Laws of the People's Republic of China

State Administration of Taxation

Order of the State Administration of Taxation of People's Republic of China

No. 12

The Interim Measures for the Auction and Sell-off of Tax-expiated Properties, which were deliberated and adopted at the 1st executive meeting of the State Administration of Taxation on January 13, 2005, are hereby promulgated and shall come into force as of July 1, 2005.

Director General of State Administration of Taxation, Xie Xuren

May 24, 2005

Interim Measures for the Auction and Sell-off of Tax-expiated Properties

Chapter I General Provisions

Article 1

For the purpose of regulating the auction and sell-off of tax-expiated properties in the coercive enforcement of tax collection, safeguarding the tax income of the state and protecting the legitimate rights and interests of taxpayers, the present Measures are formulated in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and the detailed rules for implementation thereof and the relevant provisions of other laws and regulations.

Article 2

Where the taxation organ puts any tax-expiated property on auction or sell-off and uses the income as generated therefrom for paying the taxes or late fees, the present Measures shall apply.

The term "auction" refers to the way of purchase by which the taxation organ entrusts tax-expiated properties to auction institutions according to law and specific properties are transferred through public bidding to the bidder that offers the highest price.

The term " sell-off" refers to the way of purchase by which the taxation organ entrusts tax-expiated properties to commercial enterprises for sell off, orders relevant taxpayers to deal with tax-expiated properties within a limited period of time or appraise processing at the current price to the tax-expiated properties.

The term "tax-expiated properties" refers to the commodities, goods, other properties or property rights which have been detained or sealed up in the coercive enforcement of tax collection for the purpose of security interest according to law or which shall be subject to coercive enforcement and the tax guaranty right has been setup according to relevant provisions by the taxation organ.

The term "the person against whom a judgment or order is executed" refers to such relative person of tax administration as the taxpayer, withholding agency or tax guarantor.

Article 3

Any auction or sell-off of tax-expiated properties shall be carried out according to law. The principles of openness, impartiality, fairness and efficiency shall be observed.

Article 4

The taxation organ shall carry out an auction or sell-off according to law under any of the following circumstances:

(1)

Where the tax fails to be paid on the expiration of time limit after tax revenue protection measures are taken;

(2)

Where the guaranteed tax fails to be paid on the expiration of the time limit after the tax payment is guaranteed,;

(3)

It fails to carry out the decision of taxation treatment according to the provisions within the time limit;

(4)

It fails to carry out the decision of reconsideration according to the provisions within the time limit;

(5)

It fails to carry out the decision on administrative sanctions of taxation according to the provisions within the time limit; or

(6)

It fails to pay the tax ordered to be paid within the time limit under any other circumstances.

As for any coercive enforcement under the circumstance of item (3), (4), (5) or (6), where there is any distrainment or sealing-up before the auction or sell-off, the formalities for distrainment or sealing-up shall be gone through.

Article 5

The taxation organ shall determine the sequence of auctioning or selling off tax-expiated properties, with the principle of auction being the priority:

(1)

Authorizing the auction institutions that are legally established for auctions;

(2)

For those properties that cannot be entrusted for auction and those are not suitable for auction, the taxation organ may entrust a local commercial enterprise to sell the properties for it or order the person against whom a judgment or order is executed to deal with them within a time limit;

(3)

For those properties that cannot be authorized to a commercial enterprise for any sale or be dealt with by the person against whom a judgment or order is executed, the taxation organ shall appraise it at the current rate.

Any commodity, goods or any other properties that are prohibited by the state from free trade shall be delivered to the relevant entities for purchase at the price as prescribed by the state.

Article 6

An auction or sell off of tax-expiated properties by the taxation organ shall be carried out in accordance with the following procedures:

(1)

Formulate an order of decision on auctioning or selling tax-expiated properties and distribute it to the person against whom a judgment or order is executed upon the approval of the director general of the taxation bureau (branch) above the county level;

Those articles or property rights that are subject to approval before any assignment shall go through the formalities of examination and approval before any auction or sale according to the provisions of laws and regulations.

