NOTICE ON SOME QUESTIONS CONCERNING TAX REIMBURSEMENT FOR REINVESTMENT MADE BY FOREIGN INVESTORS OF ENTERPRISE WITH FOREIGNINVESTMENT
NOTICE ON SOME QUESTIONS CONCERNING TAX REIMBURSEMENT FOR REINVESTMENT MADE BY FOREIGN INVESTORS OF ENTERPRISE WITH FOREIGNINVESTMENT
(State Administration of Taxation: 15 June 1993 Code Guo Shui FaNo. 009)
Whole Doc.
In accordance with the stipulations of ARTICLE 10 of the Income Tax
Law of the People's Republic of China on enterprise with foreign
investment and Foreign Enterprises (hereinafter referred to as Tax Law)
and ARTICLES 80, 81 and 82 of Detailed Rules for Implementation of the Tax
Law (hereinafter referred to Detailed Rules), related questions concerning
foreign investors of enterprise with foreign investment enjoying tax
reimbursement for reinvestment are hereby made clear as follows:
I. The "operational period" referred to in ARTICLE 10 of the Tax Law
should be calculated in accordance with the following principles: For the
foreign investor of a enterprise with foreign investment who reinvests the
profits gained from the enterprise directly in the same enterprise or in
other enterprise with foreign investment which have started production and
operation (including trial production and trial business), the operational
period shall be calculated from the day of the actual input of funds for
reinvestment; for those who reinvest in newly established enterprise with
foreign investment, the operational period shall be calculated from the
day the newly established enterprise starts production and operation
(including trial production and trial business).
II. In line with the stipulations of Clause 2 of ARTICLE 80 of the
Detailed Rules, the foreign investor, while applying for tax reimbursement
for reinvestment, should provide certificates which can confirm the year
in which the profits are used for reinvestment, For those who fail to
provide certificates, tax authorities can, on the basis of the payable
dividend recorded in the book of the enterprise before the reinvestment is
made by the foreign investor, or of that part of undistributed profits
which is due to the foreign investor, calculate from the earliest year
sequentially up to the subsequent year in which the profits are used for
the reinvestment, thereby calculating the income tax to be returned to the
enterprise.
III. Foreign investor, who uses the liquidation income gained from
the enterprise with foreign investment for reinvestment, shall not enjoy
the preferential treatment of tax reimbursement for reinvestment.
IV. In accordance with the stipulations of Clause 3 of ARTICLE 81 of
the Detailed Rules, those who meet the following situations shall repay 60
percent of the tax already refunded:
1. Export-oriented enterprise set up or expanded with reinvestment by
foreign investor which fails to reach the standard for export-oriented
enterprise in three years beginning from the day the enterprise starts
production and operation, or within three years after the funds for
reinvestment are put in;
2. Technically advanced enterprise set up or expanded with
reinvestment made by foreign investor which proves not up to the required
standard through check and has thus had its title as a technically
advanced enterprise cancelled within three years beginning from the day
the enterprise starts production and operation or after the funds are put
in.
V. For foreign investor who reinvests in another place, the tax
authorities in the original tax payment place, while handling tax
reimbursement in accordance with the stipulations of Clause 3 of ARTICLE
80 of the Detailed Rules, should simultaneously send the Advice Note on
the Already Refunded Tax for the Reinvestment Made by Foreign Investor to
the tax authorities which accept the reinvestment enterprise in its
location. When the foreign investor is examined and confirmed by tax
authorities in the location of the accepted reinvestment enterprise that
he withdraws from the locality before the five-year operational period
expires after reinvestment as stated in ARTICLE 10 of the Tax Law, or he
meets the situation as stated in Clause 3 of ARTICLE 81 of the Detailed
Rules, the foreign investor should perform the formalities for repaying
all or part of the already refunded tax with the tax authorities in the
location of the reinvestment enterprise.
VI. This Notice is put into practice from the day of the receipt of
the Notice. If past stipulations are inconsistent with this Notice, the
matter should be handled in accordance with this Notice.
f the tax already refunded:
1. Export-oriented enterprise set up or expanded with reinvestment by
foreign investor which fails to reach the standard for export-oriented
enterprise in three years beginning from the day the enterprise starts
production and operation, or within three years after the funds for
reinvestment are put in;
2. Technically advanced enterprise set up or expanded with
reinvestment made by foreign investor which proves not up to the required
standard through check and has thus had its title as a technically
advanced enterprise cancelled within three years beginning from the day
the enterprise starts production and operation or after the funds are put
in.
V. For foreign investor who reinvests in another place, the tax
authorities in the original tax payment place, while handling tax
reimbursement in accordance with the stipulations of Clause 3 of ARTICLE
80 of the Detailed Rules, should simultaneously send the Advice Note on
the Already Refunded Tax for the Reinvestment Made by Foreign Investor to
the tax authorities which accept the reinvestment enterprise in its
location. When the foreign investor is examined and confirmed by tax
authorities in the location of the accepted reinvestment enterprise that
he withdraws from the locality before the five-year operational period
expires after reinvestment as stated in ARTICLE 10 of the Tax Law, or he
meets the situation as stated in Clause 3 of ARTICLE 81 of the Detailed
Rules, the foreign investor should perform the formalities for repaying
all or part of the already refunded tax with the tax authorities in the
location of the reinvestment enterprise.
VI. This Notice is put into practice from the day of the receipt of
the Notice. If past stipulations are inconsistent with this Notice, the
matter should be handled in accordance with this Notice.
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