Laws of the People's Republic of China

The State Administration of Taxation

Circular of the State Administration of Taxation on the Questions Concerning the Applicable Tax Rate and Deduction of Calculated Tax Amount Related to Income of Enterprises with Foreign Investment from Outside China

GuoShuiFa [1993] No.39

July 14,1993

In accordance with the related stipulations of the Income Tax Law on Enterprises with Foreign Investment and Foreign Enterprises and its Rules for the Implementation (hereinafter referred to as the Tax Law and Rules), we hereby clarify the question concerning the applicable tax rate related to the income gained by an enterprise with foreign investment from outside China and the question concerning calculation of deduction of the income tax already paid outside China:

I.

In accordance with Article 71 of the Rules, the reduced tax rate as stipulated in the Tax Law is applicable only to the income gained by a enterprise with foreign investment from production and operation carried out in appropriate districts. Therefore, with regard to the income gained by a enterprise with foreign investment from outside China, enterprise income tax and 1ocal income tax shall be calculated and levied without exception in accordance with the stipulations of Article 5 of the Tax Law.

II.

As regards the item which states "the total amount of payable tax calculated in accordance with the Tax Law on incomes gained from inside and outside China" as set in the formula for calculating the quota of overseas tax payment to be deducted as listed in Article 84 of the Rules, the total amount of income gained from inside and outside China shall be calculated in accordance with the enterprise income tax rate and local income tax rate as stipulated in Article 5 of the Tax Law.

III.

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