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NOTICE OF THE STATE ADMINISTRATION OF TAXATION ON DOING A GOOD JOB IN EVALUATING THE INCOME TAX PAYMENT OF FOREIGN-FUNDED ENTERPRISES AND FOREIGN ENTERPRISES






Notice of the State Administration of Taxation on Doing a Good Job in Evaluating the Income Tax Payment of Foreign-funded Enterprises
and Foreign Enterprises

Guo Shui Han [2005] No. 449

The state taxation bureaus of all provinces, autonomous regions and municipalities directly under the Central Government and the cities
under separate state planning and the local taxation bureaus of Guangdong Province and Shenzhen Municipality:

Recently, the State Administration of Taxation has distributed the Measures for the Administration of Tax Payment Evaluation (for
Trial Implementation) (Guo Shui Fa [2005] No. 43, hereinafter referred to as the Measures for the Evaluation of Tax Payment), which
has uniformly regulated the means and measures for the evaluation of the payment of various taxes. In particular, it has clarified
the analysis indexes and the instructions thereof for the evaluation of the income tax of foreign-funded enterprises and foreign
enterprises (hereinafter referred to as the foreign￿Crelated enterprises). In order to effectively do a good job in the evaluation
of the income tax payment of foreign-related enterprises, we hereby notify the relevant issues as follows:

I.

Basic Requirements

Since 1998, in order to strengthen the administration of the income tax of foreign-related enterprises, the tax authorities at all
levels have successively carried out comparatively standardized measures concerning the settlement and payment, examination and evaluation
of taxes and tax audit on foreign-related enterprises and have, at the same time, tried out the measures of joint tax audit on those
foreign-related enterprises with trans-regional business operations. The practice of all these years has proved that the aforesaid
measures are effective means to strengthen the administration of tax sources. With the incessant elevation of the computerized administration
of tax collection, it is necessary to form a working system with the information pool, orderly operation and mutual promotion for
the administration of the income tax of foreign-related enterprises so as to form a resultant force of administration by means of
integrating administrative resources and further enhance the work efficiency. Therefore, all regions shall regard the popularization
of the evaluation of tax payment as an opportunity, organically blend the aforesaid measures for administration so as to make good
use of their respective advantages and avoid any conflict with each other or any overlapping work in the evaluation of tax payment.

1.

Including the examination and evaluation of taxes into the standardized evaluation of tax payment. The Measures for the Evaluation
of Tax Payment are a more standardized work procedure and a more scientific analysis index system designed on the basis ofsummarizing
the examination and evaluation of the taxes of foreign-relatedenterprises that are pointed to those weak links arising in the administrationof
tax sources in recent years and which also set a higher requirement for an in-depth analysis on the declared materials. Therefore,
the evaluation of tax payment is also an extension of the examination and evaluation of taxes and all regions shall include the examination
and evaluation of taxes into the evaluation of tax payment.

2.

Combining the settlement and payment of the income tax of foreign-related enterprises with some of the links in the evaluation of
tax payment. The settlement and payment of the income tax of foreign-related enterprises shall not only include filling in an annual
declaration form and paying its taxes in a timely manner by the enterprise, but also include carrying out a general examination on
the enterprise￿￿s annual declaration forms and other relevant materials and handling the refund of overpaid annual income taxes and
repayment of any deficiency by the tax authority. Therefore, the same requirements shall be applicable to the general examination
and the preliminary evaluation of tax payment and desk analysis in the work of settlement and payment, so that they shall be carried
out in a combined manner.

3.

Taking the foreign-related tax audit as an important means of the evaluation of tax payment. The Audit Procedures for Foreign-related
Tax (hereinafter referred to as the Audit Procedures) has embodied the modern auditing techniques and scientific working procedures
and is a forceful means to carry out the daily inspections and provide high-quality services to the foreign-related enterprises for
the tax authorities, so that all regions may continue to bring the function of foreign-related tax audit into play and do a good
job in promoting the Audit Procedures. In order to enhance the capability of the qualitative and quantitative judgment on the authenticity
and accuracy of the tax declaration, the modern auditing techniques shall be applied to the link of desk analysis and the link of
on-site investigation and verification as well so as to organically combine the evaluation of tax payment and foreign-related tax
audit in the evaluation of the income tax of foreign-concerned enterprises,.

4.

The tax authority at a higher level may be responsible for the evaluation of the income tax of large-scale foreign-related enterprises.
As the organizational structure and business operations of large-scale foreign-related enterprises, especially those that have trans-regional
operations, are comparatively complicated, more standardized technical means shall be adopted in the implementation of the evaluation
of tax payment and the coordination of the tax authority at a higher level is needed for. According to the requirements as prescribed
in Article 3 of the Measures for the Evaluation of Tax Payment by all regions, for the purpose of evaluating the tax payment of
those large-scale foreign-related enterprises, if the desk analysis and on-site investigation and verification are needed, the administrative
department of international (foreign-related) taxation of the tax authority at a higher level in all regions shall take charge of
the organization and implementation based on the preliminary evaluation by the tax authority at the grass-root level.

II.

Concrete Work

As the administration of the income tax of foreign-related enterprises has a strong policy meaning, covers many aspects and boasts
a comparatively large number of work links, for which an annual settlement and payment shall be carried out and the daily examination
shall be conducted according to the Audit Procedures, we should, on the basis of an organic combination of the aforesaid work, do
a good job in the relevant links in the work of the evaluation of tax payment.

1.

The preliminary evaluation of tax payment. The preliminary evaluation shall refer to the procedure to carry out a general examination
on the accuracy of the declaring materials concerning the settlement and payment of the income tax of foreign-related enterprises.
In this phase, we should put emphasis on collecting and sorting out the declared information of taxpayers in all aspects on the basis
of ensuring the accuracy of the logical relationship within the declaration forms, and provide the source materials for forming the
basic data. All regions shall, before the end of May, carry out a preliminary appraisal and verification on the declared materials
of those foreign-related enterprises that have participated in the settlement and payment and shall put emphasis on the examination
in the following aspects:

(1)

Whether or not all items of declared materials are complete and ready; whether or not the declared data is in conformity with that
of tax payment.