(2)

Verify those commodities, goods or any other properties that require auction or sale. Before auction or sale, all the special receipts of the detained commodities, goods and properties and the list of commodities, goods and properties sealed up shall be subject to examination and the interest relation between the person against whom a judgment or order is executed and the tax-expiated properties shall be verified, and consistency between those commodities, goods or any other properties to be auctioned or sold and the information on the receipt and list shall be verified.

(3)

According to the sequence and procedures as prescribed by the present Measures to entrust the auction and sell off, fill out the checklist of property for auction (sale), make an authorized auction contract with an auction institution, make an authorized sale contract with an authorized commercial enterprise, distribute the notice of taxation to the person against whom a judgment or order is executed and settle the money according to the provisions,.

(4)

Use the income gathered from auction or sell-off to pay for the expenses for distrainment, sealing-up and storage, which should be legally borne by the person against whom a judgment or order is executed and pay for the expenses occurred in the process of auction or sell-off;

(5)

Use the income gathered from auction or sell-off to pay for the taxes payable, late fees after the relevant expenses are paid and pay for the fines according to relevant provisions.

(6)

Use the income gathered from auction or sell-off to pay for the expenses for distrainment, storage, auction, sale, etc. and pay for the taxes payable and late fees, and the residual part shall be returned to the person against whom a judgment or order is executed within 3 workdays.

(7)

The taxation organ shall inform the person against whom a judgment or order is executed to calculate all the incomes gathered from auction or sell-off into the current sales income and file returns for all the current taxes payable.

Where the income from an auction or sell-off is not enough to pay for the taxes payable or late fees, the taxation organ shall continue to demand the payment until it is fully paid.

Article 7

An auction or sell-off of tax-expiated properties shall be organized by the taxation bureau (branch) at the county level or above. The sale of those commodities or goods that are fresh, easy to deteriorate or lapse may be organized by the taxation organ below the county level upon the approval of the director general of the taxation bureau (branch) at or above the county level.

Article 8

The person against whom a judgment or order is executed shall be notified to be present on the site where an auction or sell-off of tax-expiated properties is carried out. However, the absence of the person against whom a judgment or order is executed does not affect the auction or sell-off.

Article 9

The taxation organ and the working personnel thereof shall not participate in any bidding or purchase of the commodities, goods or any other properties auctioned or sold-off and shall not authorize any other person to do it either.

Chapter II Auction

Article 10

An auction shall be carried out by auction institution as designated by the people's government of the province, autonomous region, municipality directly under the Central Government and districted city where the property is located.

Article 11

The tax-expiated properties shall be entrusted to an evaluation and appraisal institution that is established according to law and have the corresponding qualification for quality appraisal and price evaluation and the person against whom a judgment or order is executed shall be informed of the result of the evaluation and appraisal except for those that have market prices or the prices of which may be set by normal means,.

A reserve price shall be set for tax-expiated properties and determined through negotiation between the taxation organ and the person against whom a judgment or order is executed. Where the negotiation fails to results in any agreement, the taxation organ shall set the reserve price in light of the market price, leave factory price or appraisal price.

Article 12

The cultural relics authorized to be auctioned shall be subject to the appraisal and approval of the administrative department of cultural relics according to law before the auction is carried out.

Article 13

The person against whom a judgment or order is executed shall explain the blemishes of the commodities, goods or any other properties to the taxation organ and the taxation organ shall indicate the source of the auctioned subject matter and the blemishes it has found to the auction institution.

Article 14

After an auction institution accepts the entrustment, it shall not re-entrust any other auction institution for auction without the approval of the taxation organ that authorized the auction.

Article 15

The taxation organ shall authorize an auction within 10 days as of the day when the auction is decided.

Article 16

The taxation organ shall provide the following materials to an auction institution:

(1)

The entity certification of the taxation organ and the power of attorney that certifies the authorization for an auction;

(2)

The Decision on Auctioning (Selling-off) Tax-expiated Properties;

(3)

The checklist of properties for auction (sell-off );

(4)

The result of quality appraisal and price evaluation of the tax-expiated properties; and

(5)

Any other materials relating to auction.

