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CIRCULAR ON SOME CONCRETE QUESTIONS CONCERNING REFUNDING THE EXTRATAX PAYMENTS RESULTING FROM THE SWITCH-OVER TO THE LEVY OF VALUE-ADDED TAXAND CONSUMPTION TAX ON ENTERPRISE WITH FOREIGN INVESTMENT

CIRCULAR ON SOME CONCRETE QUESTIONS CONCERNING REFUNDING THE EXTRATAX PAYMENTS RESULTING FROM THE SWITCH-OVER TO THE LEVY OF VALUE-ADDED TAXAND CONSUMPTION TAX ON ENTERPRISE WITH FOREIGN INVESTMENT (State Administration of Taxation: 21 April 1994 Coded Guo Shui Fa[1994] No. 115) Whole Doc.

To the tax bureau of various provinces, autonomous regions and municipalities, the tax bureaus of various cities with independent planning and various sub-bureaus of the Offshore Oil Tax Administration: In the spirit of the State Council Circular On Questions Related to the Provisional Regulations Concerning the Levy of Applicable Value-Added Tax, Consumption Tax and Business Tax on Foreign-Funded Enterprises and Foreign Enterprises, questions concerning refunding the extra tax paid by foreign-funded enterprises after the change-over to the levy of value-added tax and consumption tax are hereby clarified in detail as follows; I. The extra tax paid by foreign-funded enterprises due to change-over to the levy of value-added tax and consumption tax refers to the actual tax payment calculated in accordance with the Provisional Regulations of the People's Republic of China on Value- Added Tax, the Provisional Regulations of the People's Republic of China on Consumption Tax and related stipulations for the goods sold, product processing and labor services provided such as repair, production, and processing taxable consumer goods on a commission basis by foreign-funded enterprises, that surpasses the part of payable tax calculated in accordance with the original Regulations of the People's Republic of China On Consolidated Industrial and Commercial Tax (Draft), Regulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars issued by the State Administration of Taxation as well as related stipulations, The calculation formula is given as follows: Current extra tax payment = current actual payment of value - added tax + current actual payment of consumption tax - consolidated industrial and commercial tax payment - special consumer tax payment The consolidated industrial and commercial tax payment refers to the tax payment (including local surcharge) worked out in accordance with the table of tax items and tax rates of consolidated industrial and commercial tax attached to the Circular On Questions Concerning Implementing the Document Coded Guo Shui Han Fa [1993] No. 152, a document of the Foreign Tax Management Department of the State Administration of Taxation coded Coded Guo Shui Wai Han [1994] No. 009, which is calculated on the basis of the combined total of the sales volume of the current year and tax on the sale item. For foreign-funded enterprises engaged in wholesale and retail sale business, consolidated industrial and commercial tax payment on their business income is all calculated at a 3 percent rate.

The special consumption tax payment refers to the tax payment worked out in accordance with the quantity of current taxable products and the tax items, tax value and calculation methods as listed in the Regulations on Questions Concerning the Levy of Special Consumption Tax on Sedan Cars, a document of the State Administration of Taxation, coded (89) Guo Shui Liu Zi No. 112.

II. For the overly paid tax by the foreign-funded enterprise which pays both value-added tax and consumption tax, the tax reimbursement for the value-added tax and consumption tax shall be calculated in accordance with the proportion of the current value- added tax and consumption tax actually paid in the total value of the current value-added tax and consumption actually paid. The calculation formula is given as follows: Refundable VAT = Current extra tax payment X Current actual VAT payment ---------------- Total value of current actual VAT & consumption tax payment Refundable consumption tax = current extra tax payment X current actual payment of consumption tax ---------------- Total value of current actual VAT & consumption tax payment III. "The foreign-funded enterprises approved to be established before December 31, 1993" as mentioned in the Circular On Questions Involved in the Provisional Regulations of the State Council Concerning the Levy of Applicable Value-Added Tax, Consumption Tax and Business Tax on Foreign-Funded Enterprises and Foreign Enterprises refer to foreign-funded enterprises which had performed industrial and commercial registration procedures before December 31, 1993: "The approved operational period" refers to the operational period approved by the industrial and commercial administrative department, excluding the period extended after January 1, 1994; "The five years" refers to the period from January 1, 1994; "The five years" refers to the period from January 1, 1994 to December 31, 1998.

