Laws of the People's Republic of China

The State Administration of Taxation

Official Reply of the State Administration of Taxation on How to Deal with the Taxation of Building Decoration Expenses of Enterprises with Foreign Investment

September 14, 2000

The State Taxation Bureau of Tianjin:

Your Request for Instructions concerning the Amortizing Period of the Dining-hall Decoration Expenses of the Tianjin Kentucky Limited Company (JinGuoShuiWai [2000] No. 59) has been received. As how to deal with the taxation of the decoration expenses of enterprises, we reply after consideration as follows:

1.

With regard to the building decoration expenses of enterprises with foreign investment and foreign enterprises, if the property rights of the buildings belong to the enterprises themselves, the building decoration expenses, which occurred before the utilization of the buildings, shall be included in the prices of the buildings, and be calculated for depreciation in accordance with the provision of the Tax Law concerning the depreciation years of fixed assets. The building decoration expenses, which occurred after the utilization of the buildings, shall be averagely amortized within five years starting from the following month after the utilization of the buildings after their re-fitments.

2.

If the property rights of the buildings of the enterprises with foreign investment and foreign enterprises do not belong to the enterprises themselves, the building decoration expenses shall be averagely amortized within five years starting from the following day after the utilization of the buildings after their decoration.