Laws of the People's Republic of China

    Article 1  All units and individuals engaged in the production,
sub-contracting for processing or the importation of consumer goods prescribed
by these Regulations (hereinafter referred to as 'taxable consumer goods')
within the territory of the People's Republic of China are taxpayers of
Consumption Tax (hereinafter referred to as 'taxpayers') and shall pay
Consumption Tax in accordance with these Regulations.

    Article 2  The taxable items, tax rates (tax amounts) of Consumption Tax
shall be determined in accordance with the Consumption Tax Taxable Items and
Tax Rates (Tax Amounts) Table attached to these Regulations.

    Any adjustments to the Consumption Tax taxable items, tax rates (tax
amounts) shall be determined by the State Council.

    Article 3  For taxpayers dealing in taxable consumer goods with different
tax rates, the sales amounts and sales volumes for the taxable consumer goods
with different tax rates shall be accounted for separately. If the sales
amounts and sales volumes have not been accounted for separately or if the
taxable consumer goods with different tax rates are combined into a whole set
of consumer goods for sales, the higher tax rate shall apply.

    Article 4  Taxable consumer goods produced by the taxpayer shall be
subject to tax upon sales. For self-produced taxable consumer goods for the
taxpayer's own use in the continuous production of taxable consumer goods, no
tax shall be assessed; tax shall be assessed when the goods are transferred
for other use.

    For taxable consumer goods sub-contracted for processing, the tax shall be
collected and paid by the sub-contractor upon delivery to the contractor. For
taxable consumer goods sub-contracted for processing used by the contractor
for the continuous production of taxable consumer goods, the tax paid can be
credited in accordance with the regulations.

    Imported taxable consumer goods shall be subject to tax upon import
declaration.

    Article 5  The computation of tax payable for Consumption Tax shall follow
either the rate on value or the amount on volume method. The formulas for
computing the tax payable are as follows:

    The tax payable computed under the rate on value mentod

                           = Sales amount * Tax rate

    The tax payable computed under the amount on volume mentod

                           = Sales volume * Tax amount per unit

    For taxable consumer goods sold by taxpayer where the sales amounts are
computed in foreign currencies, the taxable amounts shall be converted into
Renminbi according to the exchange rates prevailing in the foreign exchange
market.

    Article 6  The "sales amount" as stipulated in Article 5 of these
Regulations shall be the total consideration and other charges receivable from
the buyer for the taxable consumer goods sold by the taxpayer.

    Article 7  Self-produced taxable consumer goods for the taxpayer's own use
that shall be subject to tax in accordance with the stipulations of the first
paragraph in Article 4 of these Regulations shall be assessed according to the
selling price of similar consumer goods produced by the taxpayer. If the
selling price of similar consumer goods is not available, the tax shall be
assessed according to the composite assessable value. The formula for
computing the composite assessable value is as follows:

    Composite assessable value = (Cost + Profit) / (1 - Consumption Tax rate)

    Article 8  Taxable consumer goods sub-contracted for processing shall be
assessed according to the selling price of similar consumer goods of the
sub-contractor. If the selling price of similar consumer goods is not
available, the tax shall be assessed according to the composite assessable
value. The formula for computing the composite assessable value is as follows:

    Composite assessable value

      = (Cost of material + Processing fee) / (1 - Consumption Tax rate)

    Article 9  Imported taxable consumer goods which adopt the rate on value
method in computing the tax payable shall be assessed according to the
composite assessable value. The formula for computing the composite assessable
value is as follows:

    Composite assessable value

    = (Customs dutiable value + Customs Duty) / (1 - Consumption Tax rate)

    Article 10  Where the taxable value of the taxable consumer goods of the
taxpayer is obviously low and without proper justification, the taxable value
shall be determined by the competent tax authorities.

    Article 11  For taxpayers exporting taxable consumer goods, the
Consumption Tax shall be exempt, except as otherwise determined by the State
Council. The measures for exemption of exported taxable consumer goods shall
be regulated by the State Administration for Taxation.

    Article 12  Consumption Tax shall be collected by the tax authorities.
Consumption Tax on the importation of taxable consumer goods shall be
collected by the customs office on behalf of the tax authorities.

    Consumption Tax on taxable consumer goods brought or mailed into China by
individuals shall be levied together with Customs Duty. The detailed measures
shall be formulated by the Tariff Policy Committee of the State Council
together with the relevant departments.

    Articie 13  Taxpayers selling taxable consumer goods and self-producing
taxable consumer goods for their own use, except otherwise as determined by
the State, shall report and pay tax to the local competent tax authorities
governing the taxpayers.

    For taxable consumer goods sub-contracted for processing, the Consumption
Tax due shall be paid to the local competent tax authorities where the
sub-contractors are located.

    For imported taxable consumer goods, the tax shall be reported and paid by
the importers or their agents to the customs offices where the imports are
declared.

    Article 14  The Consumption Tax assessable period shall be one day, three
day, five days, ten days, fifteen days or one month. The actual assessable
periods of the taxpayers shall be separately determined by the competent tax
authorities according to the magnitude of the tax payable of the taxpayers;
tax that cannot be assessed in regular periods can be assessed on a
transaction-by-transaction basis.

    Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assesable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period, and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.

    Article 15  Taxpayers importing taxable consumer goods shall pay tax
within seven days after the completion and issuance of the tax payment
certificates by the customs office.

    Article 16  The collection and administration of Consumption Tax shall be
conducted in accordance with the relevant provisions of the Law of the
People's Republic of China on Tax Collection and Administration and these
Regulations.

    Article 17  The collection of Consumption Tax from foreign investment
enterprises and foreign enterprises shall be conducted in accordance with the
resolutions of the Standing Committee of the National People's Congress.

    Article 18  The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.