Laws of the People's Republic of China

Whole Doc.Article 1

All units and individuals engaged in the provision of services asprescribed in these Regulations (hereinafter referred to as 'taxableservices'), the transfer of intangible assets or the sale of immovableproperties within the territory of the People's Republic of China shall betaxpayers of Business Tax (hereinafter referred to be 'taxpayers'), andshall pay Business Tax in accordance with these Regulations.Article 2

The taxable items and tax rates of Business Tax shall be determinedin accordance with the attached to these Regulations.

Any adjustments to the taxable items and tax rates shall bedetermined by the State Council.

The specific tax rates applicable to taxpayers engaged inentertainment businesses shall be determined by the People's governmentsof the provinces, autonomous regions and municipalities directly under thecentral government within the range prescribed by these Regulations.Article 3

For taxpayers engaged in taxable activities under different taxitems, the turnover, transfer and sales amounts (hereinafter referred toas 'turnover') under different taxable items shall be accounted forseparately. If the turnover has not been accounted for separately, thehigher tax rate shall apply.Article 4

For taxpayers providing taxable services, transferring intangibleassets on selling immovable properties, the tax payable shall be computedaccording to the turnover and the prescribed tax rates. The formula forcomputing the tax payable is as follows:

Tax payable = Turnover x Tax rate

The tax payable shall be computed in Renminbi, The turnover of thetaxpayer settled in foreign currencies shall be converted into Renminbiaccording to the exchange rate prevailing in the foreign exchange market.Article 5

The turnover of the taxpayers shall be the total consideration andall other changes receivable from the payers for the provision of taxableservices transfer of intangible assets or sales of immovable properties bythe taxpayers, except for the following situations:

(1) For transportation enterprises which carry passengers or cargoesfrom the territory of the People's Republic of China to over seaslocations and trans-ship passengers or cargoes to other transportationenterprises overseas, the turnover shall be the balance of transportcharges for the whole journey less the transport charges paid to thesub-contracted transportation enterprises.

(2) For travel enterprises which organize tourist groups to traveloutside the territory of the People's Republic of China and sub-contractto other travel enterprises overseas, the turnover shall be the balance ofthe tourist charges for the whole journey less the payments made to thosesub-contracted travel enterprises.

(3) For the main contractors in the construction business whosub-contract work to others, the turnover shall be the balance of thetotal contract sum less the payments made to the sub- contractors.

(4) For re-lending businesses, the turnover shall be the balance ofinterest on lending less the interest on borrowing.

(5) For businesses buying and selling foreign currencies, marketablesecurities and futures, the turnover shall be the balance of the sellingprices less the buying prices.

(6) Other situations as regulated by the Ministry of Finance.Article 6

The following items shall be exempt from Business Tax:

(1) Nursing services provided by nurseries, kindergartens, homes forthe aged, welfare institutions for the handicapped, matchmaking andfuneral services.

(2) Services provided on individual basis by the disabled.

(3) Medical services provided by hospitals, clinics and other medicalinstitutions.

(4) Educational services provided by schools and other educationalinstitutions; and services provided by students participating inwork-study programs.

(5) Agricultural mechanical ploughing, irrigation and drainage,prevention and treatment of plant diseases and insect pests, plantprotection, insurance for farming and animal husbandry, and relatedtechnical training services; breeding and the prevention and treatment ofdiseases of poultry, livestock and aquatic animals.

(6) Admission fees for cultural activities conducted by memorialhall, museum, cultural centre, art gallery, exhibition hall, academy ofpainting and calligraphy, library and cultural protective units; admissionfees for cultural and religious activities conducted at places ofreligious worship.

Except as stipulated in the above paragraphs, the Business Taxexemption and reduction items shall be regulated by the State Council.Local governments or departments shall not regulate any tax exemption orreduction items.Article 7

For taxpayers engaged in tax exempt or tax reduced items, theturnover shall be accounted for separately. if the turnover has not beenseparately accounted for, no exemption of reduction is allowed.Article 8

For taxpayers whose turnover has not reached the Business Tax minimumthreshold stipulated by the Ministry of Finance, the Business Tax shall beexempt.Article 9

The time at which a liability to Business Tax arises shall be thedate on which the business proceeds are received or documented evidence ofright to collect business proceeds is obtained by the taxpayer.Article 10

Business Tax shall be collected by the tax authorities.Article 11

Business Tax withholding agents are as follows:

(1) For financial institutions entrusted to grant loans, theentrusted financial institutions shall be the withholding agents.

(2) For sub-contracting of construction and installation business,the main contractors shall be the withholding agents.

(3) Other withholding agents as stipulated by the Ministry ofFinance.Article 12

The place for the payment of Business Tax is as follows:

(1) Taxpayers providing taxable services shall report and pay tax tothe local competent tax authorities where the taxable services take place.Taxpayers engaged in the transportation business shall report and pay taxto the local competent tax authorities where the business establishment islocated.

(2) Taxpayers transferring land use rights shall report and pay taxto the local competent tax authorities where the land is located.Taxpayers transferring other intangible assets shall report and pay tax tothe local competent tax authorities where the establishment is located.

(3) Taxpayers selling immovable properties shall report and pay taxto the local competent tax authorities where the immovable properties arelocated.Article 13

The Business Tax assessable period shall be five days, ten days,fifteen days or one month. The actual assessable period of taxpayers shallbe determined by the competent tax authorities according to the magnitudeof the tax payable of the taxpayers; tax that cannot be assessed inregular periods may be assessed on a transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall reportand pay tax within ten days following the end of the period. If anassessable period of five days, ten days or fifteen days is adopted, thetax shall be prepaid within five days following the end of the period anda monthly tax return shall be filed with any balance of tax due settledwithin ten days from the first day of the following month.

The tax payment deadlines for withholding agents shall be determinedwith reference to the stipulations of the above two paragraphs.Article 14

The collection and administration of Business Tax shall be conductedin accordance with the relevant regulations of the and theseRegulations.Article 15

The collection of Business Tax from foreign investment enterprisesand foreign enterprises shall be conducted in accordance with theresolutions of the Standing Committee of the National People's Congress.Article 16

The Ministry of Finance shall be responsible for the interpretationof these Regulations and for the formulation of the Detailed Rules andRegulations for the Implementation of these Regulations.Article 17

These Regulations shall come into effect from January 1, 1994, Thepromulgated by the State Council on September 18, 1984 shall be repealedon the same date.

BUSINESS TAX TAXABLE ITEMS AND TAX RATES TABLE

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Taxable

items Scope of charge Tax Rate %

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1. Communications

and transportation Transportation by land, water, 3

air and pipeline, loading

unloading and delivery

2. Construction Construction, installation,

repair, decoration and other

engineering work 3

3. Finance and insurance 5

4. Posts and

telecommunications 3

5. Culture and sports 3

6. Entertainment Singing bars, dance halls, 5-20

karaoke lounges, commercial

music halls, musical tea

houses, billiards, golf,

bowling and amusement

facilities

7. Servicing Agency, hotel, catering, 5

tourism, warehousing,

leasing, advertising and

other services

8. Transfer of

intangible assets Transfer of land-use rights, 5

patent rights, unpatchted

technologies, trade marks,

copyrights and goodwill

9. Sale of immovable

properties Sale of buildings and other 5

attachments to land

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