Laws of the People's Republic of China

the State Administration of Taxation

Circular of the State Administration of Taxation on Printing and Distributing the "Measures Governing the Final Settlement of Enterprise Income Tax"

Guo Shui Fa [2005] No. 200

State taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan,

With a view to strengthening the administration and collection of enterprise income tax, and further improving the final settlement of enterprise income tax, and in light of the requirements of "clarifying the subjects, standardizing the procedures, optimizing the services, and improving the quality", we have printed the revised "Measures for the Administration of Final Settlement of Enterprise Income Tax" and hereby distribute them to you. Please implement these Measures accordingly.

State Administration of Taxation

December 25, 2005

Measures Governing the Final Settlement and Payment of Enterprise Income Taxes

Article 1

With a view to strengthening the administration of the collection of enterprise income taxes and further regulating the final settlement of enterprise income taxes, the present Measures are formulated in accordance with the relevant provisions in the "Law of the People's Republic of China for the Administration of Tax Collection" and the Detailed Rules for the Implementation Thereof (hereinafter referred to as the Law for the Administration of Tax Collection and the Detailed Rules for the Implementation Thereof), the "Interim Regulation of the People's Republic of China on Enterprise Income Taxes" and the Detailed Rules for the Implementation Thereof (hereinafter referred to as the Regulation and the Detailed Rules for the Implementation Thereof) .

Article 2

The term of "final settlement of enterprise income taxes" refers to the activities whereby a taxpayer calculates the taxable income and the payable amount of income taxes of the whole year by itself in accordance with the taxation laws, regulations, rules and other relevant provisions on enterprise income taxes within 4 months after the end of the tax year, determines the amount of taxes to be made up or refunded in the current year on the basis of the monthly or quarterly prepaid amount of income taxes, fills out the annual enterprise income tax return forms, files annual enterprise income tax return to the competent taxation authority, provides relevant documents as required by the taxation authority, and settles the amount of enterprise income taxes of the whole year.

Article 3

A taxpayer whose enterprise income taxes are collected by way of payment by self-assessment or of verifying the taxable income rate shall, no matter whether it is within the period of tax reduction or exemption, or whether it makes profits or suffers from losses, shall make final settlement in accordance with the Regulation and the Detailed Rules for the Implementation Thereof as well as the relevant provisions of the present Measures.

A taxpayer whose enterprise income taxes are collected in a way of verifying the fixed amount need not make final settlement.

Article 4

When making final settlement of enterprise income taxes, a taxpayer shall make tax payment adjustments in accordance with the taxation laws, regulations and the relevant provisions on enterprise income taxes. The taxpayer shall, in accordance with the relevant provisions, timely handle the matters of pre-tax deduction, investment tax credit, tax reduction or exemption, etc. which need to be submitted to the taxation authority for check or approval. The taxation authority shall, when accepting the taxpayers' matters concerning enterprise income tax and when handling the check or approval thereof, comply with the relevant provisions.

Article 5

A taxpayer shall, within 15 days after the end of the tax year, complete the filing of returns of the enterprise income taxes prepaid in December or in the fourth quarter.

Article 6

Unless there is otherwise any different provision, a taxpayer shall, within 4 months after the end of a tax year, submit to the competent taxation authority the "Annual Enterprise Income Tax Return Form" and other the relevant documents required by the taxation authority, and handle the formalities of settlement of taxes. When accepting the taxpayer's annual tax return, the competent taxation authority shall check the logicality of the enterprise's annual tax forms and the completeness and accuracy of the relevant documents, and shall in time finalize such matters as refunding the excessive and making up the deficient amount of enterprise income taxes, or offsetting the payable amount of income taxes in the next year, etc.

Article 7

When a taxpayer (including the enterprises that pay taxes in a consolidated or combined way and the member enterprises thereof) files annual enterprise income tax return, they shall truthfully fill out and submit the following documents:

(1)

The annual enterprise income tax returns and the attached forms;

(2)

The enterprise's accounting statements (balance sheets, profit statements, cash flow statements and relevant attachments), notes to the accounting statements, and statements of the financial situation;(For a public institution, the information on various revenues, expenditures and surplus, information on assets and liabilities, information on employees and wages, and other contents to be submitted for annual final accounting as required by the provisions of the public finance administrative department shall be submitted.)

(3)

Relevant documents on the particulars for archival filing;

(4)

Other documents required by the competent taxation authority to be submitted.

Where a taxpayer files the tax return by electronic means, it shall attach the paper tax return documents.

Article 8

In case that a taxpayer entrusts an intermediary institution to file the annual enterprise income tax return, the intermediary institution shall issue a report containing such contents as the items subject to tax payment adjustments, and the reasons, basis, calculation process, adjusted amount, etc.

