Laws of the People's Republic of China

The State Council

Decree of the State Council of the People's Republic of China

No. 135

Interim Regulations of the People's Republic of China on Consumption Tax adopted by the 12th Executive Meeting of the State Council on November 26, 1993 are hereby promulgated and shall be come into force as of the day of Jan I, 1994.

Premier of the State Council, Li Peng

December 13, 1993

Interim Regulations of the People's Republic of China on Consumption Tax

Article 1

All units and individuals engaged in the production, the subcontracting for processing or the importation of items referred to as "taxable consumer goods" within the territory of the People's Republic of China are payers of Consumption Tax in accordance with these Regulations.

Article 2

The taxable items tax rates (tax amounts) of Consumption Tax shall be determined in accordance with the Table of Taxable Items and Tax Rates (Tax Amounts) of Consumption Tax attached to these Regulations.

Any adjustments to the Consumption taxable items, tax rates (tax amounts) shall be determined by the State Council.

Article 3

For taxpayers dealing in taxable consumer goods with different tax rates, the sales amounts and sales volumes for the taxable consumer goods shall be accounted for separately. If the sales amounts and sales volumes have not been accounted for separately or if the taxable consumer goods with different tax rates are combined into a whole set of consumer goods for sales, the higher tax rate shall apply.

Article 4

Taxable consumer goods produced by the taxpayer shall be subject to tax upon sales. For self-produced taxable consumer goods for the taxpayer's own use in the continuous production of taxable consumer goods, no tax shall be assessed; tax shall be assessed when the goods are transferred for other use.

For taxable consumer goods subcontracted for processing, the tax shall be collected and paid by the subcontractor upon delivery to the contractor. For taxable consumer goods subcontracted for pay, the tax can be credited in accordance with the regulations.

Imported taxable consumer goods shall be subject to tax upon import declaration.

Article 5

The computation of tax payable for Consumption Tax shall follow either the rate-on-value or the amount-on-volume method. The formulas for computing the tax payable are as follows:

The tax payable computed under the rate-on-value method = Sales Amount * Tax Rate

The tax payable computed under the amount-on-volume method = Sales Volume * Tax Amount Per Unit

For taxable consumer goods sold by taxpayers where the sales amounts are computed in foreign currencies, the taxable amounts shall be converted into Renminbi according to the exchange rates prevailing in the foreign exchange market.

Article 6

The "sales amount" as stipulated in Article 5 of these Regulations shall be the total consideration and other charges receivable from the buyer for the taxable consumer goods sold by the taxpayer.

Article 7

Self-produced taxable consumer goods for the taxpayer's own use that shall be subject to tax in accordance with the stipulations of the first paragraph in Article 4 of these Regulations shall be assessed according to the selling price of similar consumer goods produced by the taxpayer. If the selling price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value. The formula for computing the composite assessable value is as follows:

Composite assessable value = (Cost + Profit)/(1 - Consumption Tax Rate)

Article 8

Taxable consumer goods subcontracted for processing shall be assessed according to the selling price of similar consumer goods of the subcontractor. If the selling price of similar consumer goods is not available, the tax shall be assessed according to the composite assessable value. The formula for computing the composite assessable value is as follows:

Composite assessable value = (Cost of Material + Processing Fee)/(1 - Consumption Tax Rate)

Article 9

Imported taxable consumer goods, which adopt the rate-on-value method in computing the tax payable shall be assessed according to the composite assessable value. The formula for computing the composite assessable value is as follows:

Composite assessable value = (Customs Dutiable Value + Customs Duty)/ (1 - Consumption Tax Rate)

Article 10

Where the taxable value of the taxable consumer goods of the taxpayer is obviously low and without proper justification, the taxable value shall be determined by the competent tax authorities.

Article 11

Taxpayers exporting taxable consumer goods shall be exempt from the Consumption Tax, except as otherwise determined by the State Council. The measures for exemption of exported taxable consumer goods shall be regulated by the State Administration for Taxation.

Article 12

Consumption Tax shall be collected by the tax authorities. Consumption Tax on the importation of taxable consumer goods shall be collected by the customs office on behalf of the tax authorities.

Consumption Tax on taxable consumer goods brought or mailed into China by individuals shall be levied together with Customs Duty. The detailed measures shall be formulated by the Tariff Policy Committee of the State Council together with the relevant departments.

Article 13

Taxpayers selling taxable consumer goods and self-produced taxable consumer goods for their own use, except as otherwise determined by the State, shall report and pay tax to the local competent tax authorities governing the taxpayers.

For taxable consumer goods subcontracted for processing, the Consumption Tax due shall be paid to the local competent tax authorities where the subcontractors are located.

For imported taxable consumer goods, the tax shall be reported and paid by the importers or their agents to the customs offices where the imports are declared.

Article 14

The Consumption Tax assessable period shall be one day, three days, five days, 10 days, 15 days or one month. The actual assessable periods of the taxpayers shall be separately determined by the competent tax authorities according to the magnitude of the tax payable of the taxpayers; tax that cannot be assessed in regular periods can be assessed on a transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall report and pay tax within 10 days following the end of the period. If an assessable period of one day, three days, five days, 10 days or 15 days is adopted, the tax shall be prepaid within five days following the end of the period, and a monthly return shall be filed with any balance of tax due settled within 10 days of the first day of the following month.

Article 15

Taxpayers importing taxable consumer goods shall pay tax within seven days after the completion and issuance of the tax payment certificates by the customs office.

Article 16

The collection and administration of Consumption Tax shall be conducted in accordance with the relevant regulations of the Law of the People's Republic of China on Administration of Tax Collection and the relevant provisions of these Regulations.

Article 17

The collection of Consumption Tax from foreign investment enterprises and foreign enterprises shall be conducted in accordance with the resolutions of the Standing Committee of the National People's Congress.

Article 18

The Ministry of Finance shall be responsible for the interpretation of these Regulations and for the formulation of the Rules for Implementation.

Article 19

These Regulations shall enter into force as of January 1, 1994. The relevant provisions of the State Council regarding the collection of Consumption Tax prior to the promulgation of these Regulations shall be nullified on the same date.

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Attachment:

Consumption Taxable Items and Tax Rates (Tax Amounts) Table