(2)

Whether or not the main form of those declare forms of tax payment, the items in the annex form and the numbers as filled therein
are complete; whether or not the applicable tax items, rates and the calculation of numbers in all items are accurate; whether or
not the logical relationship between the main form and the annex form and between numbers and items is correct.

(3)

Whether or not the affiliated materials of tax declaration, namely, the formalities for declaration and approval, are authentic, accurate
and legal; and

(4)

Whether or not the difference between the number of tax declaration and that of accounting statements and the reason thereof, and
the adjustment of incomes, expenses, profits and other relevant items are in conformity with the provisions of laws and regulations
on tax collection.

2.

The desk analysis of the evaluation of tax payment. The desk analysis shall refer to the procedure to carry out an examination on
the reasonableness of declared materials concerning settlement and payment by using the evaluation and analysis index for the income
tax of foreign-related enterprises and the instructions thereof. In this phase, an evaluation of the current tax payment as declared
by the taxpayer shall be carried out to the tax-related information in the daily administration and, where any questionable point
is founded, an on-site investigation and verification shall be initiated, which may be carried out in the process of settlement and
payment or after the settlement and payment is concluded. The specific requirements are as follows:

(1)

The main objects of examination. We should conduct examination focused on the following enterprises. large-scale foreign-related enterprises,
profit-losing enterprises, enterprises of tax exemption, enterprises of tax reduction, zero-declaration enterprises, the enterprises
with comparatively low tax rate,the enterprises with trans-regional operations, the enterprises with comparatively low profitable
rate and the enterprises with associated transactions.

(2)

Measures for examination. We should make full use of the general analysis indexes and the analysis indexes and the instructions thereof
concerning the income tax of foreign-related enterprises in the Measures for the Evaluation of Tax Payment and at the same time,
we may use the measures for analytic review in the Audit Procedures to make an analysis on relevant indexes on the tendency and rates
as well as a comparison, find out those fields where any problem may exist, and provide clues for negotiation and on-site investigation
and verification and initiating an on-site investigation and verification.

(3)

The on-site investigation and verification for the evaluation of tax payment. The on-site investigation and verification shall refer
to the procedure to carry out an on-site examination on the authenticity of the materials as declared by a taxpayer in terms of those
questionable points as found in the phase of desk analysis. The on-site investigation and verification shall be conducted after the
work of settlement and payment is concluded. The relevant techniques and requirements regarding on-site auditing in the Audit Procedures
shall be applied to those foreign-concerned enterprises that have a comparatively mature financial and accounting system and a comparatively
large operating scale so as to enhance the technical content in the investigation and verification. At the same time, with regard
to the evaluation of the tax payment for those foreign-related enterprises that adopt an across-region operational mode and pay their
income taxes on a consolidated base, if an on-site investigation and verification is needed, it shall be conducted according to the
requirements of the Interim Measures for Joint Tax Audit on Foreign-related Enterprises as distributed by the State Administration
of Taxation.

(4)

The transfer of cases concerning the evaluation of tax payment. For any irregularity acts concerning tax collection or tax evasion
that shall be transferred to the tax investigation department and the administrative department of international taxation according
to the requirement of Measures on Evaluation of Tax Collection, all regions shall do a good job in transferring the working manuscript
of the evaluation of tax payment, data and materials. The State Administration of Taxation shall formulate concrete work procedures
for transferring cases based on the summarized experiences from different regions,. Where any doubtful point concerning tax evasion
of enterprise has been found before the on-site investigation and verification of the evaluation of tax payment, the administrative
department of international taxation at any level may carry out the anti-tax-evasion investigation in the phase of the investigation
and verification of the evaluation of tax payment.

III.

Measures for Guaranty

The evaluation of tax payment is an important measure to strengthen the administration of tax sources, lower taxation risks and optimize
the services of tax payment. All regions shall regard the evaluation of tax payment as an important means to strengthen the administration
of the income tax of foreign-related enterprises and effectively enhance the quality of work.

1.

Strengthening the leadership and clarifying functions and duties. According to the provisions of the Measures for the Administration
of the Evaluation of Tax Payment, the administrative departments of international (foreign-related) taxation of the tax authorities
at all levels shall be responsible for the supervision and control on the industry tax of the income tax of foreign-related enterprises,
for the establishment of index system for the evaluation of tax payment, for the calculation of early warning value of index, and
for the formulation of the specific evaluation measures, and shall provide the basis and guidance for the implementation of the evaluation
of tax payment of the tax authorities at the grass-root level. Therefore, the tax authorities at all levels shall strengthen their
leadership over the evaluation of the income tax payment of foreign-funded enterprises and the administrative departments of international
(foreign-related) taxation at all levels shall take effective measures to perform the aforesaid duties.

2.

Actively piloting and improving the indexes. The analysis indexes and how to use them in evaluating the income tax payment of foreign-related
enterprises as affiliated to the Measures for the Administration of the Evaluation of Tax Payment is abstracted on the basis of summarizing
the experiences of some provinces and municipalities. As there exist differences in the aspect of registered capital, operating scale,
industrial features and financial management, etc. whether they are scientific and reasonable or not shall be testified by more practice.
Therefore, all regions shall, on the basis of making full use of the present indexes system, pay more attention to collecting and
reporting the problems as found in the practical operations to the State Administration of Taxation timely so as to provide a decision-making
basis for establishing and improving a more scientific and reasonable indexes system. The State Administration of Taxation shall,
on the basis of summarizing the experiences of all regions, formulate specific measures for the evaluation of the income tax payment
of foreign-related enterprises.

