Laws of the People's Republic of China

DETAILED RULES AND REGULATIONS FOR THE
IMPLEMENTATION OF THE CONSOLIDATED INDUSTRIAL AND
COMMERCIAL TAX REGULATIONS OF THE PEOPLE'S
REPUBLIC OF CHINA (DRAFT)

(Issued on September 13, 1958 by the Ministry of Finance)

 

SUBJECT: TAXATION

ISSUING-DEPT: MINISTRY OF FINANCE

ISSUE-DATE: 09/13/1958

IMPLEMENT-DATE: 09/13/1958

LENGTH: 2792 words

TEXT:

CHAPTER I GENERAL PRINCIPLES

[Article 1] These Detailed Rules and Regulations are formulated in accordance with the provisions of Article 18 of the Consolidated Industrial and Commercial Tax Regulations of the People's Republic of China (hereinafter referred to as the "Regulations").

[Article 2] Any taxpayer that operates a head office and branches respectively within and outside the territory of the People's Republic of China shall pay the Consolidated Industrial and Commercial Tax (hereinafter referred to as the "Consolidated Tax") only for the business operated by those offices located within the Chinese territory.

[Article 3] In accordance with the provisions of Articles 4 to 8 of the Regulations, the points of imposition of the Consolidated Tax are as follows:

(1) The Consolidated Tax shall be imposed on industrial products at the point of production, on agricultural products at the point of purchase and on imported foreign goods at the point of importation.  If the above mentioned goods are sold through commercial retailing, the Consolidated Tax shall be imposed at the point of retail sale as well.

(2) Agricultural products not listed in the "Taxable Items and Rate Schedule" of the Regulations shall not be subject to payment of the Consolidated Tax at the point of purchase or importation, but shall be subject to the Consolidated Tax at the point of commercial retailing where such products are to be sold.

(3) In the case of communications and transportation or other service trades, the Consolidated Tax shall be imposed on the units directly operating businesses or the accounting units concerned.

[Article 4] According to the provisions of Articles 4 to 8 of the Regulations, the times when the liability to pay the Consolidated Tax arise are as follows:

(1) In the case of a taxpayer engaged in industrial production, where the products are sold by means of bank settlement procedures, the tax liability arises on the day when sales proceeds are received by the bank and are transferred to the account of the enterprise; where bank settlement procedures are not used, the time shall be fixed by the county (municipal) tax authorities in accordance with the accounting system and operating conditions of the enterprise concerned.

(2) In the case of a taxpayer engaged in the purchase of agricultural products, the tax liability arises on the day when payment for the purchase is made.

(3) In the case of a taxpayer engaged in the importation of foreign goods, the tax liability arises on the day when the goods are imported or declared for importation.

(4) In the case of a taxpayer engaged in commercial retailing, the tax liability arises on the day when sales proceeds are received.

(5) In the case of a taxpayer engaged in communications and transportation or in other service trades, the tax liability arises on the day when the proceeds are received.

CHAPTER II COMPUTATION OF THE TAX

[Article 5] "The proceeds received from the sale" mentioned in Article 4 of the Regulations means the amount of sales proceeds computed on the basis of the actual selling price of the industrial products.

[Article 6] For certain products that are manufactured by an industrial enterprise and are used in its own production, and are taxable as specified in the "Taxable items and Rate Schedule" of the Regulations, tax shall be computed on the basis of the enterprise's selling price for identical products; where the selling price for identical products does not exist, an appropriate price shall be agreed upon for tax computation through consultations between the tax authorities and the enterprise concerned or the competent departments of the said enterprise.

Products manufactured by any industrial enterprise and used in its own capital construction or for non-productive purposes shall be subject to the Consolidated Tax.  The price of such products for tax computation purposes shall be fixed in accordance with the provisions of the preceding Paragraph.

[Article 7] Where taxed products are used by an industrial enterprise for the processing of another kind of product (for example, furniture made of logs already taxed, or woollen yarn spun with wool already taxed), the other kind of product shall, after being sold, be subject to taxation computed at the rate applicable to such other product.

Where the other kind of product made after processing and the original taxed product come under the same taxable item as specified in the "Taxable Items and Rate Schedule" of the Regulations (for example, insulated electric wire made of copper wire already taxed, or candy sugar made of refined sugar already taxed), the other kind of product shall, after being sold, be subject to taxation computed at the rate applicable to "Other Industrial Products".