Article 17

The taxation organ shall make an auction authorization contract with an auction institution in written form. The auction authorization contract shall include the following contents:

(1)

Name, residence, and the name of the legal person of the taxation organ and the auction institution;

(2)

Name, specifications, quantity, quality, storage place or location, degree of depreciation or the serving term of the auctioned subject matter;

(3)

Time, place of the auction, the time for the delivery or transfer of the auctioned subject matter, the way of announcement of the auction and the expenses thereof;

(4)

The way of settlement of auction money and the time limit for payment;

(5)

Standard, the means and terms of payment for commissions;

(6)

Liabilities for breach; and

(7)

Any other matter as agreed on by both parties.

Article 18

Where an auction fails for the first time, the tax-expiated property may be sold out upon the agreement of the taxation organ and the person against whom a judgment or order is executed through negotiation; in case the person against whom a judgment or order is executed refuses to sell the tax-expiated property, a second auction shall be carried out. The real estate and cultural relics shall go through a second auction.

Where the second auction fails again, the taxation organ shall sell the tax-expiated property so as to pay for the taxes payable, late fees or penalties thereof.

After the first failure, the reserve price in the second auction shall not be any lower than two thirds of that in the previous auction.

Article 19

The taxation organ may handle the formalities for authorizing an auction by itself , otherwise the taxation organ at a higher level may handle the formalities for auctioning on its behalf.

Chapter III Sell-off

Article 20

Any of the tax-expiated properties as listed below shall fall into the category that cannot be auctioned by the way of entrusting or is unsuitable for auction, and may be delivered for sell-off to a local commercial enterprise as a surrogate or ordered to the person against whom a judgment or order is executed for sell-off within a limited period of time :

(1)

Commodities and goods which are fresh or easy to deteriorate or lose efficacy;

(2)

Tax-expiated properties that have gone through the first or second auction which have failed both of them; or

(3)

Any other tax-expiated properties that are accepted by an auction institution.

Article 21

The price of the tax-expiated property to be sold shall refer to the market price or factory price of identical commodities and shall be set in light of the principles of fairness, reasonableness and legality. The taxation organ shall negotiate with the person against whom a judgment or order is executed on the issue whether or not to ask an appraisal institution to conduct any price evaluation. Where the person against whom a judgment or order is executed regards it necessary, the taxation organ shall authorize an appraisal institution to carry out an appraisal and determine the sales price in light of the evaluation price.

As for those commodities, goods or any other properties whose prices are determined by the government, the prices thereof shall be set by the administrative department of prices in the government according to its pricing power and range thereof. As for those goods, commodities or any other properties that are subject to the guiding prices of the government, the price thereof shall be determined in light of the basis prices and the floating range thereof as prescribed by the pricing power and range.

For any tax-expiated property that has gone through an auction that fails, the sales price thereof shall not be lower than two thirds of the reserve price in the latest auction.

Article 22

Where any tax-expiated property is entrusted to an commercial enterprise for sell-off, the commercial enterprise shall be verified by the taxation organ at or above the county level and entrusting sell-off contract shall be concluded with it. The sales price shall be set in light of the pricing method as prescribed in Article 21 of the present Measures. The authorized sale contract shall include the following contents:

(1)

Name, residence, and the name of the legal person of the taxation organ and the commercial enterprise;

(2)

Name, specifications, quantity, quality, storage place or location, degree of depreciation or the serving term of the commodities, goods or any other properties to be sold;

(3)

Time, place for the sell-off of commodities, goods and any other properties and the expenses thereof;

(4)

The way of settlement of sold-off money and the time limit for payment;

(5)

Liabilities of breach; and

(6)

Any other matter as agreed on by both parties.

Article 23

Where the commercial enterprise entrusted to sell any tax-expiated property fails to sell it out within 15 days, the taxation organ shall check and verify the price for a second time and the commercial enterprise shall continue with the sale. The price as checked and verified for a second time shall not be lower than two thirds of the price as checked and verified for the first time.

Article 24

For any tax-expiated property that cannot be entrusted to any commercial enterprise for sale or cannot be dealt with by the person against whom a judgment or order is executed, the taxation organ shall sell it at the current price.