3.

Intensifying examination and enhancing performance. Before the end of each year, all regions shall make a written summary on the evaluation
of the income tax payment of foreign-related enterprises (including the general situation, existing problems and the opinions and
suggestions for resolution), fill the Statistic Form for the Evaluation of the Income Tax Payment of Foreign-related Enterprises
(See attachment) and report it to the State Administration of Taxation (department of international taxation). The State Administration
of Taxation shall make assessment on the work of all regions and circulate it. At the same time, all regions shall establish a working
system for level-by-level assessment and regard the evaluation of tax payment as a main content of the annual work assessment.

Attachment: Statistic Form for the Evaluation of the Income Tax Payment of Foreign-related Enterprises

State Administration of Taxation

May 17, 2005




Attachment

￿￿

￿￿

Attachment:

Statistic
Form for the Evaluation of the Income Tax Payment of Foreign-related Enterprises

￿￿

￿￿￿￿Name
of the declaration entity:                                     

Year:                           

   Unit: 10,000 yuan

INTERIM MEASURES OF THE CUSTOMS OF THE PEOPLE’S REPUBLIC OF CHINA FOR THE ADMINISTRATION OF BONDED LOGISTICS CENTERS (TYPE B)

Item

Number
of Enterprises

Adjustment
of the Taxable Income

Adjustment
of the Taxable Income

Actual
Amount as Turned into the State Treasury

 Adjustment
of Increase

Adjustment
of Decrease

Net
Increase￿￿(Decrease)

Adjustment
of Increase

Adjustment
of Decrease

Net
Increase￿￿(Decrease)

Tax
Amount

Late
Fee

Total

Number
of Settlement and Payment

 

–

–

–

–

–

–

–

–

 

Evaluation
of Tax Payment

Preliminary
Evaluation

 

 

 

 

 

 

 

 

 

 

Desk
Analysis

 

 

 

 

 

 

 

 

 

 

On-site
Investigation and Verification

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

Transfer

Transfer
to the Department of Tax Investigation

 

–

–

–

–

–

–

–

–

 

Transfer
to the Department of Anti-tax evasion

 

–

–

–

–

–

–

–

–

 

Total
of Transfer

 

–

–

–

–

–

–

General Administration of Customs

Order of the General Administration of Customs of People’s Republic of China

No. 130

The Interim Measures of the Customs of the People’s Republic of China for the Administration of Bonded Logistics Centers (Type B),
which were deliberated and adopted at the executive meeting of the General Administration of Customs on June 6, 2005, are hereby
promulgated and shall come into force as of July 1, 2005.

Director General Mou Xinsheng

June 23, 2005

Interim Measures of the Customs of the People’s Republic of China for the Administration of Bonded Logistics Centers (Type B)

Chapter I General Provisions

Article 1

For the purpose of adapting to the development of modern international logistics industry and regulating the customs surveillance
of bonded logistics centers (type B) and the imported or exported goods thereof and the business operations of enterprises that engage
in bonded warehousing, the present Measures are formulated according to the Customs Law of the People’s Republic of China and the
relevant laws and regulations of the state

Article 2

The term “bonded logistics center (type B) (hereinafter referred to as logistics center)” refers to a concentrated supervision place
of the customs as approved by the General Administration of Customs that is operated by one Chinese domestic enterprise with legal
person status and where a number of enterprises enter to undertake the business operations of bonded logistics warehousing.

Article 3

Any of the following goods may be stored into logistics centers upon the approval of the customs:

(1)

Domestic export goods;

(2)

Through cargo and international relay cargo;

(3)

Goods as temporarily stored by foreign enterprises;

(4)

Export and import goods of processing trade;

(5)

Materials supplied for international shipping and aircrafts and parts and components for maintenance of international ships and aircrafts;

(6)

Import consignments of parts and components for maintenance of foreign products;

(7)

Ordinary trade import goods that have not gone through customs clearance; or

(8)

Any other goods as approved by the customs that haven’t gone through the customs clearance.

An enterprise in a logistics center shall carry out its business operation of bonded logistics in accordance with the range of goods
for storage and catalogues of commodities as approved by the customs.

Chapter II Establishment of Logistics Centers and the Enterprises Therein

Section I Establishment of Logistics Centers

Article 4

The establishment of a logistics center shall meet the following requirements:

(1)

The warehousing area of a logistics center shall not be less than 100,000 square meters when it is located in the eastern regions
and it shall not be less than 50, 000 square meters when it is located in the mid-western regions;

(2)

It satisfies the requirements of supervision, planning and construction of logistics centers set forth by the customs;

(3)

The location is close to the traffic hubs of ports, airports and roads and shall be at inland places with big international logistics
demand and convenient communications where customs offices are located and the collective customs supervision is easy to be carried
out.

(4)

It has been recognized by the people’s government at the provincial level that it complies with the overall planning of local economic
development and satisfies the demands of the development of processing trades for bonded logistics;

(5)

It establishes a computerized management system that meets the requirements of the customs supervision, provides the terminal equipment
for the query of data by the customs, and, get connected to the customs through the platform of “electronic port” so as to realize
the data exchange and information pooling between the customs and such departments as state taxation and foreign exchange on an uniform
platform in light of the certification means and data standards as prescribed by the customs; and

(6)

It establishes such supervision and office facilities as safety segregation facilities, video supervision and control system that
comply with the requirements of the customs supervision.

Article 5

An enterprise that operates a logistics center shall meet the following qualifications:

(1)

It is registered by the administrative department of industry and commerce and has the status of a legal person;

(2)

Its registered capital is not less than RMB50 million yuan;

(3)

It has the ability of performing daily administration of the enterprises in the logistics center; and

(4)

It has the ability to assist the customs in performing the supervision over the goods into or out of the logistics center and over
the business operations of enterprises in the logistics center.

