Laws of the People's Republic of China

The State Administration of Taxation

Circular of the State Administration of Taxation Concerning the Levy of Consolidated Industrial and Commercial Tax in Accord with Interest Difference on Interest Incomes from Foreign Exchange Loans of Foreign-capital and Chinese-foreign Equity Joint Financial Institutions

GuoShuiFa [1993] No.011

January 20,1993

The tax bureaus of various provinces, autonomous regions and municipalities directly under the Central Government, the tax bureaus of various municipalities separately listed on the State plan, and sub-bureaus of Offshore Oil Taxation Administration:

In order to further promote opening to the outside world and facilitate the attraction of foreign capitals, with approval from the State Council, stipulations are hereby laid down as follows on the levy of consolidated industrial and commercial tax on the incomes gained by foreign-capital and Chinese-foreign equity joint financial institutions (including financial companies):

I.

Consolidated industrial and commercial tax is levied at a 5 percent rate on interest incomes from foreign-exchange loan business by calculating the balance after subtracting interest expenditure.

II.

Consolidated industrial and commercial tax is levied in full amount of the incomes from other financial businesses than foreign exchange loan business at a 5 percent tax rate; consolidated industrial and commercial tax is levied on the incomes from the above-mentioned business gained by foreign-capital and Chinese-foreign equity joint financial institutions set up in special economic zones at a 3 percent tax rate.

III.

Accounts must be kept separately for interest on which tax is calculated on the basis of interest balance, if the division is unclear, consolidated industrial and commercial tax shall be levied by calculating business income in full amount.

IV.

For foreign-capital and Chinese-foreign equity joint financial institutions set up in special economic zones which need to be granted preferential treatment of tax reduction and exemption for a period of five years beginning from the day of starting business, the matter shall be decided by the people's government of the special economic zone; if the period exceeds five years, the matter shall be reported to the State Administration of Taxation for examination and approval. For those who are previously granted the preferential treatment of tax reduction and exemption with the approval of the people's government of the special economic zone, no readjustment may be made to their period of tax reduction and exemption.

V.

The stipulations shall enter into force on January 1, 1993.