Laws of the People's Republic of China

State Administration of Taxation, Ministry of Commerce

Circular of the State Administration of Taxation and the Ministry of Commerce on Further Regulating the Business Order in Foreign Trade Export and Better Strengthening the Administration of Export Rebates (Exemption) for Export Goods

Guo Shui Fa [2006] No.24

Bureaus of State Taxes and Commerce Authorities in Charge in all provinces, autonomous regions, municipalities directly under the Central Government, and cities specially designated in the state plan:

This Circular on relevant issues is hereby given in order to guarantee a constant, healthy and stable development for China's foreign trade export, to further regulate the business order in foreign trade export, to prohibit the export enterprises from engaging in such nonstandard export operations as "Four Selfs and Three Nos ( the Four Selfs are the investor or intermediary's bringing clients itself, bringing supply of goods itself, bringing the bill of exchange itself and declaring at the customs itself, and the Three Nos are the export enterprise's having no export goods, no suppliers of goods and no foreign businessmen)" etc., to tighten the administration of export rebates (exemption) for export goods, and to prevent and crack down such illegal and criminal activities as gaining tax rebates by cheat.

I.

The export enterprise shall regulate its export operations, further establish and improve its internal management system, strengthen its training on its employees, and conduct export operations strictly in accordance with the normal trade procedures. The export enterprise shall substantively engage in the export trade activities, guarantee the authenticity of its export operations, and abide by strictly relevant laws and regulations concerning export rebates.

II.

In order to maintain the normal business order of China's foreign trade, to guarantee the stable operation of the national export rebates regime, and to avoid a loss of the national property, and in case that any of these circumstances occurs in the self-support or entrusted export operation, the export enterprise shall not apply this operation concerned to the taxation authorities for the handling of formalities of export rebates (exemption):

1.

The export enterprise gives such documents for export rebates (exemption) as the vacant customs declaration bill for export goods, verifying and writing-off instrument for export proceeds etc. to the freight forwarding company and customs broker without a contract of entrust, or to other unit or individual for use except the freight forwarding company designated by the foreign importer; and

2.

The export enterprise pretends to conduct export operations in the name of self-support, while its export operations are really conducted by other operators (enterprise, self-employed individual or other individuals) rather than the export enterprise itself or its invested enterprises in the name of this export enterprise itself; and

3.

Where the export enterprise conduct export operations in the name of self-support, its export goods of the same batch have both purchase contract and export brokerage contract;

4.

After the check and clearance of the customs authorities, the export enterprise itself or its entrusted freight forwarding carrier alters the contents of such items as "name of article", "specification" etc. in the maritime bill of lading (if transported by other means, the transport document given by the carrier to the deliverer shall be referred to, the same hereinafter), as result of which conflicts occur in the contents of between the customs declaration bill for export goods and the maritime bill of lading;

5.

Where the export enterprise conduct export operations in the name of self-support, it, however, fails to assume the risks of quality of exported goods, exchange settlement or export rebates, i.e. it fails to assume the liabilities of compensation claimed by foreign parties in case that quality problem of the exported goods occurs (except that liability-assumption concerning quality problem is already agreed in the contract); fails to assume the liabilities of verifying and writing-off unable to be conducted due to the unscheduled exchange settlement (except that liability-assumption concerning exchange settlement is already agreed in the contract); and fails to assume the liabilities of export rebates unable to be conducted due to the problems in the submitted documents of export rebates;

6.

The export enterprise fails to substantively engage in the export operations, and accepts and engage in other export operations introduced by intermediaries while conducting export operations in the name of self-support; and

7.

Other activities in violation of relevant national laws and regulations concerning export rebates.

III.

In case that the export enterprise applies for export rebates (exemption) while engaging in any of such activities as mentioned in Article II of this Circular and once detected, the rebated (exempted) tax payment shall be recovered, and unhandled application for export rebates (exemption) shall not be handled. With regard to those gain export rebates by cheat, the taxation authorities shall recover their cheated tax payment, impose on them a fine of more than one time and less than five times the cheated tax payment, and cease, with approvals from the taxation authorities of above-provincial (included) level, their rights to export rebates for more than half a year. During the period of ceased rights to export rebates, any application of this enterprise for export rebates (exemption) may not be handled with regard to this enterprise's export goods in the forms of self-support, entrustment or proxy. In case that a crime is constituted, it shall be transferred to the judicial authorities to investigate criminal liabilities.

IV.

The taxation authorities and commerce authorities in charge at all levels shall further enhance cooperation between them, do well the work of policy publicities, guide actively the export enterprises to engage in normal export trades, regulate the business order in foreign trade, and strengthen the administration on export rebates (exemption) for export goods. The taxation authorities in charge of export rebates (exemption) shall do well the administration work of export rebates (exemption) application, examination, and approval in accordance with the currently-prescribed requirements of application, examination and approval. Meanwhile, the taxation authorities and commerce authorities in charge shall strengthen communications between them, pay close attention to the new tendencies in tax fraudulence, and strictly treat the found activities in violation of laws and regulations, and shall not appease or connive the export enterprises at engaging in export operations in violation of relevant national provisions and normal procedures for export operation.

V.

This Circular shall enter into force as of the date of March 1, 2006 (the date of export specified on the customs declaration bill for export goods (exclusively used for export rebates) shall prevail).

State Administration of Taxation

Ministry of Commerce

February 13, 2006