Laws of the People's Republic of China

State Administration of Taxation

(Interim) Circular of the State Administration of Taxation on Implementing Record-Keeping Administration System of Relevant Documents for Refunding (Exempting) Taxes on Exported Goods

Guo Shui Fa [2005] No. 199

To State taxation bureaus of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in the State plan:

In order to regulate the order of foreign trade export business, strengthen the administration of refunding (exempting) taxes on exported goods as well as prevent illegal activities of tax refund frauds, the State Administration of Taxation decided to carry out a record-keeping administration system of relevant documents for refunding (exempting) taxes on goods exported by export enterprises. Related matters are hereby notified as follows:

I.

If goods, which are exported independently by export enterprises or authorized by such enterprises to be exported, are available to refund (exemption) of value added tax or consumption tax, the following documents of exported goods shall, not later than 15 days after refund (exemption) of taxes on exported goods has been declared, be put on record with financial departments under such enterprises for the verification of tax authorities. Please refer to Appendix1 for Descriptions to Recording-Keeping of Relevant Documents for Refunding (Exempting) Taxes on Exported Goods.

(1)

purchase contracts of export-oriented enterprises, purchase contracts entered into by production enterprises to acquire non-self-produced goods for export, a supplementary contract concluded under a purchase and sales contract, and so on;

(2)

particulars of exported goods;

(3)

shipping orders of exported goods; and

(4)

transport documents of exported goods (including such goods receipts issued by a carrier as ocean B/L, air transport waybill, railway consignment note, receipt for carriage of goods, post receipt and others).

II.

Record-keeping requirements

(1)

Record-keeping can be taken in two methods:

Export enterprises shall be required to bind documents to be put on file into book form, with correspondence to the sequence in which refund (exemption) of taxes on exported goods is declared, number such documents in a unified manner and complete the Catalog of Documents to be Put on File for Exported Goods (refer to Appendix 2).

The second one: Export enterprises shall be required to complete the Catalog of Documents to be Put on File for Exported Goods in the sequence how refund (exemption) of taxes on exported goods is declared, must, instead of binding such documents into book form, indicate the location for keeping the said documents in the column titled the "Place for Keeping Documents to be Put on File" under the said Catalog. Such documents shall not be delivered to be under the individual custody of sales representatives (or other personnel) of enterprises, but must be deposited with such enterprises.

In case of any of the following circumstances, within 2 years thereafter, enterprises shall, after having declared the refund (exemption) of taxes on exported goods, must adopt the first method to put documents on file:

1.

Having its tax credit rating evaluated as Grade C or Grade D;

2.

Having failed to handle registration of tax refund (exemption) for export within a specified period;

3.

Having established an unsound financial and accounting system, made mistakes in daily declaring the refund (exemption) of taxes on exported goods or made in accurate declaration;

4.

Having dealt with the registration of tax refund (exemption) for export, for a period of less than 1 year;

5.

Having had their acts in violation of tax laws recorded, such as tax dodging, evasion from being pursued of tax arrears, tax refund frauds, refusal to pay tax, false issue of exclusive value-added tax invoices.

6.

Having committed other acts in violation of tax laws, regulations, as well as provisions on the administration of tax refund (exemption) for export.

(2)

Originals of documents to be put on file must be submitted. Where originals are unable to be kept on record, photocopies thereof, which are signed by the handling person to indicate consistency with originals and affixed with official seals of enterprises, may be reported for the record instead.

As to the purchase and sales contract under Article 1 , goods under such a purchase and sales contract that are exported many times may be put on file upon the first time of exportation. For the remaining exports, it may be permitted to indicate the place where the purchase and sales contract is kept on file at first under the "Place for Keeping Documents to be Put on File" of the Catalog of Documents to be Put on File for Exported Goods.

(3)

Unless otherwise stipulated, documents to be put on file shall be placed with and under the custody of export enterprises, and shall not be destroyed discretionarily, with a retention period of 5 years.

III.

The tax authority shall urge export enterprises to establish their records management system for documents to be put on file, strengthen the daily management and verification of such documents, bring the said management into the responsibility range of tax administrator. The tax authority may, upon conducting tax refund verification, tax refund evaluation and daily examination of tax refund, take the said documents for inspection. At the same time, tax refund departments of tax authorities of all localities shall offer internal special positions to be responsible for the daily examination of such documents submitted by export enterprises.

IV.

For export enterprises committing any of the six acts under Article 2 .2, the tax authority may require them to submit documents to be put on file upon declaring refund (exemption) of taxes on exported goods. As to the such said documents, the tax authority shall give emphasis to verify:

(1)

Whether purchases, descriptions, specifications and unit price listed on the said documents are consistent with materials submitted by export enterprises for declaring refund (exemption) of taxes on exported goods, such as if there are some issues concerning the amendment to transport documents of exported goods.