Article 9

A taxpayer shall, in light of the taxation laws, regulations and relevant taxation provisions, correctly calculate the taxable income and the amount of income taxes payable, truthfully and correctly fill out the enterprise income tax return forms and the attached forms, submit the complete set of documents, and bear legal liabilities for the authenticity, accuracy and entirety of the tax returns.

Article 10

In case that a taxpayer fails to file a tax return on time due to force majeure, it may file a deferred tax return in accordance with the Law for the Administration of Tax Collection and the Detailed Rules for the Implementation Thereof.

Article 11

In case that a taxpayer finds any error in a tax return within the period for annual tax return, it may file the tax return again within the period for the annual tax return.

Article 12

In case that the amount of taxes prepaid by a taxpayer within a tax year is less than the payable amount of taxes of the whole year, the taxpayer shall, within the time limit for the final settlement, settle all the taxes to be supplemented; while if the amount of prepaid taxes is more than the payable amount of taxes of the whole year, the competent taxation authority shall in time refund the excessively prepaid amount or use the excessive amount to offset the income taxes payable in the next year.

Article 13

In case that a taxpayer really needs to defer the supplementary payment of taxes because of a particular difficulty, it shall deal with the matter according to the relevant provisions in the Law for the Administration of Tax Collection and the Detailed Rules for the Implementation Thereof.

Article 14

In case that a taxpayer is dissolved, goes bankrupt, or is revoked during the year, it shall, prior to the liquidation, report to the competent taxation authority, and make the current final settlement of enterprise income taxes. If the taxpayer's tax payment obligation is legally terminated due to any other cause, it shall, within 60 days as of suspension of the production or business operation, make final settlement of the current income taxes to the competent taxation authority.

Article 15

A head office or group parent company approved to file tax returns on a consolidated basis for the sake of paying the enterprise income tax (hereinafter referred to as the enterprise making final settlement) shall, within the time limit for final settlement, submit to the local competent taxation authority the consolidated "Annual Enterprise Income Tax Return Form" of all member enterprises, the relevant documents prescribed in Article 7 of the present Measures, and each member enterprise's "Annual Enterprise Income Tax Return Form", and uniformly make its own final settlement and its member enterprises' final settlement of enterprise income taxes.

An enterprise making final settlement shall, in accordance with the requirement on the time limit for final settlement, inform each member enterprise of the time limit for submitting the relevant documents in Article 7 of the present Measures. A member enterprise must, before submitting the aforesaid documents to the enterprise making final settlement, have them checked by its competent taxation authority.

Article 16

In case that a taxpayer is unable to make final settlement within the prescribed time limit or is in dispute with the taxation authority over tax payment, the matter shall be settled in accordance with the relevant provisions in the Law for the Administration of Tax Collection and the Detailed Rules for the Implementation Thereof.

Article 17

The taxation authority at each level shall, in accordance with the local actual situation, unifiedly arrange for and deploy the final settlement work for each tax year. All internal functional departments of a taxation authority shall fully coordinate and cooperative with each other to do a good job in the administration of final settlement.

Article 18

The taxation authorities at all levels shall, before the beginning of final settlement and during the final settlement, provide taxpayers with high quality services. They shall, in various ways, propagandize the policies on enterprise income tax, and enable taxpayers to access to such policies, especially to the new policies made in the current year and the policies involving tax payment adjustments; and shall state the work procedures and requirements on final settlement to taxpayers, through various avenues.

Article 19

After the final settlement work is completed, the taxation authority shall organize the enterprise income tax payment evaluation and inspection. The objects, contents, methods and procedures, etc. of the tax payment evaluation shall be governed by the relevant provisions of the State Administration of Taxation.

Article 20

After the final settlement work is completed, the taxation authority at each level shall carefully summarize the work, form a written report and submit it to the superior authorities level by level. The bureaus of state taxes and those of local taxes of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan shall, by the end of July in each year, submit the summary report on the final settlement work and the statement of annual enterprise income tax sources to the State Administration of Taxation (Department of Income Tax Administration). The contents of the summary report shall include:

(1)

Basic information on the final settlement work;

(2)

Layout of the structure of enterprise income tax sources;

(3)

Increase, decrease, and changes of enterprise income tax revenues and the reasons therefor;

(4)

The implementation of enterprise income tax policies and the existing problems;

(5)

The work experiences, problems and suggestions concerning the administration of enterprise income taxes.

Article 21

The bureaus of state taxes and those of local taxes of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan may formulate specific implementation measures in accordance with the present Measures.

Article 22

The present Measures shall be implemented as of January 1, 2006. The "Notice of the State Administration of Taxation on Printing and Distributing the Measures for the Administration of Final Settlement and Payment of Enterprise Income Taxes" (No. 182 [1998] of the State Administration of Taxation) shall be repealed simultaneously.