Laws of the People's Republic of China

The State Administration of Taxation

Circular of the State Administration of Taxation on Questions Concerning Applicable Regular Tax Reduction and Exemption on Income from Liquidation by Enterprise with Foreign Investment

GuoShuiFa [1993] No.8

June 15, 1993

With regard to the question as to whether or not enterprise with foreign investment which conduct liquidation within the regular tax reduction and exemption period as stipulated in Article 8 of the Income Tax Law of the People's Republic of China for Enterprise with Foreign Investment and Foreign Enterprises (hereinafter referred to as Tax Law) can enjoy enterprise income tax reduction and exemption, it is hereby clarified as follows:

The stipulation set in Article 8 of the Tax Law which states "Productive enterprise with foreign investment scheduled to operate for a period over 10 years shall be exempted from enterprise income tax in the first two profit-making years and be granted a 50 percent enterprise income tax reduction in the third to the fifth year" applies only to the income gained during the enterprise's operational period. Therefore, income gained from liquidation which is conducted during the above- mentioned tax reduction and exemption period shall not be granted enterprise income tax reduction and exemption in accordance with Article 8 of the Tax Law.

This Circular shall enter into force as of the day of receipt of the document.