(2)

Whether the time when the said documents are issued and goods rotation procedure are reasonable, and whether the date when a purchase and sales contract is signed is inconsistent with the date and sequence of goods transportation and Customs declaration.

(3)

Whether exported goods particulars and shipping orders of exported goods accord to exclusive value added tax invoices (or a list of exclusive value added tax invoices). In case of any challenge raised to documents to be put on file, the tax refund may be suspended temporarily, and related matters, after verified clear, shall be handled according to provisions concerned.

V.

Where export enterprises fail to bind, place or keep documents to be put on file in accordance with Article 2 of this Circular, penalties shall be given by the tax authority subject to Article 60 pursuant to Law of the People¡¯s Republic of China on the Administration of Tax Collection.

VI.

Where export enterprises provide false documents to be put on file, thus unable to truthfully report the situation or failing to submit factual documents to be put on file, the tax authority shall, in addition to give penalties in accordance with Article 64 and Article 70 of the Law of the People¡¯s Republic of China on the Administration of Tax Collection, timely recover refunded (exempted) tax, shall not deal with tax refund (exemption) for export enterprises which have failed to apply so, and shall levy taxes upon export enterprises in such a manner as imposed upon goods for domestic market.

VII.

This Circular shall take effect as of January 1, 2006.

Appendices:

1.

Descriptions to Recording-Keeping of Relevant Documents for Refunding (Exempting) Taxes on Exported Goods

2.

Catalog of Documents to be Put on File for Exported Goods

State Administration of Taxation

December 13, 2005

Appendix 1:

Descriptions to Recording-Keeping of Relevant Documents for Refunding (Exempting) Taxes on Exported Goods

1.

Purchase contracts of export-oriented enterprises and purchase contracts entered into by production enterprises to acquire non-self-produced goods for export (including supplementary purchase and sales contracts)

These contracts refer to such contracts whereupon a domestic seller is able to assign the ownership of subject matter to a domestic buyer, and the buyer makes goods payment.

2.

Exported goods particulars

Export goods particulars are also called a shipment analysis list or a L/C analysis list of goods. In the export transaction, where it is ready to deliver goods after certificates, including L/Cs issued from abroad, are examined correct, in order to make handling persons of related departments become familiar with and understand requirements of the said transaction when preparing goods and going through other various procedures, exported goods particulars are generally prepared in several copies pursuant to main contents of L/C (or a factory¡¯s dispatch list or warehouse-out order) and then distributed to various units or departments concerned

3.

Shipping orders of exported goods

A shipping order is an important document for consignment of exported goods, which is not only a certificate for the shipper to deliver goods to the Ship (or land transportation unit) but also a certificate with which the Customers may conduct customs inspection and release goods. Only after a shipping order has been signed by the Customs, shall the Ship (or land transportation unit) be permitted to receive goods, load a ship or truck and so on. Therefore, a shipping order is also called a "Customs document" in practical business.

4.

Transport documents of exported goods

An ocean B/L is a written certificate which is issued by the carrier or its agent to the shipper after receipt of goods, committing to carry such batch of goods to the port of destination and deliver them to the consignee. Each original of B/L shall have the same force and effect. If one of such originals is used to take delivery goods, the other ones shall immediately be invalidated. Therefore, a B/L is not only a very important document for international transport, but also the most basic document for the buyer and the seller to hand over goods and settle goods payment. "Ocean B/L", "waybill" or receipts are all transport documents. Except "ocean B/L" used for marine transportation, "waybills" or receipts are all used for other means of transport. An air transport waybill is a freight agreement entered into by the shipper and the carriers in terms of transport of goods sent by air, a goods receipt issued by the carrier, but not a certificate of goods ownership, and cannot be negotiable. A railway consignment note is a freight agreement signed by railway department and the goods owner, doesn¡¯t represent goods ownership, can neither be negotiable nor be used to pick up goods;

Among the said documents, a "goods delivery document" shall be carried together with goods to freight station and be kept at the arrival station; an "original of one waybill" and the second form of a "goods arrival notice which indicates the number of an export contract" shall be carried to together with goods to freight station and be delivered to the consignee with goods; a receipt for carriage of goods is also a kind of freight agreement made out by and between the shipper and the carrier, is a transport document used for such goods as carried from Chinese mainland to Hong Kong and Macao regions, is a goods receipt issued by the carrier, indicates the number of an export invoice and the number of an export contract; The "consignee¡¯s signature for receipt " means that the consignee shall sign for receipt upon taking delivery of goods to acknowledge the receipt of goods. A post receipt is a goods receipt, which is used by the receiver to receive posts.