Article 6

An enterprise that operates a logistics center shall observe the following responsibilities and obligations:

(1)

To establish the administrative institution which takes charge of the daily administration of the logistics center;

(2)

To abide by the Customs Law and the relevant administrative provisions;

(3)

To abide by the laws, administrative regulations and the relevant provisions in such aspects as the land administration, planning,
fire control, quality administration and environmental protection; and

(4)

To formulate and improve the management system of the logistics center and assist the customs in carrying out the supervision of the
goods into or out of the logistics center and over the business activities of enterprises in the logistics center.

An enterprise that operates a logistics center shall not directly engage in any business activities of bonded warehousing logistics
within the logistics center thereof.

Article 7

An enterprise that applies for the establishment of a logistics center shall file a written application to the customs directly affiliated
to the General Administration of Customs and submit the following documents that are affixed with the enterprise’s seal:

(1)

Application Form;

(2)

Opinion of the people’s government at the provincial level (enclosed with the feasibility report);

(3)

A photocopy of the enterprise’s constitution;

(4)

A photocopy of the business license of the enterprise as a legal person;

(5)

A photocopy of the identity certification of the legal representative thereof;

(6)

A photocopy of the taxation registration certificate;

(7)

Such credit certification documents as the capital verification report as produced by an accounting firm; and

(8)

The certification of legal land use right of the logistics center and the geographic location map and plane planning map thereof.

Article 8

Inside the logistics center shall only establish warehouses, yards for pile and the workaround for customs supervision and shall
not establish any commercial facilities for consumption.

Article 9

An application for the establishment of a logistics center shall be filed to and accepted by the customs directly affiliated to the
General Administration of Customs and shall be reported to the General Administration of Customs for examination and approval.

An enterprise shall apply to the General Administration of Customs for inspection and acceptance within 1 year after the approval
is granted by the General Administration of Customs to establish a logistics center. The General Administration of Customs shall
carry out the examination and inspection in accordance with the provisions of the present Measures in collaboration with such departments
as the State Administration of Taxation and the State Administration of Foreign Exchange or those institutions as authorized.

Where a logistics center is accepted as eligible upon inspection, the General Administration of Customs shall verify it and issue
the Acceptance Certificate of Bonded Logistics Centers (Type B) upon Inspection (See Attachment 1 for the format) and the Registration
Certificate of Bonded Logistics Centers (Type B) (See Attachment 2 for the format) to the enterprise and issue a signboard (See Attachment
5 for the sample) as well.

Only after it passes the inspection and acceptance shall a logistics center carry out its business operation.

Article 10

Where an enterprise that has been approved to establish a logistics center fails to apply for the inspection and acceptance in time
due to any justifiable reason, the term for inspection and acceptance may be extended upon the approval of the General Administration
of Customs.

Where an enterprise that has been approved to establish a logistics center fails to apply for the inspection and acceptance within
the time limit with no justifiable reasons or fails to pass the inspection and acceptance, it shall be deemed as withdrawing its
application for the establishment of a logistics center.

Section II Establishment of Enterprises in a Logistics Center

Article11

An enterprise in a logistics center shall meet the following qualifications:

(1)

It has the status of a legal person or is a branch of an enterprise outside the logistics center under any special circumstance;

(2)

For a legal-person enterprise, its registered capital shall be not less than RMB 5 million yuan; for any branch of an enterprise,
its registered capital shall be not less than RMB 10 million yuan;

(3)

It has the ability to pay taxes to the customs and perform any other legal duties;

(4)

It establishes a computerized management system in line with the supervision requirement of the customs and gets connected to the
customs; and

(5)

It has a special place to store the goods under the customs supervision within the logistics center.

Article 12

An enterprise that applies for entering a logistics center shall file a written application to the local administrative customs and
submit the following documents that are affixed with the enterprise’s seal:

(1)

Application Form (See Attachment 3 for the format);

(2)

Documents on the internal management system of the enterprise;

(3)

A photocopy of the business license of the enterprise as a legal person;

(4)

A photocopy of the identity certification of the legal representative thereof;

(5)

A photocopy of the taxation registration certificate;

(6)

Certification of its stocking holding structure (joint-venture and contractual enterprises) and the photocopies of the registration
documents of all investment parties;

(7)

A photocopy of the certification of its opening bank;

(8)

Such credit certification documents as the capital verification report as produced by an accounting firm;

(9)

The location map of the warehouse as rented, the layout of the warehouse and the leasing contract; and

(10)

A photocopy of the registration certificate of declaration operation by a declaration entity.

Article 13

The application shall be reported to the customs directly affiliated to the General Administration of Customs for examination and
approval after the competent customs accepted it..

The customs directly affiliated to the General Administration of Customs shall issue the Registration Certificate of Enterprises
in Bonded Logistics Centers (Type B) of the Customs of the People’s Republic of China (see attachment 4 for the sample) to the enterprise
that has obtained the approval.

Chapter III Operation and Management of Logistics Centers

Article 14

A logistics center shall not be subleased or lent to any other entity for operation, neither may any sub-warehouse center be set up.

Article 15

An enterprise in a logistics center may carry out the following business operations:

(1)

Bonded warehousing of import or export goods and any other goods that haven’t gone through the customs clearance;

(2)

Provision of circulating simple processing and value-adding services for stored goods;

(3)

Global purchase and international allocation and distribution;

(4)

Transit trades and international transfer business; and

(5)

Any other international logistic business operation as approved by the customs.

Article 16

An enterprise in a logistics center may not carry out any of the following business operations within the logistics center:

(1)

Commercial retail;

(2)

Production, processing and manufacture;

(3)

Maintenance, renovation and dismantlement;

(4)

Storage of any goods as prohibited by the state from being import and export or any other goods as restricted by the state from being
import and export that may harm public security, public sanitation or health, public morality or order;

(5)

Any other goods that shall not enjoy any bonded policy as expressively prescribed by laws and administrative regulations; or

(6)

Any other business operation that is irrelevant to the logistics center.

