Laws of the People's Republic of China

NOTICE OF THE MINISTRY OF FINANCE CONCERNING
THE HANDLING OF TAX REGISTRATION AND TAX RETURN
MATTERS BY FOREIGN COMPANIES CONTRACTING OFFSHORE
PETROLEUM PROJECTS AND PROVIDING LABOR SERVICE

(February 6, 1985)

 

SUBJECT: TAXATION

ISSUING-DEPT: MINISTRY OF FINANCE

ISSUE-DATE: 02/06/1985

IMPLEMENT-DATE: 02/06/1985

LENGTH: 997 words

TEXT:

In accordance with the Income Tax Law of the People's Republic of China Concerning Foreign Enterprise and the Rules for Implementation thereof, and provisions of other legislations, the following provisions concerning the handling of tax registration and tax return matters by foreign companies contracting offshore petroleum projects and providing labor service in China (hereinafter referred to as contractors) are drawn up:

[Article 1] Contractors shall register with the local offshore petroleum tax bureau according to the Interim Provisions for Tax Registration of Foreign Enterprises Upon Commencement and Termination of Their Operations.  Those shortterm contractors whose term of contracting is less than 30 days shall register before commencement or termination of their operations.

[Article 2] In accordance with the interim provisions contained in No. 149 document (Ministry of Finance document, 1983) issued by the Ministry of Finance, contractors shall file their tax return, in which the taxable income generated from offshore petroleum contracting and labor service providing projects shall be explicitly stated, to the local tax authorities, who collect tax on the former upon verification.  Should any contractors be unable to present accurate cost and expense voucher or unable to assess the actual taxable income correctly, the offshore petroleum tax bureau shall verify the profit ratio of contractors (temporarily fixed at 10% of the total income from contracting) and assess their actual taxable income accordingly, based on which contractors pay their income tax.  Whichever tax method is to be adopted by foreign contractors, it shall not be changed once fixed in a tax year.

[Article 3] Contractors paying their income tax according to their actual profit shall submit to the offshore pertroleum tax bureau their annual income tax return, the statements of final accounts and other related documents.  Within a tax year, should some contractors operate their business for less than a year they shall submit their income tax return and the report of final accounts concerning their operations in China within 45 days from the date of the closing of their operations so as to settle their final tax payment with tax authorities.

Where the annual income tax return and statement of final accounts are submitted, an audit report issued by certified public accountants registered in China shall be attached.

When reasonable managerial expenses related to operations of the project and expenses related to the provision of service are paid by contractors to their head office, contractors shall present to the offshore petroleum tax bureau for examination and verification attesting documents, receipts and vouchers issued by their head office, which shall be attached by the accounting report issued by registered public accountants.

[Article 4] In case contractors have established their administrative organ in China and they have more than two offshore petroleum contracting and labor service providing projects, the taxable income from various projects shall be added together so as to enable the administrative organ to submit its combined income tax to the offshore petroleum tax bureau where it is located.  As to income and expenses thereof generated from contracting or labor service providing projects in other places than those mentioned above, contractors concerned shall submit such income and expenses to the local offshore petroleum tax bureaux for examination and verification.

Contractors paying their income tax according to actual taxable income assessed by verified profit ratio shall firstly pay their income tax at the place in which their contracting or labor providing projects are located.  At the year end or upon termination of the last project, their administrative organ shall make the final settlement with the local offshore petroeum tax bureau.  Contractors without administrative organs in China shall make the final settlement with the offshore petroleum tax bureaux where their last contracting or labor service providing project is sited.  Contractors shall pay their consolidated industrial and commercial tax to offshore petroleum tax bureaux where their contracting projects are located.

[Article 5] Contractors must pay their income tax within the prescribed time limit.  In case of failure to do so, the tax authorities, in addition to setting a new time limit for tax payment, shall impose a surcharge for overdue payment pursuant to the tax law starting from the first day payment becomes overdue.

[Article 6] The entrusting party of contracting or labor service providing project shall, within 15 days from the date of signing of the contracting contract, report in writing to the local offshore petroleum tax bureau such details as the name of contractor, project contracted, amount of money involved, validity period of contract, location of the project, as well as the name, address and telephone number of the person in charge.  Meanwhile, they shall inform contractors of the requirement for tax registration and tax return pursuant to the tax law.  Should the entrusting party fail to report the abovementioned details and the contractors do not pay the tax, the entrusting party is obligated to pay the taxable amount which the contractor should pay.

[Article 7] Offshore petroleum tax bureaux shall strengthen contacts between them so that they will be in a position to know and timely inspect tax payers on their tax return performance.

[Article 8] This notice is worked out based on foreign contractors undertaking offshore petroleum contracting and labor service providing projects and is applicable to foreign contractors under the jurisdiction of the offshore petroleum tax bureaux as well as foreign contractors operating both on land and at sea.

[Article 9] This Notice shall be implemented on the date it is received.