WRITTEN REPLY TO QUESTION CONCERNING SINO-FOREIGN JOINT ENTERPRISEXX CO. LTD. NOT ENJOYING PREFERENTIAL TAX POLICIES AS GRANTED TOCHINESE-FUNDED WELFARE ENTERPRISES

WRITTEN REPLY TO QUESTION CONCERNING SINO-FOREIGN JOINT ENTERPRISEXX CO. LTD. NOT ENJOYING PREFERENTIAL TAX POLICIES AS GRANTED TOCHINESE-FUNDED WELFARE ENTERPRISES (State Administration of Taxation: 21 April 1994 Coded Guo ShuiHan Fa [1994] No. 121) Whole Doc.

To Beijing Municipal Tax Bureau: We have acknowledged the receipt of your letter "Asking for Instruction On the Question Concerning Whether Beijing Municipal XX Co.

Ltd. Can Enjoy Preferential Policies of Tax Reduction and Exemption as Granted to Chinese-Funded Welfare Enterprises, a document of your bureau coded Jing Shui Wai [1994] No. 173. After study, we hereby give a written reply as follows: Since the initiation of opening to the outside world, China has all along pursued two sets of different tax systems for domestically funded and enterprise with foreign investment, and preferential treatment toward the two types are not the same. The Circular of the State Administration of Taxation On the Question Concerning Tax Exemption and Reduction for Social Welfare Production Units Run by civil Affairs Departments, a document issued by the State Administration of Taxation Coded Guo Shui Fa [1990] No. 127, was drafted in light of the situation regarding domestically funded welfare enterprises, The stipulations of this Circular are not applicable to the Beijing XX Co. Ltd. which is a Sino-foreign joint venture.

Beginning from January 1, 1994, the turnover tax system for both domestically funded and enterprise with foreign investment was unified, in order to maintain the continuity of policies and guarantee the smooth implementation of the new tax system, the original preferential tax policies applicable to both enterprise with foreign investment and domestically funded enterprises have been properly dealt with in light of the respective cases. The Document of the State Administration of Taxation Coded Guo Shui Ming Dian [1993] No. 076 states: The original preferential policies on turnover tax enjoyed by welfare enterprises are still retained, the method of preceding tax refunding with tax collection adopted by tax authorities refers to domestically funded welfare enterprises which enjoy preferential turnover tax treatment, not applicable to enterprise with foreign investment, as set down in the Document of the State Administration of Taxation Coded Guo Shui Fa [1990] No. 127.

In view of this situation, tax shall be levied on the Beijing XX Co.

Ltd. proper measures shall be adopted to press for tax payment it owes which then be put in treasury.