Laws of the People's Republic of China

the Ministry of Finance, the State Administration of Taxation

Supplementary Circular of the MOF and the SAT on the Issues of Exempting Value-added Tax on the Purchase of Goods in China for Non-reimbursable Assistance Projects by Foreign Governments and International Organizations

Cai Shui [2005] No. 13

The finance departments (bureaus) and the administrations of State taxes of all provinces, autonomous regions, municipalities directly under the Central Government, and municipalities directly under the State planning, the Finance Bureau of Xinjiang Production and Construction Army Corps:

In 2001, the Ministry of Finance, the State Administration of Taxation and the former Ministry of Foreign Trade and Economic Cooperation jointly promulgated the "Circular on the Issues of Exempting Value-added Tax on the Purchase of Goods in China for Non-reimbursable Assistance Projects by Foreign Governments and International Organizations" (Cai Shui [2002] No. 2), clarifying the policy of exempting value-added tax on the purchase of goods in China for non-reimbursable assistance projects by foreign governments and international organizations. We hereby formulate the supplementary provisions as follows regarding the procedures of application and examination for approval made by World Bank and other international organizations and foreign governments under unified administration of the Ministry of Finance for exempting tax on the purchase of goods in China for non-reimbursable assistance projects under fiscal cooperation with China:

I.

The exemption of value-added tax on the purchase of goods in China for non-reimbursable assistance projects by foreign governments and international organizations under unified administration of the Ministry of Finance, shall be implemented according to the relevant provisions in the "Measures for the Exempting of Value-added Tax on the Purchase of Goods in China for Non-reimbursable Assistance Projects by Foreign Governments and International Organizations (for Trial Implementation)", which are attached to Decree Cai Shui [2002] No. 2. That is, after a project is established, the purchaser of goods needed in an aided project (hereinafter referred to purchaser) shall, jointly with the project entity, submit an application for exempting tax on the purchase of goods simultaneously to both the competent department under the Ministry of Finance and the State Taxation Administration. The contents of the application shall include: name of the aided project, the aiding party and aided entity, the sales contract (photocopy) signed by the purchaser and the supplier, etc. The applicants shall also fill out the "Detailed Table on the Purchase of Goods in China for Non-reimbursable Assistance Projects by Foreign Governments and International Organizations", while the supplier shall, after signing the sales contract, submit the contract (photocopy) to the local taxation organ where the enterprise is located for archival purposes. The competent department under the Ministry of Finance shall, after receiving the application of the purchaser and the project entity for exempting tax on the purchase, verify the authenticity of the relevant contents of the project, and whether the purchase of goods is needed in the aided project, and so on; and shall, after making sure that no error exist in the said contents, bring forth to the State Taxation Administration a testifying document confirming that the contents of the application are inerrable. The State Taxation Administration shall, after receiving the application of the purchaser and the project entity for tax exemption as well as the testifying document issued by the competent department under the Ministry of Finance, verify via the local taxation organ where the supplier is located the relevant information on the goods which is applied for tax exemption, and shall issue a testifying document to the State Taxation Administration. In case the testifying document issued by the local competent taxation organ is consistent with that issued by the Ministry of Finance, the State Taxation Administration shall distribute to the local competent taxation organ where the supplier is located the documents on exemption of value-added tax for the relevant goods sold by the supplier, and meanwhile make copies to the competent department under the Ministry of Finance, the purchaser and the project entity.

II.

All other tax exemption matters shall be implemented in accordance with the relevant provisions in Document Cai Shui [2002] No. 2.

III.

"Name List of International Organizations" added to Document Cai Shui [2002] No. 2

Add: European Investment Bank, shortened as EIB

Global Environment Facility shortened as GEF

IV.

The above provisions shall come into force on the date when this Document is served.

In addition, there are some errors in the English spelling of the names of a few international organizations in the "Name List of International Organizations" of Document Cai Shui [2002] No. 2, which are hereby corrected as follows:

1.

The English spelling for 国际复兴开发银行(世界银行) is:

International Bank for Reconstruction and Development, shortened as IBRD (World Bank)

2.

The English spelling for 国际金融公司 is:

International Finance Corporation, shortened as IFC

3.

The English spelling for 亚洲开发银行 is:

Asian Development Bank, shortened as ADB

the Ministry of Finance

the State Administration of Taxation

January 21, 2005