IV. That part of value-added tax and consumption tax paid for the imported goods of foreign-funded enterprises that exceed the payable tax for imports calculated in accordance with relevant stipulations of the original Regulations Concerning Consolidated Industrial and Commercial Tax shall not be refunded in principle. However, for the extra tax paid by individual foreign-funded enterprises for the raw and semi-finished materials and spare parts and components needed in production but the supply of which cannot be guaranteed on the domestic market and imported for the production of products which are urgently needed at home or the development of which is encouraged by the state, may be dealt with as an individual case with approval from the State Administration of Taxation.

The formula for calculating consolidated industrial and commercial tax on imports is given as follows: Consolidated industrial & commercial tax on imports = Duty - paid value + tariff -------- x industrial & commercial tax rate Consolidated industrial & commercial tax rate V. For the goods produced by foreign-funded enterprise and sold to an export-oriented enterprise for export, the extra tax payment resulting from increased tax burden shall not be refunded.

VI. A foreign-funded enterprise shall, within 30 days after the end of the Year, send a written application report to the competent foreign-related tax authorities, fill in the Application Form for Tax Reimbursement Due to Increased VAT and Consumption Tax Burden (attached at the back), at the same time it shall send a copy of the VAT and consumption tax paid certificate, after the application has been examined and verified by the competent foreign-related tax authorities and approved by the authorized tax authorities, the enterprise shall perform the procedures for tax reimbursement.

VII. The annual tax reimbursement amount of a foreign-funded enterprise that exceeds 1 million Yuan (including 1 million Yuan) shall be examined and approved by the State Administration of Taxation; an annual tax reimbursement amount that is below 1 million Yuan shall be examined and approved by the provincial-level sub-bureau and sub-bureau of cities with independent planning under the State Administration of Taxation.

The various provincial sub-bureaus and sub-bureaus of cities with independent planning shall, within 60 days after the end of the year, submit a report on the information about tax reimbursement of the previous year to the State Administration of Taxation.

VIII. The refunding of extra tax payment shall be handled lump sum in principle after the end of the year. If the annual tax reimbursement amount is large, it may be refunded on a quarterly basis and settlement made at year-end with approval from the provincial-level sub-bureau or sub-bureau of cities with independent planning. For individual enterprises which really have difficulty in turnover of funds, with approval from the State Administration of Taxation, tax can be refunded in advance on a monthly basis and settlement be made at year end.

IX. A foreign-funded enterprise shall accurately declare the amount of tax reimbursement, if more tax payment than required resulting from inaccurate report or the adoption of illegitimate means is discovered, the matter shall be handled in accordance with the related stipulations of the Measures of the People's Republic of China for the Collection and Management of Tax.

Appendices: I. The Application Form of Tax Reimbursement Due to Increased Value-Added Tax and Consumption Tax Burden II. Stipulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars Law-5 Appendix I: Application Form of Tax Reimbursement Due to Increased Value-Added Tax and Consumption Tax Burdens (Year) Registration Number of Tax Payer: Name of Tax Payer: Economic Nature: Business Address: Tel: Unit of Money: 10000 Yuan ------------------- Name of Sale Actual Actual Consolidated Refund-able major volume VAT consumption industrial & tax amount goods or tax tax commercial taxable payment payment tax labor --- service Tax Tax rate payment ------------------ 1 2 3 4 5 6 7 = 3 + 4 - 6 ------------------ ------------------ ------------------ ------------------ ------------------ Total ------------------ Opinions based on examination & verification by competent foreign-related Remarks tax authorities ------------------ Responsible leader Responsible leader Filled on xx day, of enterprise: of finance: month year Notes: I. This written application report shall be submitted to each upper level II. Foreign-funded enterprises engaged in the production of sedan cars shall add a "Special Consumption Tax" Column after the "Consolidated Industrial & Commercial Tax" Column of this application form, its contents include "tax items" and "tax payment." Appendix II: Regulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars April 1, 1989 Coded (89) Guo Shui Liu Zi No. 112 To the people's government of various provinces, autonomous regions and municipalities, to various ministries and commissions and affiliated institutions directly under the State Council: In accordance with the State Council decision on strengthening the management of sales of sedan cars and the levy of special consumption tax, and having been examined and agreed by the Ministry of Finance and reported to the State Council for approval, the Circular concerning the levy of special consumption tax on sedan cars is hereby issued as follows: I. A unit and individual who engage in the production and import of sedan cars within the territory of the People's Republic of China are the tax payers of special consumption tax (hereinafter referred to as tax payers) who shall pay special consumption tax in accordance with these Regulations.

II. Items and amounts of special consumption tax on sedan cars: (1) Sedan cars 1. Imported whole cars, of which Volga imported from the former Soviet Union and East European Region is taxed 15000 yuan each, Lada 10000 yuan each, Fiat 126P 5000 yuan each, other cars 7000 yuan each; cars imported from regions outside the former Soviet Union and Eastern Europe are taxed 40000 yuan each.