It shall fall into the category that cannot be entrusted to a commercial enterprise for sell-off under any of the following circumstances:

(1)

Where the taxation organ contacts and negotiates with two (or more) commercial enterprises but fails to reach any agreement of authorized sale;

(2)

Where the taxation organ solicits a sales agent on news media, but no entity or person responds to the solicitation announcement within 10 days as of the date of the announcement or there is someone who responds to the solicitation but both parties fail to reach an agreement thereafter;

(3)

Where the commercial enterprise authorized to perform the sale as an agent fails to sell out the commodities, goods or any other properties as entrusted by the taxation organ within 15 days as of the date when the prices are checked and verified for the second time.

The circumstance under which the person against whom a judgment or order is executed refuses to deal with it or fails to deal with it within the prescribed period shall be both deemed as a failure.

Article 25

Where the taxation organ sells any tax-expiated property at the current price, the price shall not be lower than two thirds of the price as set by the previous two ways of sale according to the principle as prescribed in Article 21 of the present Measures.

Before the taxation organ sells any tax-expiated property, it shall make an announcement in the tax handling service hall, on the websites of the taxation organ and via the local news media, indicating such matters as name, specifications, quantity, quality, degree of appreciation or service term, sales price and sales time. The sale shall be made 10 days after the announcement is publicized.

Where the sale fails to be fulfilled 10 days after the taxation organ carries out the sell-off, the taxation organ may check and verify the price, announce and organize a second sale. The price checked and verified for the second time shall not be any lower than two thirds of the price as set for the first time.

Where any tax-expiated property fails to be sold out after two times of pricing, it shall be sold out at a price that may be accepted by the market.

Chapter IV Realization of Tax Money and Payment of Expenses

Article 26

The payment of the taxes payable, late fees and relevant expenses by the income gathered from auction or sale shall be made according to the following sequences:

(1)

The expenses for auction or sale: the expenses that shall be borne by the person against whom a judgment or order is executed include those expenses that occur in the activities of distrainment, sealing-up or auction or sale that shall be borne by the person against whom a judgment or order is executed according to law, which are, to be specific, the storage expenses, warehouse expenses, freight expenses, evaluation expenses, appraisal expenses, expenses for auction announcement, expenses for the delivery to the sales enterprise and any other expenses that shall be borne by the person against whom a judgment or order is executed according to law.

Where the buyer of any auctioned article fails to take it according to the agreement, it shall bear the relevant storage expenses as of the day when the auctioned article shall be taken.

(2)

Payable taxes and late fees

(3)

Penalties: The income as generated from auction or sale shall be paid for penalties under the following circumstances:

a.

Where the person against whom a judgment or order is executed takes initiative to use the income gathered from an auction or sale to pay for the penalties;

b.

Where any goods, commodity whose value exceeds the taxes payable and that is inseparable or any other property is detained, sealed up or auctioned as a whole and if the income as gathered from the auction is used to pay for the taxes payable and late fees, the relevant penalties shall be paid together.

c.

Where the person and against whom a judgment or order is executed engaging in production and operation fails to apply for an administrative reconsideration or lodge any complaint to the people's court against the decision of the taxation organ on penalties and refuses to carry out the decision either, the taxation organ that makes the decision shall enforce the payment for penalties.

Article 27

Where an auction or sale is realized, the taxation organ shall , handle the formalities for turning over the taxes, late fees or penalties into the state treasury within 3 workdays after it makes settlement and collects the relevant payment.

Article 28

Where there is any balance after the income as gathered from auction or sale is paid for the taxes payable, late fees or penalties, the taxation organ shall return the balance to the person against whom a judgment or order is executed and shall inform the person against whom a judgment or order is executed of accounting all incomes as gathered from the auction or sale into the current sales income for filing tax returns to pay for all the current taxes within 3 workdays as of the date when the formalities for turning over the taxes payable, late fees or penalties into the state treasury are handled,.

Article 29

After an auction or sell-off is concluded, the taxation organ shall formulate two copies of a notice of the result of the auction and sell-off, and a checklist of the commodities, goods and properties that were auctioned, sold, detained or sealed up, with one copy being kept in the taxation organ for archival filing and the other delivered to the person against whom a judgment or order is executed.

Article 30

Where the person against whom a judgment or order is executed has paid the taxes payable and late fees before an auction or sale is concluded, the taxation organ shall terminate the activities of auction or sale and return the commodities, goods or any other properties to the person against whom a judgment or order is executed. the expenses that have occurred in the distrainment, sealing-up, storage and auction or sale shall be borne by the person against whom a judgment or order is executed.