Article 17

The person responsible for and personnel of the enterprise within the center and the enterprises that operates a logistics center
shall be familiar with the relevant laws and administrative regulations of the customs and shall abide by the provisions on the customs
supervision.

Chapter IV Customs Supervision to Logistics Centers and the Enterprises Therein

Article 18

The customs shall carry out a dynamic supervision and control of the goods, articles and transportation vehicles into or out of a
logistics center by such means as networking supervision, video supervision and control and on-spot verification, etc..

Article 19

The customs shall carry out a network of supervision on logistics centers and the enterprises therein through computers. A logistics
center and the enterprises therein shall establish a computerized management system that meets the qualifications of the customs
supervision and get connected to the customs and form complete and authentic electronic data for the import, export, transfer and
storage of goods for the purpose of ensuring that the customs may conduct such supervisory work as the inquiry, statistics, collection,
exchange and verification of the data of relevant business operations.

Article 20

The competent customs shall carry out a distance supervision to logistics centers through the video supervision system.

Article 21

The valid term of the Registration Certificate of Bonded Logistics Centers (Type B) shall be 3 years.

An enterprise that operates a logistics center shall go to the customs directly affiliated to the General Administration of Customs
to go through the formalities of applying for the postponement of examination 30 days before the expiration of each valid term of
the Registration Certificate of Bonded Logistics Centers (Type B).

Where an enterprise that operates a logistics center applies for the postponement of examination, it shall submit the following documents
that are affixed with the seal of the enterprise.

(1)

A photocopy of the balance sheet and income statement of the current year, which have been audited by an accounting firm;

(2)

A photocopy of the business license that has been pasted with the mark of passing the annual inspection of the current year by the
administrative department of industry and commerce and a photocopy of the business license of the enterprise as a legal person; and

(3)

Any other certification documents as required by the customs.

An extension of 3 years may be granted to an enterprise that passes the examination.

Article 22

Where a logistics center needs to alter such matters as its name, address, area or ownership, an application shall be filed to and
accepted by the customs directly affiliated to the General Administration of Customs and reported to the General Administration of
Customs for examination and approval. Any other matter regarding alteration shall be reported to the customs directly affiliated
to the General Administration of Customs for archival filing.

Article 23

Where an enterprise in a logistics center needs to alter any matter, an application shall be filed to and accepted by the competent
customs and reported to the customs directly affiliated to the General Administration of Customs for examination and approval.

Article 24

Where an enterprise that operates a logistics center fails to carry out its business operation for consecutive 12 months without any
justifiable reason, it shall be deemed that the said enterprise has revoked its application for the establishment of a logistics
center. The customs directly affiliated to the General Administration of Customs shall report it to the General Administration of
Customs for dealing with the formalities for deregistration and withdraw the signboard and the Acceptance Certificate of Bonded Logistics
Centers (Type B) upon Inspection.

Where an enterprise that operates a logistics center terminates its business operation due to any reason, it shall file a written
application to the customs directly affiliated to the General Administration of Customs and go through the formalities for writing-off
and return the signboard and the Acceptance Certificate of Bonded Logistics Centers (Type B) upon Inspection upon the examination
and approval of the General Administration of Customs.

Article 25

Where an enterprise in a logistics center fails to carry out its business operation for consecutive 6 months without any justifiable
reason, it shall be deemed that the said enterprise has revoked its application for entering the bonded logistics center, the competent
customs shall report it to the customs directly affiliated to the General Administration of Customs to go through the formalities
for deregistration and withdraw the Enterprise Registration Certificate of Bonded Logistics Center (Type B).

Article 26

The storage term for the bonded goods in a logistic center shall be 2 years. In case of justifiable reasons, an extension may be granted
upon the approval of the competent customs, and the extension shall not exceed 1 year except special circumstances,.

Chapter V Customs Supervision to Goods into or out of Logistics Centers

Section I Goods as Transported between Logistics Centers and Border Beyond

Article 27

Any goods that is transported between a logistics center and border beyond shall be subject to the relevant formalities at the competent
customs in charge of the logistics center. Where a logistics center and a port are not subject to the same competent customs, the
relevant formalities may be handled in the port customs upon the approval of the competent customs.

Article 28

Where any goods is transported between a logistics center and border beyond no administration of import or export quota or licensing
shall be applied except for those goods that are subject to the passive export quota control or any international treaty as attended
and concluded by the People’s Republic of China or unless it’s otherwise clearly prescribed by the state,.

Article 29

Where any goods is transported from border beyond into a logistics center, the tariff and import link taxes levied by the customs
on behalf of other authorities thereof shall be handled in accordance with the following provisions:

(1)

Those goods as listed in Article 3 of the present Measures shall be given the bonded treatment; and

(2)

Where an enterprise in a logistics center imports office appliance, transportation tools and life consumption articles, etc. for self-use,
or machines, loading or unloading equipment, management equipment, etc. that are required by comprehensive logistics services, the
relevant formalities shall be gone through in accordance with the relevant provisions on and taxation policies of import goods.

Section II Goods as Transported between Logistics Centers and Domestic Places

Article 30

Where any goods in a logistics center is collected across customs areas, the formalities thereof may be handled at the customs in
charge of the logistics center or the relevant formalities may be handled in accordance with other provisions of the customs.

Article 31

An enterprise in a logistics center may transport in or out goods batch by batch and make the monthly declaration collectively in
accordance with the provisions of the customs upon the approval of the administrative customs. However, the collective declaration
shall not be handled beyond the year.