2. Cars assembled with imported parts, of which: Charad of Tianjin is taxed 10000 yuan each; other cars 20000 yuan each.

3. Domestically produced cars are taxed 10000 yuan each.

(2) Jeeps (including trans-shaped cars) 1. Imported whole cars, of which the Lada 2121, Aro 244 imported from the former Soviet Union and the region of Eastern Europe are taxed 5000 yuan each, other imported cars 35000 yuan each.

2. Cars assembled with imported parts are taxed 15000 yuan each.

3. China-made cars 5000 yuan each (3) Coaches (including tool cars) 1. Imported whole cars are taxed 30000 yuan each.

2. Cars assembled with imported parts are taxed 10000 yuan each.

3. China-made cars are taxed 5000 yuan each (the levy of tax is postponed for the time being this year) Readjustment of tax items and tax amount is determined by the State Council.

III. The formula for the calculation of the payable amount of special consumption tax: Payable tax amount = unit tax amount x the amount of taxable products IV. Tax-paying link of special consumption tax on sedan cars: For taxable sedan cars produced within China, tax is paid by the producer at the time of selling; for cars processed on a commission basis by the productive enterprise, tax is paid by the assignee at the time of delivery; for cars produced by the productive enterprise for its own use, tax shall be paid by the producer at the time of commissioning of the car.

For imported taxable sedan cars, tax shall be paid by the import declarant at the time of customs entry.

V. The special consumption tax on the sedan cars produced and sold by the tax payer shall be collected by the tax payer from the purchaser, with the selling price excluded; the special consumption tax on the sedan cars processed by the tax payer on a commission basis shall be collected by the tax payer from the consignor, with the processing charges excluded. The tax payer shall accurately indicate on the invoice the special consumption tax he collects on sedan cars and pay it to the tax authorities.

The special consumption tax on the sedan cars produced by the tax payer for his own use shall be paid by the tax payer to the tax authorities.

The special consumption tax on the sedan cars imported by the tax payer shall be paid by the tax payer to the tax-levying agency. The special consumption tax thus paid shall be collected from the purchaser, with the sedan car import price excluded, and shall be accurately indicated in the invoice.

VI. Reduction and exemption of special consumption tax on sedan cars: (1) Taxable sedan cars for export are exempt from special consumption tax. The principle of "levying first and refunding later" is introduced for tax exemption. The tax already levied shall be refunded after the exporter has declared export. Related procedures for tax reimbursement shall be performed in light of the stipulations concerning the refunding of product tax (value-added tax) for the export products.

(2) Diplomatic agencies and diplomats who enjoy diplomatic privileges and diplomatic immunities are exempt from especial consumption tax on sedan cars.

(3) Other tax-free items determined by the State Administration of Taxation.

Except for the above-mentioned stipulations, special consumption tax on sedan cars shall, without exception, not be reduced and exempted.

VII. The special consumption tax on sedan cars shall be collected by tax authorities, related matters concerning the collection and management shall be handled in accordance with the Provisional Regulations of the People's Republic of China Concerning the Collection and Management of Tax.

The special consumption tax on imported sedan cars shall be collected by the customs on a commission basis.

VIII. The special consumption tax levied on sedan cars shall be turned over to the central financial department.

IX. These Regulations goes into effect on February 1, 1989, if other documents contradict these Regulations, these Regulations shall be acted upon.

and Management of Tax.

Appendices: I. The Application Form of Tax Reimbursement Due to Increased Value-Added Tax and Consumption Tax Burden II. Stipulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars Law-5 Appendix I: Application Form of Tax Reimbursement Due to Increased Value-Added Tax and Consumption Tax Burdens (Year) Registration Number of Tax Payer: Name of Tax Payer: Economic Nature: Business Address: Tel: Unit of Money: 10000 Yuan ------------------- Name of Sale Actual Actual Consolidated Refund-able major volume VAT consumption industrial & tax amount goods or tax tax commercial taxable payment payment tax labor --- service Tax Tax rate payment ------------------ 1 2 3 4 5 6 7 = 3 + 4 - 6 ------------------ ------------------ ------------------ ------------------ ------------------ Total ------------------ Opinions based on examination & verification by competent foreign-related Remarks tax authorities ------------------ Responsible leader Responsible leader Filled on xx day, of enterprise: of finance: month year Notes: I. This written application report shall be submitted to each upper level II. Foreign-funded enterprises engaged in the production of sedan cars shall add a "Special Consumption Tax" Column after the "Consolidated Industrial & Commercial Tax" Column of this application form, its contents include "tax items" and "tax payment." Appendix II: Regulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars April 1, 1989 Coded (89) Guo Shui Liu Zi No. 112 To the people's government of various provinces, autonomous regions and municipalities, to various ministries and commissions and affiliated institutions directly under the State Council: In accordance with the State Council decision on strengthening the management of sales of sedan cars and the levy of special consumption tax, and having been examined and agreed by the Ministry of Finance and reported to the State Council for approval, the Circular concerning the levy of special consumption tax on sedan cars is hereby issued as follows: I. A unit and individual who engage in the production and import of sedan cars within the territory of the People's Republic of China are the tax payers of special consumption tax (hereinafter referred to as tax payers) who shall pay special consumption tax in accordance with these Regulations.

