Laws of the People's Republic of China

The Ministry of Finance, the State Administration on Taxation

Urgent Notice of the Ministry of Finance and the State Administration on Further Implementation of the Policy Concerning Extending Value Added Tax Credit Scope

Cai Shui [2004] No. 226

Departments (Bureaus) of finance and bureaus of state taxation of Liaoning province, Jilin province, Heilongjiang province and Dalian city:

After the distribution of the documents of the Ministry of Finance and the State Administration of Taxation concerning revitalization of Northeast old industrial base, they have been enthusiastically implemented by the financial and tax sectors in Northeast region. In order to further implement the spirit of the State Council on revitalization of Northeast old industrial base, to put into practice the extension of VAT credit scope and year-end tax refund of enterprises' fixed asset, the supplementary notice concerning the extension of VAT credit scope is hereby given as follows:

1.

Any enterprise subsumed under the extended scope of VAT credit (hereinafter referred to as "taxpayer") that fails to pay VAT duly shall, whether it has new amount of VAT to be paid or not, firstly offset VAT arrears against income tax of fixed assets and carry it out in strict accordance with the relevant provisions concerning offset of VAT arrears in Notice of the Ministry of Finance, the State Administration on Taxation on Printing and Distribution of Interim Measure on Extending the Value-Added Tax Credit Scope in Northeast Region in 2004 (Cai Shui [2004] No. 168).

As for the outstanding tax prior to May 1, 2005 that is offset (deducted), in case that a unified exempt policy comes out in future , the offset outstanding tax that is exemptible may be adjusted correspondingly.

2.

Where the fixed asset income tax gets surplus after having offset tax arrears by taxpayer(s) from July 1, 2004 to November 30, 2004, tax reimbursement may be counted in the VAT achieved and paid without following new VAT rebate after the approval of Departments (Bureaus) of Finance of Liaoning Province, Jilin Province, Heilongjiang Province and Dalian City. The unfinished rebate of fixed asset income tax shall be credited next year.

3.

All level tax authorities shall perform well in the work of tax refund of fixed assets income tax amount and shall conduct examination and verification in strict accordance with relevant requirements; the refundable VAT shall be refunded to taxpayers promptly prior to December 31, 2004.

4.

The measures for credit of income tax amount of enterprises' fixed assets and for extension of VAT credit scope in Northeast region in 2005 shall be regulated separately.

The Notice is thereby given and shall be implemented accordingly.

The Ministry of Finance

The State Administration of Taxation

December 27, 2004