excluding the value-added tax.

The supplier shall file the application for tax exemption with the department in charge of taxation of the place where it is located. And the department in charge of taxation of the place where the supplier is located shall, on the basis of the tax exemption documents granted by the State Administration of Taxation, handle the procedures for offsetting the exempted sale tax with the income tax.

Article 7

The purchaser and the project unit may not alter the contents of the application for tax exemption for purchase and the Particular Sheet of Goods Purchased in China by Gratuitous Aid Projects of Foreign Governments and International Organizations at will after submitting them. Where alteration is really needed, they shall separately submit them for examination and approval according to the procedures provided for by these Measures.

Article 8

The goods purchased free from tax must be used in the prescribed aid project, and may not be sold or used in other projects, otherwise it shall be deemed as tax fraud, and shall be dealt with according to the relevant provisions of Article 66 of the Law of the Republic of China on the Administration of Tax Collection.

Article 9

These Measures shall be put into practice on Aug. 1, 2001.

Attachment:

1. List of the International Organizations

2. Particular Sheet of Goods Purchased in China by Gratuitous Aid Projects of Foreign Governments and International Organizations Attachment 1List of International Organizations

A.

Relevant organizations of the United Nations

(1)

United Nations Development Programme-UNDP

(2)

United Nations Environment Programme-UNEP

(3)

United Nations Conference on Trade and Development-UNCTAD

(4)

United Nations Population Fund-UNFPA

(5)

United Nations Children's Fund-UNICEF

(6)

Office of the United Nations High Commissioner for Refugees-UNHCR

(7)

United Nation's Economic Commission for Europe-UN/ECE

(8)

World Food Programme-WFP

(9)

Economic and Social Commission for Asia and the pacific-ESCAP

(10)

The Committee on the Peaceful Uses of Outer Space-COPUOS

B.

The intergovernmental institutions that have established relation with the United Nations

(11)

International Labour Organization-ILO

(12)

Food and Agriculture Organization of the United Nations-FAO

(13)

United Nations Educational, Scientific and Cultural Organization-UNESCO

(14)

World Health Organization-WHO

(15)

International Monetary Fund-IMF

(16)

International Development Association-IDA

(17)

International Bank for Reconstruction and Development-IBRD (World Bank)

(18)

International Finance Corporation-IFC

(19)

International Civil Aviation Organization-ICAO

(20)

Universal Postal Union-UPU

(21)

International Telecommunication Union-ITU

(22)

World Meteorological Organization-WMO

(23)

International Maritime Organization£­IMO

(24)

World Intellectual Property Organization£­WIPO

(25)

International Fund for Agricultural Development-IFAD

(26)

United Nations Industrial Development Organization-UNIDO

(27)

International Atomic Energy Agency-IAEA

(28)

World Trade Organization-WTO

C.

Other relevant international organizations and financial institutions

(29)

The International Federation of Red Cross and Red Crescent Societies-IFRCS

(30)

The International Committee of The Red Cross-ICRC

(31)

European Union-EU

(32)

Asia Pacific Economic Cooperation-APEC

(33)

Asia Development Bank-ADB

(34)

Japan International Cooperation Agency-JICA

(35)

Korea International Cooperation Agency-KOICA

(36)

International Planned Parenthood Federation-IPPF

(37)

International Mobile Satellite Organization-INMARSAT

(38)

League of Arab States-LAS

Attachment 2Particular Sheet of Goods Purchased in China by Gratuitous Aid Projects of Foreign Governments and International Organizations

Project name: Chinese project unit and the contact phone number:

Aid provider: Goods purchaser and the contact phone number: htm/e02911.htm

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