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The State Administration of Taxation
Circular of the State Administration of Taxation on Printing and Distributing the Measures Concerning Business Income Tax Credit on
the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Equipment
GuoShuiFa [2000]No.90
May 18,2000
In order to implement the policy of the income tax credit on the investment of enterprises with foreign investment and foreign enterprises
by way of purchasing homemade products, and to enhance the regulation and examination in this regard, the State Administration of
Taxation has formulated the following Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign
Investment and Foreign Enterprises by way of Purchasing Homemade Products in accordance with the Circular on Several Issues on the
Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing
Homemade Products jointly promulgated by the Ministry of Finance and the State Administration of Taxation. You are requested to abide
by the following measures, and should there be any questions arising from practice, please inform the State Administration of Taxation.
Attachment:Measures Concerning Business Income Tax Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by
Way of Purchasing Homemade Products
Article 1
In order to implement the policy on the business income tax credit on the investment of enterprises with foreign investment and foreign
enterprises by way of purchasing homemade products, and to enhance the regulation and examination in this regard, these Measures
have been formulated in accordance with the Income Tax law of the People’s Republic of China on Enterprises with Foreign Investment
and Foreign Enterprises and the Rules for Implementation thereof as well as the Circular on Some Issues on the Business Income Tax
Credit on the Investment of Enterprises with Foreign Investment and Foreign Enterprises by Way of Purchasing Homemade Products (CaiShuiZi
[2000] No. 49, hereinafter referred to as the Circular).
Article 2
These measures apply to enterprises that pay income tax by way of collection upon verification.
Article 3
The equipment in the Circular refers to machines, transportation vehicles, appliances, and tools which fall within the scope stipulated
in the Circular and which are maintained as fixed assets for production or business purposes (including testing and verification
for production). Tools and appliances which are not maintained as fixed assets are excluded.
Article 4
The domestically-made equipment in the Circular refers to any domestically-made equipment which has not been previously used and which
was purchased using currency after July 1, 1999. Equipment invested as part of the registered capital is excluded.
Article 5
The investment made with domestically-made equipment in the Circular refers to the invoice price plus tax for the purchase of the
equipment, not including the VAT refunded in accordance with relative provisions or the fees for the transportation, installment,
and testing of the equipment.
The purchase date shall be the date of the invoice. In case of payment by installment or on credit, the purchase date shall be the
date of arrival of the equipment.
Article 6
Enterprises requesting income tax credit by purchasing domestically-made equipment shall submit an application to the competent tax
authority which shall in turn report to the provincial tax authority for approval.
Article 7
The annual income tax credit shall be used by the Enterprise in accordance with the limitation and the time limit stipulated in the
Circular. In case that the Enterprise was loss making or in the stipulated tax holidays in the previous year before the purchase
of the domestically-made equipment, its income tax for the previous year before the purchase shall be zero and be regarded as the
basis to calculate its increased income tax.
Article 8
In case that the enterprise was loss making in the previous years running before the purchase of the domestically-made equipment,
the income tax credit shall be decided only after the taxable income in the current or following years of the purchase is used to
compensate its losses in the previous years. In case that the enterprise is in the stipulated tax holidays in the current or following
years of the purchase, its taxable income in the current or following year shall be first exempted from income tax and the income
tax credit as a result of purchase of the equipment shall be carried forward to the next year within the time limit stipulated in
the Circular.
Article 9
The additional taxable income decided after inspection by the tax authority shall be added to the taxable income of that year if it
arose in the years before the purchase. It shall not be regarded as tax-credible income if it arises in the current or following
years of the purchase.
Article 10
Enterprises requesting tax credit shall submit their applications to the competent tax authority within two(2) months after the purchase
of the domestically-made equipment. The competent tax authority shall report the applications to the provincial tax authority that
shall examine and approve or disapprove the applications within one(1) month upon receiving the applications. The enterprise shall
receive a copy of the approval document.
When filing the application, the taxpayer shall provide the following documents:
1.
application form of tax credit arising from purchase of domestically-made equipment by enterprises with foreign investment or foreign
enterprises (See attachment 1).
2.
copy of its business license.
3.
copy of its tax registration certificate.
4.
copy of approval of the project granted by MOFTEC or COFTEC.
5.
copy of the contract for the establishment of the enterprise.
6.
copies of the purchasing contract of the domestically-made equipment and the invoice.
7.
copy of the Tax Payment Document (for exportation).
8.
any other documents requested by the tax authority.
Article 11
When submitting the annual income declaration form and its final accounts to the competent tax authority within four (4) months after
each tax year, the enterprise shall note in the declaration form the tax credit it has applied for in the year, together with the
General Form for Approval of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign Investment
and Foreign Enterprises (See attachment 2), and the Detailed form of Income Tax Credit Arising from Purchase of Domestically-made
equipment by Enterprises with Foreign Investment and Foreign Enterprises (See attachment 3).
Article 12
The competent tax authority, upon receiving applications and documents submitted by enterprises, shall carefully examine the items
and numbers in the documents and calculate the tax credit and collect income tax.
Article 13
The competent tax authority shall enhance the administration of income tax credit arising from the purchase of domestically-made equipment
by enterprises. It shall keep separate files and account books on income tax credit for each applicant, and keep detailed records
of the creditable income tax, investment already receiving tax credit and not receiving tax credit.
Article 14
The request of income tax credit arising from purchase of domestically-made equipment by the branch offices of the enterprises with
foreign investment in China shall be filed by the enterprise at the place where its main office is located.
Article 15
These Measures shall enter into force on July 1, 1999. Enterprises with foreign investment or foreign enterprises shall before the
end of June 2000 declare to the competent tax authority their purchases of domestically-made equipment executed between July 1, 1999
and December 31, 1999. And the tax authorities at various levels shall examine and approve the applications in accordance with the
above-mentioned provisions and refund the concerned tax before the end of September 2000.
Article 16
Tax authorities of the provinces, autonomous regions, cities under direct control of the Central Government, and municipalities separately
listed on the State plan by the Central government may formulate detailed implementation rules of these Measures, which shall be
filed at the State Administration of Taxation.
Attachments 1:Application Form of Tax Credit Arising from Purchase of Domestically-made Equipment by Enterprises with Foreign Investment
or Foreign Enterprises (Omitted).
Attachments 2:General Form for Approval of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with
Foreign Investment and Foreign Enterprises (Omitted).
Attachments 3:Detailed form of Income Tax Credit Arising from Purchase of Domestically-made equipment by Enterprises with Foreign
Investment and Foreign Enterprises (Omitted)
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