RULES FOR THE IMPLEMENTATION OF THE THE ADMINISTRATION OF TAX COLLECTION

    Article 1  These Rules are formulated in accordance with the provisions of
the Law of the People’s Republic of China on the Administration of Tax
Collection (hereinafter referred to as the Tax Administration Law).

    Article 2  The Tax Administration Law and these Rules shall apply to the
administration of the levying and collection of the various types of taxes
imposed by the tax authorities. In cases not covered by the provisions of the
Tax Administration Law and these Rules, matters shall be handled in accordance
with the provisions of other relevant tax laws and administrative legislations.

    Article 3  The initial levying and suspended levying of taxation, as well
as tax reductions and exemptions, tax refunds and supplementary tax payments
shall be handled in accordance with the provisions of the Tax Administration
Law and these Rules. A tax authority shall have the right to refuse to
implement any decision in conflict with the provisions of tax laws and
administrative legislations and shall report such a case to its higher level
tax authority.

    Article 5  The term “taxpayer” as stated in the paragraph two of Article 9
of the Tax Administration Law shall refer to a unit or individual not engaging
in production or business operations, but obliged to pay tax pursuant to the
provisions of the law and administrative legislations. The scope of and
measures for taxation registration for such units and individuals shall be
stipulated separately.

    Article 6  A taxpayer engaging in production or business operations shall
file a written application for taxation registration with the relevant tax
authority within the stipulated time limit and shall accurately complete a tax
registration form. The main contents of the tax registration form shall
include:

    (1) name of unit, name of legal representative or business owner and the
number of his resident identification card, passport or other legal
documentation;

    (2) place of residence and of business operations;

    (3) economic nature of the operations;

    (4) form of enterprise and method of accounting;

    (5) scope of production or business operations and method of operation;

    (6) registered capital, total investment, name of bank where an account is
held and bank account number;

    (7) duration of the term of the production or business operations, number
of employees, business licence number;

    (8) party in charge of finance matters and taxation personnel;

    (9) other relevant matters.

    Where an enterprise establishes a branch operation or premises engaging in
production or business operations in another district, the enterprise must
also register its head office’s name, address, legal representative, main
scope of business, and name of the party in charge of finance matters.

    Article 7  When presenting the tax authority with its tax registration
form, a taxpayer shall, depending on the circumstances, provide the following
documents and information:

    (1) business licence;

    (2) relevant contracts, articles of association and letters of agreement;

    (3) bank account number documentation;

    (4) resident identification card, passport or other legal documentation;

    (5) other documents and information required by the tax authority.

    Article 8  A tax authority shall complete its examination and verification
of the tax registration form submitted by a taxpayer and the documents and
information provided within 30 days of their receipt. For those applications
in compliance with regulations, registration shall be granted and a tax
registration certificate shall be issued.

    The format of the tax registration certificate shall be determined by the
State Administration of Taxation.

    Article 9  If a change occurs to the contents of its taxation registration
in the case of the taxpayer registrated with the administrative authority for
industry and commerce, the taxpayer shall, within 30 days of registering the
alteration with the administrative authority for industry and commerce,
present the relevant certificate to the original tax registration authority to
apply for registration of the alteration in tax. If, in accordance with
regulations, the taxpayer is not required to be registrated with the
administrative authority for industry and commerce, the taxpayer shall, within
30 days of the relevant organ approving or announcing the alteration, present
the relevant certificate to the original tax registration authority to apply
for registration of the alteration in tax.

    Article 10  If a taxpayer is involved in a dissolution, bankruptcy,
cancellation or other circumstances, thus terminating its tax payment
obligations pursuant to the law, the taxpayer shall, before cancelling its
registration with the administrative authority for industry and commerce,
present the relevant certificate to the original tax registration authority to
apply for cancellation of its taxation registration. If, in accordance with
regulations, the taxpayer is not required to be registrated with the
administrative authority for industry and commerce, the taxpayer shall, within
15 days of the relevant organ approving or announcing the termination, present
the relevant certificate to the original tax registration authority to apply
for cancellation of its tax registration.

    If a change in a taxpayer’s place of residence or place of business
operations necessitates an alteration of its relevant tax registration
authority, the taxpayer shall, before applying to the administrative authority
for industry and commerce to amend or cancel its registration and before
changing its place of residence or place of business operations, present the
relevant certificate to the original tax registration authority to apply for
cancellation of its tax registration and shall carry out tax registration
procedures with the relevant tax authority in the place to which the taxpayer
has moved.

    A taxpayer whose business licence is revoked by the administrative
authority for industry and commerce shall, within 15 days of the revocation of
the business licence, apply to the original tax registration authority for
cancellation of its tax registration.

    Article 11  Before carrying out procedures to cancel its tax registration,
a taxpayer shall settle all payable taxes, overdue payment fines and other
fines and shall turn over invoices and other taxation documents to the tax
authority.