II. Items and amounts of special consumption tax on sedan cars: (1) Sedan cars 1. Imported whole cars, of which Volga imported from the former Soviet Union and East European Region is taxed 15000 yuan each, Lada 10000 yuan each, Fiat 126P 5000 yuan each, other cars 7000 yuan each; cars imported from regions outside the former Soviet Union and Eastern Europe are taxed 40000 yuan each.

2. Cars assembled with imported parts, of which: Charad of Tianjin is taxed 10000 yuan each; other cars 20000 yuan each.

3. Domestically produced cars are taxed 10000 yuan each.

(2) Jeeps (including trans-shaped cars) 1. Imported whole cars, of which the Lada 2121, Aro 244 imported from the former Soviet Union and the region of Eastern Europe are taxed 5000 yuan each, other imported cars 35000 yuan each.

2. Cars assembled with imported parts are taxed 15000 yuan each.

3. China-made cars 5000 yuan each (3) Coaches (including tool cars) 1. Imported whole cars are taxed 30000 yuan each.

2. Cars assembled with imported parts are taxed 10000 yuan each.

3. China-made cars are taxed 5000 yuan each (the levy of tax is postponed for the time being this year) Readjustment of tax items and tax amount is determined by the State Council.

III. The formula for the calculation of the payable amount of special consumption tax: Payable tax amount = unit tax amount x the amount of taxable products IV. Tax-paying link of special consumption tax on sedan cars: For taxable sedan cars produced within China, tax is paid by the producer at the time of selling; for cars processed on a commission basis by the productive enterprise, tax is paid by the assignee at the time of delivery; for cars produced by the productive enterprise for its own use, tax shall be paid by the producer at the time of commissioning of the car.

For imported taxable sedan cars, tax shall be paid by the import declarant at the time of customs entry.

V. The special consumption tax on the sedan cars produced and sold by the tax payer shall be collected by the tax payer from the purchaser, with the selling price excluded; the special consumption tax on the sedan cars processed by the tax payer on a commission basis shall be collected by the tax payer from the consignor, with the processing charges excluded. The tax payer shall accurately indicate on the invoice the special consumption tax he collects on sedan cars and pay it to the tax authorities.

The special consumption tax on the sedan cars produced by the tax payer for his own use shall be paid by the tax payer to the tax authorities.

The special consumption tax on the sedan cars imported by the tax payer shall be paid by the tax payer to the tax-levying agency. The special consumption tax thus paid shall be collected from the purchaser, with the sedan car import price excluded, and shall be accurately indicated in the invoice.

VI. Reduction and exemption of special consumption tax on sedan cars: (1) Taxable sedan cars for export are exempt from special consumption tax. The principle of "levying first and refunding later" is introduced for tax exemption. The tax already levied shall be refunded after the exporter has declared export. Related procedures for tax reimbursement shall be performed in light of the stipulations concerning the refunding of product tax (value-added tax) for the export products.

(2) Diplomatic agencies and diplomats who enjoy diplomatic privileges and diplomatic immunities are exempt from especial consumption tax on sedan cars.

(3) Other tax-free items determined by the State Administration of Taxation.

Except for the above-mentioned stipulations, special consumption tax on sedan cars shall, without exception, not be reduced and exempted.

VII. The special consumption tax on sedan cars shall be collected by tax authorities, related matters concerning the collection and management shall be handled in accordance with the Provisional Regulations of the People's Republic of China Concerning the Collection and Management of Tax.

The special consumption tax on imported sedan cars shall be collected by the customs on a commission basis.

VIII. The special consumption tax levied on sedan cars shall be turned over to the central financial department.

IX. These Regulations goes into effect on February 1, 1989, if other documents contradict these Regulations, these Regulations shall be acted upon.


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