Laws of the People's Republic of China

The State Administration of Taxation

Notice of the State Administration of Taxation on the Issues relating to the Valued-added Tax of Its Common Taxpayer in Forward Business

Guo Shui Han [2005] No.1060

To the bureaus of state taxation of all provinces, autonomous regions and city specifically designated in the state plan:

In order to reasonably solve problems relating to the collection of tax payments and issuing of special invoice in forward business premium, Notice of policies relating to the valued-added tax of its common taxpayer in forward business is hereby given as follows:

1.

Where the common taxpayer of value-added tax, no matter premium or discount, sells goods through forward business in commodity exchange, the taxpayer hereof may, in accordance with the quantity of goods noted expressively in standard warrant (its form is shown in Appendix 1) and the settlement price of delivery, issue special invoice for value-added-tax.

2.

Where premium occurs in forward business when the warrant registrant register the goods, the registrant shall, when the warrant is cancelled (i.e. withdrawing goods from forward circulation), issue special VAT invoice to the canceler for the fund of the premium part and withdraw VAT on sales, and the canceler shall calculate creditable input tax by means of the obtained special invoice.

In case that discount occurs, the registrant shall, as for fund of the premium part, issue negative VAT special invoice and net off against output tax, and the canceler shall, by means of the obtained special invoice, impair input tax, and warrant canceler shall not issue special VAT invoice to the warrant registrant. The registrant shall, when issuing negative special invoice, obtain Standard Warrant Registration Premium Bill or Standard Warrant Cancellation Premium Bill( its form is shown in Appendix2, Appendix 3) and issue the special invoice hereof in accordance with the noted premium or discount sum and retain them for the supervision and check by the taxation authorities in charge.

3.

The Notice shall come into effect as for December 1, 2005, the collection and administration of VAT of forward business warrant registered prior to December 1 shall be governed and implemented in accordance with Notice of the State Administration of Taxation on Printing Measures for Collection of Value-added Tax for Forward Goods (Guo Shui Fa[1994] No.244) and otherwise relevant rules.

4.

Premium ,as mentioned in the Notice, refers to the sum difference paid by the bourse via premium or discount account to the registrant provided that the grade, weight, sort and warrant position of the benchmark and of benchmark warrant are superior in accordance with the prescribed forward business rule. In case that premium occurs, if the standard warrant holder withdraws goods cancellation warrant bill after several dealing, the bourse shall, via premium or discount account, withdraw the sum equivalent to the amount of premium.

Discount ,as mentioned in the Rule refers to the sum difference paid by the bourse via premium or discount account to the registrant provided that the grade, weight, sort and warrant position of the benchmark and of benchmark warrant are inferior in accordance with the prescribed forward business rule. In case that discount occurs, if the standard warrant holder withdraws goods cancellation warrant bill after several dealings, the bourse shall, via premium or discount account, provide to the canceler the sum equivalent to the amount of premium.

5.

In case that problems occur in the process of implementing the Notice, please report to the State Administration of Taxation( Turnover Tax Department)

Appendix:

1.Standard Warrant Holding Certificate of ˇÁˇÁ Commodity Exchange(model)

2.Standard Warrant Registration Premium Bill of ˇÁˇÁCommodity Exchange(model)(omitted)

3.Standard Warrant Cancellation Premium Bill of ˇÁˇÁCommodity Exchange(model)(omitted)

The State Administration of Taxation

November 9,2005 Appendix 1:Standard Warrant Holding Certificate of ˇÁˇÁ Commodity Exchange( model)

In accordance with articles of commodity exchange, rules of transaction and provisions in rules of implementation, the Certificate representing ownership of the listed commodity, shall be protected by law. The original Standard Warrant Holding Certificate shall be null and void automatically as of the date of the signature of the Certificate. Any alteration or forgery shall be punished by law.