Where it is difficult for the manufacturer of simply processed products (for example, sizing or calendering of cotton piece goods already taxed, and simple reconditioning or alteration of commodities, etc.) to make the tax payment at the rate for "Other Industrial Products", the tax authorities of provinces, autonomous regions or municipalities directly under the central government may report the actual situation to the respective People's Councils for the approval of tax exemption.

[Article 8] In the event that an industrial enterprise uses a portion of self-produced raw materials or other materials in a processing job it has undertaken, such raw or other materials shall be subject to taxation computed at the applicable rate if payment for such materials is settled through sales accounts.  If payment for such materials is not settled through sales accounts, the cost of such materials shall be included in the processing fees for tax computation.

[Article 9] In the event that the consigner sets the costs of remnants and wastes resulting from the processing against the payment of processing fee, the consignee shall be taxed for the full amount of the processing fee.

[Article 10] "The amounts paid for the purchase" mentioned in Article 5 of the Regulations means the actual purchase price of the agricultural products.

[Article 11] "The amounts paid for the import" mentioned in Article 6 of the Regulations means: for industrial products, the c.i.f. price of the imported goods plus customs duty and the Consolidated Industrial and Commercial Tax payable; for agricultural products, the c.i.f. price of the imported goods.

[Article 12] An industrial enterprise that sells its products through its own retail department shall pay the Consolidated Tax at the point of commercial retailing in addition to the Consolidated Tax payable at the point of production.  In the event the enterprise has difficulty in making tax payments, the county (municipal) tax authorities may, in consideration of the actual conditions, decide to impose the Consolidated Tax only at the point of production.

[Article 13] In case it is hard to classify an enterprise as being industrial or commercial, the county (municipal) tax authorities may, in consideration of the actual conditions, decide to impose the Consolidated Tax only at the rate applicable to industrial products or only at the rate applicable to commercial retailing.

[Article 14] Wholesale commercial units that are simultaneously engaged in retailing shall pay the Consolidated Tax on the proceeds from retail sales accordingly.

[Article 15] In the event a commercial enterprise consigns a product processing job to an industrial enterprise, the tax may be computed on the basis of the processing factory's selling price for identical products; or it may be computed on the basis of an appropriate price agreed upon for tax computation through consultations between the tax authorities and the consigning enterprise or its competent departments.

[Article 16] In the event a capital construction unit or a unit which is neither an industrial nor a commercial enterprise consigns a product processing job to an industrial enterprise, tax payment shall be made by the consignee on behalf of the consigner at the time when the consigner takes delivery of the products.  The prices for tax computation are to be set in accordance with the provisions of the preceding Article.

[Article 17] In no case shall the tax be imposed on products already taxed that, owing to deterioration, discolouration or damage, are returned to the factory or consigned to other industrial enterprises for processing, reconditioning or alteration.

[Article 18] Owing to special conditions of operation, the prices for tax computation on certain specific industrial and agricultural products shall be stipulated separately by the Ministry of Finance.

CHAPTER III TAX PAYMENT PROCEDURES

[Article 19] The tax payment period for taxpayers shall be set by the county (municipal) tax authorities at periods of one day, three days, five days, ten days, fifteen days or a month.  Tax amounts shall be computed period by period.  Where it is impossible to compute the tax amount on such periodical basis, it shall be computed on the basis of each operation.

[Article 20] For taxpayers whose tax payment period is set at one day, three days, five days, ten days, or fifteen days and whose tax amount is to be computed accordingly, the tax payment shall be made within three days following the expiration of the period (for example, in case of tax payment to be made every five days, the tax amount for the period 1 February to 5 February must be paid no later than 8 February).  Where the tax amount is to be computed every month, the tax payment shall be made within five days following the expiration of the period.

[Article 21] When the last day of the time limit for tax payment as provided in the preceding Article falls on a Sunday or national holiday, the time limit may be extended.

[Article 22] A taxpayer shall, in accordance with the time limit prescribed by the tax authorities, compute by itself the amount of Consolidated Tax payable, complete the tax payment form and pay the amount to the local branch of the People's Bank of China which acts as the agent of the state treasury.  In districts where there is no People's Bank, the Consolidated Tax shall be paid to the local tax authorities.

[Article 23] If an enterprise fails to compute the amount of tax payable within the prescribed time limit for tax payment, it may either first pay an amount equal to that paid in the preceding period or an estimated amount, and then wait until the following period to fully settle the account together with the tax payable for such period.

[Article 24] The Consolidated Tax on industrial and agricultural products imported from abroad shall be collected by the Customs on behalf of the tax authorities.