    Article 12  Except in cases where a tax registration certificate is not
required in accordance with regulations, a taxpayer must present a tax
registration certificate when carrying out the following matters:

    (1) applying for a tax reduction, exemption or refund;

    (2) purchasing invoices;

    (3) obtaining a certificate for tax revenue administration of outside
operations;

    (4) other tax related matters.

    Article 13  A tax withholding agent bearing an obligation to withhold,
collect and hand over taxes pursuant to tax laws and administrative
legislations shall apply to the responsible tax authority to be issued with a
tax withholding or tax collection certificate.

    Article 14  A tax authority shall implement a regular certificate
inspection and replacement system for tax registration certificates. A
taxpayer shall present the relevant certificate to the responsible tax
authority within the stipulated time limit to undergo certificate inspection
or replacement procedures.

    Article 15  The tax registration certificate issued to taxpayers and the
tax withholding or tax collection certificate issued to tax withholding agents
shall not be permitted to be lent to others, altered, damaged, sold or forged.

    Should a taxpayer lose a tax registration certificate or a tax withholding
agent lose a tax withholding or tax collection certificate, a written report
shall be filed with the responsible tax authority, the lost document shall be
publicly declared invalid and, at the same time, an application shall be made
for the certificate to be reissued.

    Article 17  A taxpayer engaging in production or business operations
shall, in accordance with the provisions of Article 12 of the Tax
Administration Law, establish account books within 15 days of the date of
issue of its business licence.

    The term “account books” as stated in the previous paragraph shall refer
to general ledgers, detailed accounts, journals and other auxiliary account
books. General ledgers and journals must be in a bound form.

    Article 18  An individual industrial or commercial undertaking with only a
small production or business operation and which genuinely lacks the ability
to keep account books may appoint a registered accountant or accounting
personnel recognised by the tax authority to keep its books and handle
accounting matters. Should there be real difficulty in appointing a registered
accountant or accounting personnel recognised by the tax authority, the party
may, subject to approval by a tax authority at county level or above, keep a
book for pasting in all receipt and expenditure vouchers and a goods purchase
and sale registry, etc., pursuant to the provisions of the tax authority.

    Article 19  Within 15 days of receipt of its tax registration certificate,
a taxpayer engaging in production or business operations shall report details
of its financial and accounting systems or measures for handling finance and
accounting matters to the tax authority for the record.

    Article 20  Within 10 days of the start of its tax withholding obligations
as prescribed by the tax laws and administrative legislations, a tax
withholding agent shall establish a tax withholding or tax collection book
pursuant to the categories of tax to be withheld or collected.

    Article 21  If a taxpayer or tax withholding agent intends using a
computer to keep accounts, details of the bookkeeping software, programs,
user’s manuals and other relevant material shall first be sent to the
responsible tax authority for the record.

    If a taxpayer or tax withholding agent has a sound accounting system and
can use a computer accurately and completely to calculate its gains or income,
the account entries it stores and puts out may be regarded as an account book.
The records must, however, be printed out as written entries and kept intact.
If the accounting system is not sound and gains or income are unable to be
calculated accurately and completely by computer, the taxpayer or tax
withholding agent shall establish a general ledger and other accounts relating
to its tax payments or the withholding or collection of tax.

    Article 22  Account books, vouchers and statements shall be kept in the
Chinese language. In national minority autonomous localities, one of the local
national minority language scripts in common use throughout the locality may
be used simultaneously. Foreign investment enterprises and foreign enterprises
may use a foreign language script simultaneously.

    Article 24  A taxpayer or tax withholding agent must, within the
declaration period stipulated by the law and administrative legislations or
determined by tax authorities pursuant to the provisions of the law and
administrative legislations, lodge a tax return or a report on tax withheld or
collected and handed over on behalf of others with the responsible tax
authority.

    A taxpayer enjoying tax reduction or exemption benefits shall lodge tax
returns in accordance with regulations during the tax reduction or exemption
period.

    If a taxpayer has difficulty going to a tax authority to lodge its tax
return, the tax return may be sent by post, subject to approval by the tax
authority. If a tax return is mailed, the date on the postmark shall be
regarded as the actual date of lodgement.

    Article 25  The tax return or report on tax withheld or collected and
handed over on behalf of others which is lodged by a taxpayer or tax
withholding agent accordingly shall include the following main contents: tax
category, taxable items, taxable projects or projects on which tax should be
withheld and paid over or collected and paid over, applicable tax rate or tax
amount per unit, basis for tax calculations, deductible items and standards,
amount of tax payable or the amount of tax due to be withheld or collected and
paid over and the applicable tax period.

