Laws of the People's Republic of China

REGULATIONS FOR THE USE OF CURRENCY IN
CONTRIBUTING TAXES TO THE STATE AND IN SETTLEMENT
ON ACCOUNTS WITH ENTERPRISES OR INDIVIDUALS
RESIDING IN CHINA BY JOINT VENTURES WITH CHINESE
AND FOREIGN INVESTMENT

(Issued on February 24, 1983)

SUBJECT: TAXATION

ISSUING-DEPT: MINISTRY OF FOREIGN ECONOMIC RELATIONS & TRADE

ISSUE-DATE: 02/24/198

IMPLEMENT-DATE: 02/24/1983

LENGTH: 952 words

TEXT:

In accordance with the pertinent stipulations laid down in the "Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment" and "Provisional Regulations for Exchange Control of the People's Republic of China", the currency used by joint ventures with Chinese and foreign investment (hereafter called joint ventures in short) in contributing taxes to the State and in settlement on accounts with enterprises or individuals residing in China is stipulated as follows:

[Article 1] Joint ventures shall contribute taxes and pay legitimate fees in Renminbi in all cases.  No governmental organizations should accept foreign currency of foreign exchange certificate paid by joint ventures.  These taxes and fees include:

(1) Import and Export Duty;

(2) Industrial and Commercial Tax (Industrial and Commercial Consolidated Tax);

(3) Enterprise Income Tax and Local Surtax, Income Tax on remitted profit of the foreign participant;

(4) Urban Real Estate Tax;

(5) Enterprise Site Use Fee;

(6) Enterprise Registration Fee or Enterprise Registration Alteration Fee;

(7) Commodity Inspection Fee;

(8) Vehicle or Vessel License Fee;

(9) Road Toll, Harbour Due;

(10) Individual Income Tax of foreign employees working in joint ventures.

[Article 2] Renminbi shall be used in the settlement on accounts between joint ventures and enterprises or individuals residing in China.  No enterprises or individuals should accept foreign currency or foreign exchange certificate paid by joint ventures.  These include:

(1) Fees charged for water, electricity and heating;

(2) Fees charged for domestic telephone calls, telexes, telegrams and other cost on communications;

(3) Domestic communications and transportation fees (including vehicle, ship and aircraft), personal service and other services;

(4) Payments by joint ventures on raw materials, fuels (coal, oil, gas), auxiliary equipment and other needed commodities supplied by enterprises or individuals residing in China;

(5) Charges on manufactured or semi-manufactured goods sold by joint ventures to enterprises or individuals residing in China.

[Article 3] As circumstances alter, either Renminbi or foreign currency shall be used in the settlement on accounts between joint ventures and banks, insurance companies and foreign trade corporations.

(1) Should joint ventures borrow loans in Renminbi from Bank of China residing in China, the repayment of the loans and interest shall be in Renminbi.  While the loans are in foreign currency the repayment shall be in foreign currency accordingly.

(2) The insurance appropriate the joint ventures shall be furnished by Chinese insurance companies.  Should the property of joint ventures is insured in foreign currency, the insurance premium shall be paid in foreign currency.  Should the property is insured in Renminbi, the insurance premium shall be in Renminbi.  The Chinese insurance companies shall settle the claims according to the currency used by joint ventures.

(3) In accordance with the Categories of Export Commodities defined by the Ministry of Foreign Economic Relations and Trade, in their purchase of the needed raw material, accessories, auxiliary equipment or other commodities from the foreign trade corporations or other enterprises authorized to handle import and export business, joint ventures should be granted approval from the Ministry of Foreign Economic Relations and Trade.  The buyers and sellers may settle the price and payment of accounts in foreign currency through consultations.  The two sides may also calculate the price in foreign currency but arrange the payment in Renminbi; Should joint ventures sell their manufactured or semi-manufactured goods subject to the approval by the foreign trade department in charge to the foreign trade corporations or other enterprises authorized to handle import and export business, the two sides may either settle payment of accounts in foreign currency or calculate the price in foreign currency but arrange the payment in Renminbi.

Joint ventures shall pay the freight rate in foreign currency to the General Administration of Civil Aviation of China, foreign trade transportation corporations, Chinese occean shipping companies or other enterprises approved to engage in business on transportation of import and export commodities.

[Article 4] Except the undertakings of tourist hotel projects using foreign funds, capital construction units residing in China shall contract to build projects for joint ventures on the payment term of Renminbi.

With the exception of the aforesaid stipulations, it is impossible to enumerate all payment items in economic transactions between the joint ventures and institutions, enterprises (including joint ventures, enterprises with overseas Chinese capital, enterprises with foreign capital) and individuals residing in China.  However the principle in general is that all transactions and payments of accounts undertaken in China shall be paid in Renminbi except those subject to be examined and approved by the foreign exchange control department.  Joint ventures shall not pay foreign currency or foreign exchange certificate to the aforesaid establishments.

These stipulations are applicable to Chinese-foreign co-operative enterprises, co-operative exploration projects and enterprises established in China with overseas Chinese capital or foreign capital.

The four Special Economic Zones of Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province may, with the reference of these regulations, formulate feasible provisions in the light of specific local conditions.