Laws of the People's Republic of China

Circular of the State Administration of Taxation on Strengthening the Administration of Taxation for Contracted Projects Undertaken by Foreign Enterprises

Guo Shui Fa [2006] No. 83

State and Local Taxation bureaus in all provinces, autonomous regions, municipalities directly under the Central Government and cities separately designated in the state plan:

In accordance with the arrangements and requirements of the national work meeting on the administration of international (foreign-related) taxation of the State Administration of Taxation, and in view of the current weak foundation of the administration of taxation of foreign enterprises, especially issues such as tax dodges related to contracted construction projects undertaken by foreign enterprises, the measures and requirements concerning the strengthening of administration of taxation are herby notified as follows:

1.

Further strengthening the administration of taxation for contracted projects undertaken by foreign enterprises, enhancing responsibilities and plugging up loopholes.

At present, the projects for which foreign enterprises come to China to contract are ever increasing and besides, foreign enterprises are getting more and more opportunities to take part in major state construction projects, including the construction of gymnasiums and stadiums for the Olympic Games and the World Exposition as well as the constructions of traffic and energy sources.

In order to strengthen the administration of taxation for contracted projects undertaken by foreign enterprises, the State Administration of Taxation requires local tax departments to particularly grasp the basic work of the source of tax information by combining with the actual local situation on the basis of fully strengthening the administration of taxation on foreign enterprises. State and local tax departments at all levels shall tightly cooperate and coordinate with each other, actively connect with local governments and fund settlement departments, such as commercial departments, development and reform commissions (bureaus), construction commissions, industrial and commercial circles, the Customs, trade associations and banks, thus learning the trend of tax source as soon as possible, perfecting internal process, clarifying liabilities and division of labor, strictly ascertaining responsibilities, and putting an end to the phenomena of failing to levy or manage. All tax departments shall heighten and ascertain the withholding responsibilities by steps with plans, and work hard to make the administration level of taxation for contracted construction projects undertaken by foreign enterprises mount a new step within this year.

2.

Intensifying the publicity of the enforcement of foreign enterprise taxation policies and agreements.

All levels of tax authorities shall, in full use of all means of publicity, carry out wide publicity about the foreign enterprise taxation policies and relevant enforcement provisions of taxation agreements to taxpayers and withholding agents, who must know their obligations and liabilities. The tax departments shall persevere unremittingly, pay special attention to typical cases and fan out from a point to an area. As for those serious illegal cases, tax departments shall make decisions of punishment in accordance with the law and lay bare the selected cases upon approval by the State Administration of Taxation. Where the tax personnel commit dereliction of duty of management and bring about significant loss to the state taxation, they shall be investigated in accordance with relevant provisions of the Tax Collection and Administration Law of the People's Republic of China.

3.

After receiving the present Circular, all levels of tax departments shall, in accordance with the above mentioned requirements and in due time, make arrangements and carry them out as soon as possible. Any problem or difficulty encountered in the course of implementation shall be reported to the State Administration of Taxation on a timely basis. Results of implementation shall be reported to the State Administration of Taxation (International Department) in a written form before the end of November, 2006.

State Administration of Taxation

June 8, 2006