    Article 26  A taxpayer lodging a tax return shall complete the tax
declaration form accurately and, depending on the circumstances, shall submit
the following relevant documents and information accordingly:

    (1) financial and accounting statements and related explanatory material;

    (2) contracts and letters of agreement relevant to the tax payment;

    (3) certificate for tax revenue administration of outside operations;

    (4) relevant documentation issued by public notary bodies within China and
overseas;

    (5) other documents and information required by tax authorities in
accordance with regulations.

    Article 27  A tax withholding agent filing a report on tax withheld or
collected and handed over on behalf of others shall complete the form
accurately and submit legal certificates related to its tax withholding and
collection obligations, as well as other relevant documents and information
required by the tax authorities.

    Article 28  If a taxpayer or tax withholding agent has genuine difficulty
submitting a tax return or a report on tax withheld or collected and handed
over on behalf of others within the stipulated time limit and requires an
extension, a written application for an extension shall be lodged with the tax
authority within the stipulated time limit and, subject to examination and
approval of the application by the tax authority, procedures shall be
completed within the approved extension period.

    Article 29  In accordance with the provisions of the law and
administrative legislations, tax authorities shall collect all kinds of taxes
and shall turn over the taxes, overdue payment fines and other fines collected
to the State treasury.

    Article 30  A taxpayer unable to pay taxes on schedule due to special
difficulties may, in accordance with the provisions of paragraph one of
Article 20 of the Tax Administration Law, be granted an extension subject to
approval by the tax authority and no overdue payment fine shall be added
during the approved extension period.

    Article 31  A tax authority may collect taxes based on an examination of
the relevant accounts, assessment, inspection, fixed period-fixed amount
collection and other methods.

    Article 32  A tax authority may, in accordance with relevant State
regulations, commission related units to collect small, decentralised,
nuisance tax payments and shall issue such units with a certificate of a
commissioned tax collector. A commissioned unit shall collect taxes lawfully
in the name of the tax authority pursuant to the conditions stipulated in the
certificate of a commissioned tax collector.

    Article 33  If a taxpayer posts its tax return, the tax payment funds
shall be posted at the same time as the tax return is sent. After receiving a
tax return and tax payment funds, the tax authority must issue the taxpayer
with proof of tax payment and carry out procedures for the handing over of tax
payments to the State treasury.

    Article 34  The term “proof of tax payment certificate” as stated in
Article 22 of the Tax Administration Law shall refer to the various types of
tax paid certificates, tax memos, revenue stamps, withholding certificates and
other documentation of tax payment.

    The format of a tax paid certificate shall be determined by the State
Administration of Taxation.

    Article 35  In the case of a taxpayer in one of the instances stated in
Article 23 of the Tax Administration Law, a tax authority shall have the
right to use one of the following methods to assess the amount of tax payable:

   (1) assess the amount of tax payable with reference to the income and
profit rate of other local taxpayers involved in the same or a similar line of
business on a similar scale and at a similar level of income;

   (2) assess the amount of tax payable according to the cost, plus reasonable
amounts of expenses and profit;

   (3) assess the amount of tax payable according to a calculation or
assessment of the amount of raw materials, fuel, power, etc., consumed;

   (4) assess the amount of tax payable according to other reasonable methods.

    If use of one of the aforesaid methods is insufficient to accurately
assess the amount of tax payable, two or more methods may be used concurrently.

    Article 36  The term “affiliated enterprise” as stated in Article 24 of
the Taw Administration Law shall refer to a company, enterprise or other
economic entity which has one of the following relationships:

    (1) direct or indirect ownership or control in relation to such areas as
capital, business operations and purchases and sales;

    (2) direct or indirect ownership or control by a third party;

    (3) other mutually beneficial associations.

    A taxpayer shall be obliged to provide its local tax authority with
details of prices, expenses standards, etc., with regard to its business
transactions with affiliated enterprises.

    Article 37  The “business transactions between independent enterprises” as
stated in Article 24 of the Tax Administration Law shall refer to business
dealings between enterprises with no correlative relationship which are
conducted pursuant to fair transaction prices and common business practices.

    Article 38  If pricing, in relation to purchasing and sales transactions
conducted between a taxpayer and an affiliated enterprise, is not handled in
line with business transactions between independent enterprises, the tax
authority may, when determining the amount of tax payable, adjust the amount
of taxable income in accordance with the following procedures and methods:

    (1) according to pricing for the same or similar business transactions
between independent enterprises;

    (2) according to the revenue and profit margin obtainable if reselling the
goods to a non-affiliated third party;

    (3) according to the cost, plus reasonable expenses and profit;

    (4) according to other appropriate methods.

    Article 39  If, in the case of an accommodation fund between a taxpayer and
an affiliated enterprise, the amount of interest paid or received exceeds or
is less than the amount that would be agreeable between non-affiliated parties
or exceeds or is less than the normal interest rates of similar loan services,
the competent tax authority may make adjustments based on normal interest
rates.