Article 32

Any transportation of goods from a logistics center into domestic places shall be deemed as an import and the formalities for import
declaration shall be gone through in accordance with the actual trading forms and the actual situations; where the goods are subject
to the licensing administration, the relevant enterprise shall provide effective license certificates to the customs; where any import
or export goods is subject to collective declaration, the tariff rate and foreign exchange rate as applied on the day when the customs
accepts the declaration of each import or export of goods shall be applied.

Article 33

Any transportation of goods from domestic place into a logistics center shall be deemed as an export and the formalities for export
declaration shall be handled. Where the export tariff is required, it shall be paid in accordance with the relevant provisions; as
for the goods that are subject to the licensing administration, the effective license certificates of export shall be provided to
the customs.

For the goods transported from a domestic place into a logistics center that was imported earlier, the domestic consignor shall go
through the formalities for declaration at the customs and the goods shall be subject to the inspection and release of the competent
customs. The tariff collected and import link taxes as levied by the customs on behalf of other authorities shall not be refunded.

It shall be handled in accordance with the following provisions unless there is any separate provision of laws and administrative
regulations:

(1)

The customs shall sign and issue the certification page of the declaration form of export goods for the handling of export refund
under any of the following circumstance,:

1.

The goods as transported from a domestic place into a logistics center has gone through the formalities for declaration;

2.

For any export goods in transit, the customs at the consignment place has received the return receipt of transit verifying that the
transit goods has entered the logistics center from the customs in charge of the logistics center; or

3.

Domestic machines, loading or unloading equipment, management equipment, inspection and testing equipment, etc. that are transported
from a domestic place into the logistics center for the self-use of the enterprise therein.

(2)

The customs shall not sign and issue the certification page of the declaration form of export goods for the handling of export refund
under any of the following circumstance:

1.

Articles for daily use and transportation vehicles that are transported from a domestic place into the logistics center for the self-use
of enterprises in the logistics center;

2.

Machines, loading or unloading equipment, management equipment, inspection and testing equipment, etc. that are transported from a
domestic place into a logistics center for the self-use of enterprises in the logistics center; or

3.

The transportation of goods between bonded logistics centers and between bonded logistics centers and such special customs supervision
areas or customs supervisory bonded places as export processing areas, bonded logistics parks or areas, logistics centers (type B),
and export supervisory warehouses where the policy of tax refund in the warehousing link of domestic goods is applied.

Article 34

The enterprises shall go through the formalities for export refunds in accordance with the relevant measures for the administration
of tax collection by the State Administration of Taxation and shall go through the formalities for the receipt and payment of foreign
exchange in accordance with the relevant measures for the administration of foreign exchange by the State Administration of Foreign
Exchange.

Article 35

For goods falls in the following categories, the tariff and import link taxes as levied by the customs on behalf of other authorities
may be exempted in the transportation into the territory of China by way of entering a logistics center:

(1)

Parts and components that are used for free maintenance of relevant foreign products within the guaranteed period and that are in
conformity with the relevant provisions on non-compensated goods;

(2)

Documents as used for international shipping and aircraft; or

(3)

Any other tax-free goods as prescribed by the state.

Article 36

The transportation of goods between bonded logistics centers and such special customs supervision areas or customs supervisory bonded
places as bonded areas, export processing areas, bonded logistics parks or areas, logistics centers (type A or B), bonded warehouses
and export supervisory warehouses where the policy of tax refund in the warehousing link of domestic goods is applied shall be governed
by relevant provisions.

Section III Goods as Circulated among Enterprises in a Logistics Center

Article 37

The goods in a logistics center may be assigned or transferred between the enterprises therein and shall be subject to relevant customs
formalities. Without the approval of the customs, no enterprise in a logistics center may unlawfully mortgage, pledge, keep or misuse
the goods as stored or make any other disposal.

Chapter VI Legal Liabilities

Article 38

Where any damage or destruction is done to the bonded warehousing goods in the storage period, the enterprises in a logistics center
shall pay the taxes of those goods as damaged or destroyed to the customs in accordance with law and shall be subject to the relevant
legal liabilities except the case of force majeure.

Article 39

As for any violation of the present Measures, the customs shall give punishments in accordance with the Customs Law of the People’s
Republic of China and the Regulation on the Implementation of Administrative Sanctions of the Customs of the People’s Republic of
China. Where a crime is constituted, the violators shall be subject to criminal liabilities according to law .

Chapter VII Supplementary Provisions

Article 40

Definitions of the following terms in the present Measures:

The term “enterprises in a logistics center” refers to the enterprises that have obtained the approval from the customs to enter a
logistics center to carry out the business operations of bonded warehousing logistics.

The term “circulating simple processing and value-adding services” refers to the general term of such simple supplementary operations
as grading and classification, dismantling and selecting, separate packing, measuring, combination package, fixing films, adding
shipping marks, mark labeling, changing package and assembling.

The term “international transfer goods” refers to the goods that are consigned from abroad, reloaded onto transportation vehicles
sailing on international navigation lines in a transfer port and continuously transported to the designated port of a third country
or district thereafter.

Article 41

The power of interpreting the present Measures shall remain with the General Administration of Customs.

Article 42

The present Measures shall come into force as of July 1, 2005.

Attachment:

1.

Acceptance Certificate of Bonded Logistics Centers (Type B) upon Inspection(Omitted)

2.

Registration Certificate of Bonded Logistics Centers (Type B)(Omitted)

3.

Application Form for Enterprise Establishment of Bonded Logistics Centers (Type B)(Omitted)

4.

Enterprise Registration Certificate of Bonded Logistics Centers (Type B)(Omitted)

5.