Where the person against whom a judgment or order is executed refuses to bear the relevant aforesaid expenses and continues an auction or sale, the income as gathered from the auction or sale shall be used to pay for the expenses for distrainment, sealing-up and storage, auction and sale that shall be borne by the person against whom a judgment or order is executed and the balance thereof shall be returned to the person against whom a judgment or order is executed within 3 workdays by the taxation organ.

Article 31

Where any tax-expiated property cannot be auctioned or sold or is considered to be unsuitable for auction or sale upon appraisal or evaluation, the taxation organ shall terminate the auction or sell-off and return the tax-expiated property to the person against whom a judgment or order is executed.

Where the payment for the taxes payable by the income as gathered from auctioning or selling tax-expiated properties fails to be realized after procedure of auction or sale completes, the taxation organ shall return the tax-expiated properties to the person against whom a judgment or order is executed.

Where any tax-expiated property cannot be returned to the person against whom a judgment or order is executed, the taxation organ shall reject the tax-expiated property upon the appraisal or notarization of the special appraisal institution or notarization.

The taxes payable, late fees and expenses payable that shall be paid by the person against whom a judgment or order is executed shall be demanded by the taxation organ through other measures.

Chapter V Legal Liabilities

Article 32

In the course of an auction or sell-off, it is prohibited to apportion or collect any illegal expenses from the person against whom a judgment or order is executed. Where any taxation functionary apportions or collects any illegal expenses from the person against whom a judgment or order is executed in the course of an auction or sale, he shall be given an administrative punishment according to law. Where any taxation organ or any of the personnel thereof participates in the bidding or purchase of the commodities, goods or any other properties as auctioned or sold out, or entrusts any other person to do so, it/ he shall be given administrative punishment.

Article 33

Where any of the taxation personnel unlawfully auctions or sells any tax-expiated property, unlawfully sells any property that should be auctioned, or directly sells any property that shall be sold by a commercial enterprise upon authorization or shall be dealt with by the person against whom a judgment or order is executed by order, he shall be given an administrative punishment. Where there is any loss to the person against whom a judgment or order is executed, the taxation organ that approves for the auction or sale shall compensate for the immediate loss.

The taxation organ may demand part of or all the immediate loss from the person-in-charge and give an administrative punishment to the person as held responsible for any malice or big fault.

Article 34

Where the taxation organ illegally causes any loss to those commodities, goods or any other properties as detained or sealed up, it shall take charge of the compensation and may demand part of or all the immediate loss from the directly liable persons.

Article 35

Where the auction institution or commercial enterprise as entrusted by the a taxation organ carries out any auction or sell-off in violation of the auction contract or sales contract, it shall be subject to breach liabilities as stipulated in the contract; where there is no such articles in the contract, it shall be subject to the breach liabilities according to law; where a crime is committed, it shall be subject to legal liabilities according to law.

Article 36

Where any tax-expiated property has been used as a guarantee but is concealed by the person against whom a judgment or order is executed before being sealed up or detained, or there is any blemish or quality problem which is concealed by the person against whom a judgment or order is executed, the expenses from the distrainment, sealing-up, auction or sale shall be borne by the person against whom a judgment or order is executed, who shall be subject to legal liabilities as well.

Chapter VI Supplementary Provisions

Article 37

Where the taxation organ recovers the export tax refund gained by fraud from any taxpayer that engages in production and business operations, it shall be governed by the present Measures.

Article 38

The documents regarding the coercive enforcement of an auction or sell-off shall be uniformly formulated by the State Administration of Taxation.

Article 39

The present Measures shall come into force as of July 1, 2005.

Attachments:

1. Decision on Auctioning/Selling-off Tax-expiated Properties(Omitted)

2. Notice of the Result of Auction/Sell-off(Omitted)

3. Checklist of Commodities, Goods or Any Other Properties as Auctioned or Sold off(Omitted)

4. Notice of Returning Commodities, Goods or Any Other Properties(Omitted)

5. Checklist of Returned Commodities, Goods or Any Other Properties(Omitted)