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CIRCULAR OF THE STATE COUNCIL CONCERNING MEASURES FOR TAX EXEMPTION,OFFSET AND REFUND OF EXPORT GOODS MANAGED BY PRODUCTION ENTERPRISES OR AGENCIES BY AGREEMENT

    To further invigorate the state-owned large- and medium-size enterprises,
expand foreign trade and export and push ahead the agency system, the State
Council hereby decides on the measures for tax "exemption, offset and refund"
of export goods managed by production enterprises authorized to engage in
import-export operations or entrusted to foreign trade enterprises as
agencies. The relevant questions are notified as follows:

    1.Range for tax "exemption, offset and refund". Export goods managed by
all categories of production enterprises with import-export operational rights
or entrusted to foreign trade enterprises as agencies, unless otherwise
provided for, shall all implement the measures for tax "exemption, offset
and refund".

    Implementation of measures for tax exemption for export goods by
enterprises with foreign business investment the establishment of which was
approved before December 31, 1993 shall continue up to December 31, 1998.
Measures for tax "exemption, offset and refund" shall likewise be carried
out on expiry.

    2."Exemption" of tax in measures for tax "exemption, offset and refund"
means goods the export of which managed by production enterprises or entrusted
to foreign trade enterprises as agencies shall be exempted from the valued
added tax in the marketing link of the production enterprises;"offset" of tax means goods the export of which managed by production enterprises or
entrusted to foreign trade enterprises as agencies shall be exempted from
or refunded of the tax payment already made for raw materials, parts and
components offsetting the payable tax payment of goods marketed domestically;
"refund" of tax means goods the export of which managed by production
enterprises or entrusted to foreign trade enterprises as agencies account
for more than 50% of the total sales of goods of the enterprises in the
corresponding period, the amount of tax which should be offset is greater
than the payable taxation and has not been completely offset in one
quarter, the portion of tax amount which has not been completely offset
shall be refunded upon approval by the competent tax office for export
refund.

    3.In carrying out measures for tax "exemption, offset and refund",
the refund rate prescribed in the the Reduction of the Refund Rate for Export Goods>(Guo Fa[1995] No.29)
shall continue to be implemented, and the amount of tax "exemption, offset
and refund" shall be calculated on the basis of F.O.B. price of the export
goods.

    4.These Measures enter into force as of January 1, 1997. Specific
measures for implementation shall be formulated by the Ministry of Finance and
the State Taxation Administration.

    Measures for tax "exemption, offset and refund" for goods the export of which managed by production enterprises with import-export operational rights
or entrusted to foreign trade enterprises as agencies constitue an important
reform of export refund control measures. People's Governments at all
levels should proceed from the overall interest of the country, strengthen
leadership and actively support this reform. All departments concerned should
closely cooperate with one another, solve the questions which emerge in the
process of implementation in a timely manner, and in the meantime earnestly
sum up experiences so as to create conditions for the gradual expansion of the scope of implementation of the measures for tax "exemption, offset and
refund" and the further perfection of the export refund mechanism.