Signboard of Bonded Logistics Centers (Type B)(Omitted)

 
General Administration of Customs
2005-06-23

 



REPLY OF THE MINISTRY OF FINANCE AND STATE ADMINISTRATION OF TAXATION ON RELEVANT ISSUES OF THE INDIVIDUAL INCOME TAX

Ministry of Finance, State Administration of Taxation

Reply of the Ministry of Finance and State Administration of Taxation on Relevant Issues of the Individual Income Tax

Cai Shui [2005] No. 94

To the department of public finance and the local taxation bureau of Jiangsu Province:

Your Request for Instructions on Relevant Issues of the Individual Income Tax (Su Di Shui Fa [2005] No. 50) has been received. Upon
the deliberation, the reply shall be as follows:

1.

Issue concerning how to deal with the individual income tax and enterprise income tax after an entity withdraws the supplementary
old-age insurance for individual. When the commercial supplementary old-age insurance is purchased by an enterprise for its employees,
it shall be subject to the individual income tax item of the “income from wages and salaries” and pay the individual income tax
pursuant to the tax law when handle the formalities of insurance; if it is withdrawn for any reason and the individuals fail to obtain
the actual income, the individual income tax which has been paid shall be refunded.

2.

Issue concerning the individual income tax on an individual’s income gained by providing guaranty. Where an individual obtains payment
by providing an enterprise or another person with a guaranty, he shall pay individual income tax according to the item – “other income”
as specified in the Individual Income Tax Law. The tax payable shall be levied through withholding by the entity or individual that
makes the payment.

Ministry of Finance

State Administration of Taxation

June 2, 2005



 
Ministry of Finance, State Administration of Taxation
2005-06-02

 






CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON RELATED MATTERS CONCERNING THE IMPROVEMENT OF ADMINISTRATION OF EXPORT PREPAYMENT AND COLLECTION OF FOREIGN EXCHANGE FROM CARRYING TRADE AT THE PRESENT STAGE

State Administration of Foreign exchange of the People’s Republic of China

Circular of the State Administration of Foreign Exchange on Related Matters Concerning the Improvement of Administration of Export
Prepayment and Collection of Foreign Exchange from Carrying Trade at the Present Stage

Hui Fa [2005] No. 33

May 17, 2005

The branches and offices of the State Administration of Foreign Exchange of the People’s Republic of China (SAFE) in all provinces,
autonomous regions, municipalities directly under the Central Government, and the SAFE branches of municipalities of Shenzhen, Dalian,
Qingdao, Xiamen and Ningbo as well as various designated foreign exchange banks with Chinese investment:

In view of issues with respect to foreign exchange collection under current items at the present stage, especially the prepayment
and the collection of foreign exchange from carrying trade and for the purpose of strengthening the examination of the authenticity
of the inflow of foreign exchange funds under current items and regulating the activities of export prepayment and collection of
foreign exchange from carrying trade, related matters are hereby notified as follows:

1.

Various SAFE branches and offices (hereinafter referred to as “foreign exchange departments”) and designated foreign exchange banks
(hereinafter referred to as “banks”) shall strengthen the examination of the authenticity of export prepayment and collection of
foreign exchange from carrying trade in strict compliance with this Circular and other pertinent regulations for the administration
of foreign exchange.

2.

Banks shall, upon the receipt of foreign remittance made by units collecting foreign exchange, carefully examine the nature of such
remittance based on the remittance instruction and deal with corresponding formalities of foreign exchange settlement or entry into
account books for such units in accordance with this Circular and existing relevant regulations for the administration of collecting
and settling foreign exchange.

3.

With regard to any of the following single foreign remittance in an amount equivalent to USD 200 million or above (the figure inclusive),
banks shall transfer such remittance into special foreign exchange accounts, which are opened by units collecting foreign exchange
with such banks, namely accounts used for future foreign exchange settlement:

(1)

export prepayment;

(2)

collection of foreign exchange from carrying trade;

(3)

a sum which is explicitly required to be deposited into an account for the settlement of foreign exchange under current items according
to foreign remittance instruction, but unable to have its transaction nature judged by banks subject to the same instruction; and

(4)

a sum which is explicitly required to be settled into an RMB account based on foreign remittance instruction, but unable to have its
transaction nature judged by banks subject to the same instruction.

Foreign remittance with the nature of donation and international exchange shall directly enter corresponding special accounts under
current items in accordance with the existing regulations.

4.

Expenditures in accounts for future foreign exchange settlement shall include: the expenditure of foreign exchange under current items,
approved expenditure of foreign exchange under capital items, the transfer in original currency of foreign exchange funds deposited
in different accounts for future foreign exchange settlement of the same unit collecting foreign exchange and the settlement of foreign
exchange conforming to provisions of this Circular.

5.

Banks may, without any approval from the foreign exchange departments, open accounts for future foreign exchange settlement for units
collecting foreign exchange. No such account shall be incorporated into the information management system for foreign exchange accounts
temporarily, the balance of which shall not be subject to the limit of accounts for the settlement of foreign exchange under current
items.

6.

Where foreign exchange funds in accounts for future foreign exchange settlement are settled, any unit collecting foreign exchange
shall submit a written explanation to a bank, indicating the nature of the sum to be settled, provide relevant documents and comply
with the following provisions:

(1)

If foreign exchange funds are indicated in writing by a unit collecting foreign exchange as export prepayment, settlement of foreign
exchange shall be made on presentation of an original copy of an instrument for verification and writing- off of the export proceeds
in foreign exchange (hereinafter referred to as “instrument for verification and writing-off”) with a seal stating “examined” as
affixed by the Customs thereon. Any banks shall, upon completing such formality, endorse on the column for bank use only of such
original copy the corresponding amount of settled foreign exchange and date. Foreign exchange funds which are required to be paid
in RMB at home with no presentation of an original copy of an instrument for verification and writing- off temporarily, shall be
settled in compliance with the payment instruction provided by a unit collecting for exchange, showing the use of RMB funds after
foreign exchange settlement. RMB funds after foreign exchange settlement shall be directly paid to any payee other than a payer designated
on such payment instruction.

