Laws of the People's Republic of China

To the tax bureaus of various provinces, autonomous regions and municipalities and to the tax bureaus of various cities with independent planning:

Recently, our Administration has continuously received letters from tax bureaus of some provinces and cities, saying that some foreign or Hong Kong, Macao and Taiwan non-air transport enterprises which come to China and the Chinese mainland to engage in international transport business by means of chartered planes, demanding that our Administration clarify related questions concerning taxation. After study, we hereby issue the following circular:

I. Enterprises of foreign countries or of Hong Kong, Macao and Taiwan, although not belonging to air transport enterprises, their chartered planes, however, have income earned from passenger tickets for carrying and transporting passengers, goods and mails, income from transporting goods and income from overweight luggage, shall all pay taxes in China, in Chinese mainland according to law irrespective of whether they sell tickets or performing the procedures for carrying and transporting in China and the Chinese mainland. With regard to the concrete method of taxation, the matter shall be carried out in accordance with the related stipulations of the document of May 14, 1993 coded Guo Shui Fa [1993] No. 097 concerning the taxation question related to engaging in international air transport business in the form of chartered planes.

II. In view of the fact that consolidated industrial and commercial tax and the detailed rules for its implementation have been annulled, according to the Provisional Regulations On Business Tax and the Detailed Rules for Its Implementation, the applicable tax rate of communications and transportation business tax is 3 percent. Therefore, beginning from January 1, 1994, for foreign enterprises or enterprises from Hong Kong, Macao and Taiwan which engage in international air transport business and have income earned from transporting passengers, goods and mails in China and the Chinese mainland, before there are separate stipulations, tax shall be calculated and levied in accordance with the composite rate of 4.65 percent.