(State Administration of Taxation: 15 June 1993. Code Guo Shui FaNo. 008)

(State Administration of Taxation: 15 June 1993. Code Guo Shui FaNo. 008) Whole Doc.

With regard to the question as to whether or not enterprise with foreign investment which conduct liquidation within the regular tax reduction and exemption period as stipulated in ARTICLE 8 of the Income Tax Law of the People's Republic of China for enterprise with foreign investment and Foreign Enterprises (hereinafter referred to as Tax Law) can enjoy enterprise income tax reduction and exemption, it is hereby clarified as follows: The stipulation set in ARTICLE 8 of the Tax Law which states "Productive enterprise with foreign investment scheduled to operate for a period over 10 years shall be exempted from enterprise income tax in the first two profit-making years and be granted a 50 percent enterprise income tax reduction in the third through the fifth year" applies only to the income gained during the enterprise's operational period. Therefore, income gained from liquidation which is conducted during the above-mentioned tax reduction and exemption period shall not be granted enterprise income tax reduction and exemption in accordance with ARTICLE 8 of the Tax Law.

This Notice goes into effect from the day of receipt of the document.

The stipulation set in ARTICLE 8 of the Tax Law which states "Productive enterprise with foreign investment scheduled to operate for a period over 10 years shall be exempted from enterprise income tax in the first two profit-making years and be granted a 50 percent enterprise income tax reduction in the third through the fifth year" applies only to the income gained during the enterprise's operational period. Therefore, income gained from liquidation which is conducted during the above-mentioned tax reduction and exemption period shall not be granted enterprise income tax reduction and exemption in accordance with ARTICLE 8 of the Tax Law.

This Notice goes into effect from the day of receipt of the document.