(2)

Where foreign exchange funds are indicated in writing by a unit collecting foreign exchange as foreign exchange earnings from carrying
trade to be paid first and collected then, foreign exchange settlement shall be made on presentation of a duplicate of a verification
certificate of import payment and a carrying trade contract. Any banks shall, upon completing such formality, endorse on such contract
the corresponding amount of settled foreign exchange and date.

(3)

Where foreign exchange funds are indicated in writing by a unit collecting foreign exchange as foreign exchange earnings from carrying
trade to be collected first and paid then, the settlement of foreign exchange shall not be made prior to the completion of external
payment for carrying trade. The balance of such foreign exchange funds shall, after external payment has been made, be settled on
presentation of a carrying trade contract.

(4)

In case foreign exchange funds are indicated in writing by a unit collecting foreign exchange as other sums to fall under the scope
of trade items, foreign exchange settlement shall be made on the presentation of the original copy of an instrument for verification
and writing- off. Any banks shall, upon completing such formality, endorse on the column for bank use only of such original copy
the corresponding amount of settled foreign exchange and date.

(5)

In case foreign exchange funds are indicated in writing by a unit collecting foreign exchange as other sums to fall under the scope
of current items and to be paid in RMB at home, foreign exchange settlement shall be made in compliance with the payment instruction
provided by such unit, showing the use of RMB funds after foreign exchange settlement. RMB funds after foreign exchange settlement
shall be directly paid to any payee other than a payer designated on such payment instruction.

(6)

Banks shall, upon handling the formality of foreign exchange settlement for units collecting foreign exchange, retain originals or
photocopies of corresponding documents.

7.

The external payment of the foreign exchange funds deposited into the account for future settlement of foreign exchange shall comply
with existing relevant regulations for the administration of foreign exchange collection. Foreign exchange funds in different accounts
for future foreign exchange settlement of the same unit collecting foreign exchange may be transferred in original currency. Transferring
banks shall, upon dealing with such formality, endorse on the remark column the wordings of “transfer of funds deposited in the account
for future foreign exchange settlement”.

Foreign exchange funds deposited in the account for future foreign exchange settlement, other accounts other than accounts for future
foreign exchange settlement belonging to the same unit collecting foreign exchange and other foreign exchange accounts of other units
shall not be transferred one another.

8.

After the prepayment has been entered into the book account or settled, where units collecting foreign exchange apply to banks for
obtaining coupons special for verification and writing-off of the export proceeds in foreign exchange, banks shall examine original
copies of instruments for verification and writing- off and goods declaration for exportation respectively as provided by such units,
and shall not issue coupons special for verification and writing-off until endorsing on the column for bank use only of the said
instrument the corresponding the amount of collected foreign exchange and affixing an official business seal after number of such
instrument is verified consistent with that on the goods declaration for exportation.

9.

Where an application is filed for the refund of export prepayment or foreign exchange earnings from carrying trade after such prepayment
or foreign exchange earnings has been collected, settled or entered into the book account due to any reason, foreign exchange departments
shall conduct an strict examination in accordance with relevant provisions of the Detailed Rules for the Implementation of the Measures
for the Administration of Verification and Writing-off of the Export Proceeds in foreign Exchange (Hui Fa [2003] No.107)

10.

Banks shall, within ten working days prior to each quarter, report such information as the opening of accounts for future foreign
exchange settlement, foreign exchange collections and payments, foreign exchange settlement and the balance (See Appendix 1 for the
format) to foreign exchange departments where foreign exchange is collected. Local SAFE branches shall, within 15 working days prior
to each quarter, report such information as the opening of accounts for future foreign exchange settlement, foreign exchange collections
and payments, foreign exchange settlement and the balance (See Appendix 2 for the format) to the Current Account Management Department
of the SAFE.

11.

Foreign exchange departments shall intensify the sorting out of data in respect of foreign exchange which has been collected but failed
to be verified and written off, focus on the supervision over the large and overdue foreign exchange which has been collected but
failed to be verified and written off, strengthen the analysis, verification, inspection and correction of abnormal circumstances,
and transfer cases in contravention of regulations for the administration of foreign exchange to departments in charge of foreign
exchange inspection for investigation and punishment.

12.

Banks shall be given punishments in accordance with Article 42 of the Regulations of the People’s Republic of China on Foreign Exchange
Control if dealing with the formality of foreign exchange settlement in violation of this Circular; Banks failing to timely submit
reports according to provisions shall be penalized subject to Article 31 and Article 49 of the Regulations of the People’s Republic
of China on Foreign Exchange Control; Where banks and importing & exporting units violate other provisions hereof, punishments shall
be applied in compliance with the Regulations of the People’s Republic of China on Foreign Exchange Control and other regulations
for the administration of foreign exchange.

13.

This Circular shall not apply to enterprises located in special economic regions subject to the enclosed supervision by the Customs,
for instance, bonded areas, bonded processing areas, bonded logistics zones and logistics centers.

14.

This Circular shall become effective as of June 1, 2005. In case of any discrepancy between former regulations and this Circular,
the latter shall prevail.

Various SAFE branches shall, upon the receipt of this Circular, transmit it to all the central sub-branches, foreign-funded banks
and related units within the jurisdiction of such SAFE branches as soon as possible; All the designated foreign exchange banks with
Chinese investment shall, upon receiving this Circular, promptly transmit it to their subordinated branches. In case of any problem
during the implementation hereof, please timely report such case to the Current Account Management Department of the SAFE.

Appendices:

1)

Quarterly Report on the Information of an Account for the Future Settlement of Foreign Exchange under Current Items (For Bank Use
Only) (Omitted)

2)

Quarterly Report on the Information of an Account for the Future Settlement of Foreign Exchange under Current Items (For SAFE Branch
Only) (Omitted)



 
State Administration of Foreign exchange of the People’s Republic of China
2005-05-17

 






1234Page 4 of 4

CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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