Laws of the People's Republic of China

SAT Reply on How to Apply the Provisions on Deduction and Exemption of Enterprise Income Tax on Purchase of Home-made Equipment by Foreign-funded Enterprises Whose Total Investment Has not been Approved

Guo Shui Han [2004] No.496 April 13, 2004

Shanghai municipal administration of state taxation and Shanghai municipal administration of local taxation:

We have given a reply to your Request for Instructions on Issues concerning Deduction and Exemption of Enterprise Income Tax on Purchase of Home-made Equipment by Shanghai Zhenhua Port Machinery Co., Ltd. (Hu Guo Shui Wai [2002] No.96 ) by the Reply of the State Administration of Taxation on Issues concerning the Deduction and Exemption of Enterprise Income Tax on Purchase of Home-made Equipment by Shanghai Zhenhua Port Machinery Co., Ltd. ( Guo Shui Han [2003] No. 1257 ) on November 21, 2003. For convenience of implementation, we hereby clarify as follows the issues put forward in your letter concerning how to determine the total investment of the foreign-funded enterprises whose total investment has not been approved when the provisions on deduction and exemption of enterprise income tax on their purchase of home-made equipment are applied:

For he issue concerning how to determine the total investment of a foreign-funded enterprise who has only set down the registered capital or total capital stock, and whose total investment has not been approved according to the provisions of the Ministry of Commerce (the former Ministry of Foreign Trade and Economic Cooperation), when it enjoys the preference of deduction and exemption of enterprise income tax on purchase of home-made equipment within the total investment, we agree upon deliberation, that the total investment of the enterprises can be inferred and determined according to the proportion of the registered capital in the total investment of the enterprise as prescribed in the Interim Provisions of the State Administration for Industry and Commerce on the Proportion of the Registered Capital in the Total Investment of the Sino-foreign Equity Joint Ventures (Gong Shang Qi Zi [1987] No. 38 ).