    Article 40  If labour service fees for labour services provided between a
taxpayer and an affiliated enterprise are not charged or paid for pursuant to
provisions for business transactions between independent enterprises, the
competent tax authority may make adjustments based on normal fee standards for
similar types of labour service activities.

    Article 41  In the case of business transactions, such as the assigning of
assets or provision of property rights, between a taxpayer and an affiliated
enterprise, if usage fees are not priced, charged or paid for pursuant to
provisions for business transactions between independent enterprises, the
competent tax authority may make adjustments based on an amount that would be
agreeable to non-affiliated enterprises.

    Article 42  If a unit or individual engages in contracting for engineering
projects or providing labour services without obtaining a business licence,
the tax authority may order it to pay a tax payment security deposit. The said
unit or individual shall settle tax payments with the tax authority within the
stipulated period. Should it fail to do so, the tax payment security deposit
shall be used to offset the amount of tax payable.

    Article 43  If a unit or individual engages in business operations
without obtaining a business licence and the tax authority confiscates
commodities or goods pursuant to the provisions of Article 25 of the Tax
Administration Law, the party concerned shall pay its taxes within 15 days of
the date of confiscation. In the case of confiscated commodities or goods
which are fresh, live, perishable or easily lose their efficacy, the tax
authority may first auction them during their quality guarantee period and
then use the proceeds to offset the amount of tax payable.

    Article 44  The “tax payment guarantee” as stated in Article 26 and
Article 28 of the Tax Administration Law shall include a tax payment guarantor
proposed by the taxpayer and approved by the tax authority, as well as
property owned by the taxpayer which is not connected with a mortgage.

    A tax payment guarantor shall refer to any citizen, legal person or other
economic entity within Chinese territory able to provide a tax payment
guarantee. Government agencies shall not be permitted to act as a tax payment
guarantor.

    Article 45  A tax payment guarantor agreeing to provide a tax payment
guarantee for a taxpayer shall complete a tax payment guarantee statement
which specifies the target, scope of the guarantee, duration of guarantee
period, guarantee obligations and other relevant matters. A guarantee
statement shall only be deemed to be valid after the taxpayer, tax payment
guarantor and tax authority have signed it and affixed their seals.

    If using owned property not subject to a mortgage as a tax payment
guarantee, a taxpayer shall make a detailed list of the property to be used as
a guarantee and specify the value of the property and other relevant matters.
A tax payment guarantee property inventory shall only be deemed to be valid
after the taxpayer and tax authority have signed it and affixed their seals.

    Article 46  The confiscation and sealing up of commodities, goods and
other property by a tax authority must be executed by two or more taxation
personnel and the owner of the said items must be notified. If a citizen, the
owner or an adult member of his household shall be notified to be present. If
a legal person or economic entity, the legal representative or person in
charge shall be notified to be present. If the principal refuses to be
present, this shall not affect the carrying out of procedures.

    Article 47  If intending to offset the proceeds of confiscated
commodities, goods and other property against payable taxes, the tax authority
shall engage an auction organisation established pursuant to the law to
auction the goods or a commercial enterprise to buy the goods at market
prices. If free trading in the said goods is prohibited by the State, the
relevant units shall be engaged to purchase the goods at State listed prices.

    Article 48  The term “liability for compensation” as stated in paragraph
three of Article 26 of the Tax Administration Law shall refer to a case where
the tax authority’s adoption of inappropriate tax payment guarantee measures
causes the legal rights and interests of a taxpayer to sustain real economic
losses.

    Article 49  The term “other financial institutions” as stated in Article
26 and Article 27 of the Tax Administration Law shall refer to trust and
investment corporations, rural credit cooperatives, urban credit cooperatives
and other financial organisations established with the approval of the
People’s Bank of China.

    Article 50  The term “bank savings” as stated in Article 26 and Article 27
of the Tax Administration Law shall include the savings deposits of individual
industrial and commercial undertakings engaging in production and business
operations.

    Article 51  If a taxpayer or tax withholding agent engaging in production
or business operations fails to pay tax or fulfil tax withholding or
collection obligations within the stipulated period or if the tax payment
guarantor fails to make a guaranteed tax payment within the stipulated period,
the tax authority shall issue a tax payment call notice imposing a time limit
for payment which shall be a maximum of 15 days.

    Article 52  If a taxpayer with outstanding tax payments fails to settle
the amount or provide a tax payment guarantee before attempting to leave
Chinese territory, the tax authority may notify the border control authority
to prevent the said party’s departure. Detailed measures on exit prevention
procedures shall be determined by the State Administration of Taxation in
Conjunction with the Ministry of Public Security.

    Article 53  The period for commencing and finishing payment of overdue
payment fines as provided in paragraph two of Article 20 of the Tax
Administration Law shall commence on the day following the end of the tax
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