CHAPTER IV TAX EXEMPTIONS AND REFUNDS

[Article 25] The business proceeds which are not subject to the Consolidated Tax as specified in Article 10 of the Regulations are defined as follows:

(1) "The business proceeds of state banks" means interest, remittance fees, handling charges and other miscellaneous proceeds received in banking operations.

(2) "The business proceeds of insurance operations" means premiums and handling charges received in the insurance companies' business operations (including the reinsurance business done abroad), as well as proceeds from sales of damaged goods and remnants.

(3) "The business proceeds of agricultural machinery stations" means the proceeds from cultivation work done by the agricultural machinery stations for agricultural production units, the proceeds from leasing agricultural machinery and other proceeds from services.

(4) "The business proceeds of medical and health services" means the proceeds from medical services rendered by various hospitals, clinics, rural hospitals (centres), health centres (stations) and veterinarian hospitals (centres).

(5) "The proceeds from experiments made by scientific research institutions" means the sales proceeds of experimental products and specimens and the revenue from services rendered by scientific research units.

[Article 26] The various proceeds which are entitled to tax reductions or tax exemptions as specified in Article 11 of the Regulations are defined as follows:

(1) "The proceeds received by public canteens and other public services run by agricultural production cooperatives or by the urban neighbourhood organizations" means the proceeds received by public canteens and other public services operated on a non-business nature to serve the members of the cooperatives and residents.

(2) "The proceeds from the purchase and sale undertaken by the supply and marketing departments of agricultural production cooperatives on behalf of state enterprises" means the proceeds from handling charges received by the supply and marketing departments for acting as the agencies for buying and selling industrial and agricultural products on behalf of state-owned enterprises.

(3) "The proceeds of the productive undertakings operated by schools under work-study programmes" means the sales proceeds of industrial and agricultural products, the proceeds from processing fees for processing jobs consigned and other proceeds from services received by the schools.

[Article 27] The non-business proceeds and proceeds from the sale of remnants and wastes received by enterprises shall be exempt from the Consolidated Tax.

[Article 28] In the event that the goods sold by an enterprise are returned, the taxpayer may apply to the local tax authorities for refund of that portion of the tax originally paid on the goods returned, or set the amount refundable against the tax payable for the following period.

[Article 29] Any taxpayer that has overpaid tax owing to miscalculation or other reasons may, within one year of the date of payment, submit relevant evidence to the local tax authorities for examination and verification.  Following verification, a tax refund may be processed or the taxpayer may set the amount against the tax payable for the following period.

CHAPTER V VIOLATIONS AND PENALTIES

[Article 30] Anyone may expose any taxpayer who has evaded or underpaid taxes.  Such person shall be commended or materially rewarded after the case is verified and dealt with in accordance with law by the tax authorities.

[Article 31] Overdue fines shall be computed from the day following the expiration of the time limit prescribed for tax payment by the tax authorities up to the day when payment is made.  For example, if February 8 is prescribed by the tax authorities as the last day of the time limit for payment and the taxpayer does not make the payment until February 11, an overdue fine shall be computed from February 9 to February 11 for a total of three days at the rate of one-tenth of one (0.1%) per cent per day on the amount of tax in arrears.

[Article 32] Cases of violations of the Consolidated Tax shall be handled by the county (municipal) tax authorities with the exception of serious cases which must be handled by the people's court.  The county (municipal) tax authorities, when handling such violation cases, should settle them with expedition and deliver a notice of the decision to the party concerned.

[Article 33] If the party concerned disagrees with the decision of the county (municipal) tax authorities, it should first pay the full amount of tax due, and then apply to the local county (municipal) People's Council or to the tax authorities at a higher level for reconsideration of the case within twenty days from the day following the receipt of the notice.  If the taxpayer concerned still disagrees with the result of the reconsideration, it may appeal level by level to the higher authorities.

If the party concerned fails to apply for a reconsideration or to make an appeal within the specified time limit, the authorities that originally handled the case shall enforce the original decision or the decision of the higher authorities.

CHAPTER VI SUPPLEMENTARY ARTICLES

[Article 34] The tax authorities of provinces, autonomous regions or municipalities directly under the central government shall formulate measures governing matters and procedures relating to tax registration, collection and administration, and submit them to the respective People's Councils for approval.  Such measures shall also be reported to the Ministry of Finance for record.

[Article 35] These Detailed Rules and Regulations shall come into force from the date of promulgation.