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State Administration of Taxation
Notice of SAT on Printing and Issuing the Agreement Text between the Government of the People’s Republic of China and the Government
of the Kingdom of Saudi Arabia on the Avoidance of Double Taxation and Getting Prepared for Its Implementation
No 138 [2006] of the State Administration of Taxation
The state taxation bureau and the local taxation bureau of all provinces, autonomous regions, municipalities directly under the
Central Government, cities directly under State planning, Yangzhou Taxation Refresher Institute, and all the departments under the
State Administration of Taxation,
The Agreement on the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property between the Governments
of the People’s Republic of China and the Kingdom of Saudi Arabia was formally signed by Xie Xuren, Director of the State Administration
of Taxation of China, and Ibrahim Bin Abdul-Aziz Asaf, Minister of Finance of the Kingdom of Saudi Arabia, in Beijing on January
23, 2006. The Agreement shall be effective after both contracting states have completed their respective legal procedures. The text
of the Agreement is hereby printed and distributed to you, please make good preparations prior to the implementation of the Agreement.
Annex: The Agreement between the Government of the People’s Republic of China and the Government of the Kingdom of Saudi Arabia on
the Avoidance of Double Taxation and the Prevention of Tax Evasion on Income and Property
State Administration of Taxation
February 8, 2006 AnnexThe Agreement between the Government of the People’s Republic of China and the Government of the Kingdom of Saudi Arabia on the Avoidance
of Double Taxation and the Prevention of Tax Evasion on Income and Property
The Government of the People’s Republic of China and the Government of the Kingdom of Saudi Arabia, desiring to conclude an agreement
on the avoidance of double taxation and the prevention of tax evasion on income and property , and having agreed to the following:
Article 1
Persons Covered This
Agreement shall apply to the persons who are residents of one or both of the contracting states.
Article 2
Taxes Covered
1.
The present Agreement shall apply to all the taxes imposed by either of the contracting states, its administrative regions or local
authorities on the incomes and properties, disregarding the way of tax collection.
2.
The taxes on all incomes, all properties, or a certain income or a certain property, including the taxes on the proceeds arising from
the transfer of movable property or immovable property, taxes on the total amount of wages or salaries paid by enterprises as well
as the taxes on capital appreciation shall be deemed as taxes on incomes and properties.
3.
The current tax categories to which this Agreement shall apply are:
(a)
in the case of the peoples republic of China:
(1) the individual income tax; and
(2) the foreign-funded enterprises and foreign enterprise income tax.
(hereinafter referred to as “Chinese taxes”)
(b)
in the case of the Kingdom of Saudi Arabia :
(1) zakat tax; and
(2) income tax, including the natural gas investment tax.
(hereinafter referred to as “Saudi taxes”)
4.
This Agreement shall also apply to the identical or substantially similar taxes that are levied after the date of signature of this
Agreement as an addition or replacement to the current tax categories. The competent authorities of both contracting states shall
notify each other of any substantial changes made in their respective taxation laws within a reasonable time limit after such changes
are made.
Article 3
General Definitions
1.
For the purpose of present Agreement, unless the context otherwise requires:
(a)
The term “China” refers to the People’s Republic of China. When used in a geographical sense, it means all the territory of the People’s
Republic of China, in which the Chinese laws relating to taxation apply, including its territorial seas, and any area beyond its
territorial seas, within which the People’s Republic of China has sovereign rights of exploration for and exploitation of the resources
on the sea-bed and its sub-soil and superjacent water resources in accordance with the international law;
(b)
The term “the Kingdom of Saudi Arabia” refers to the territory of the Kingdom of Saudi Arabia sense, including any area beyond its
territorial seas, within which the Kingdom of Saudi Arabia has sovereign rights of exploration for and exploitation of resources
on the water area, sea-bed and its sub-soil and natural resources in accordance with its domestic law and the international law;
(c)
The terms “a contracting state” and “the other contracting state” refer to either China or the Kingdom of Saudi Arabia, as the context
requires;
(d)
The term “person” refers to an individual, a company or any other body;
(e)
The term “company” refers to any legal person entity or any entity which is treated as a legal person entity for taxation purposes;
(f)
The terms “enterprise of a contracting state” and “enterprise of the other contracting state” refer to, respectively, an enterprise
operated by a resident of a contracting state and an enterprise operated by a resident of the other contracting state;
(g)
The term “national” refers to:
(1) any individual possessing the nationality of a contracting state;
(2) any legal person, partnership or association deriving its status as such from the laws of a contracting state;
(h)
The term “international traffic” refers to any transport by a ship or aircraft operated by an enterprise with an actual management
institution or head office in a contracting state, excluding the transport by a ship or aircraft which is operated solely between
places in the other contracting state;
(i)
the term “competent authority” refers
(1) in the case of China, to the State Administration of Taxation or its authorized representatives;
(2) in the case of the Kingdom of Saudi Arabia, to the Ministry of Finance, represented by the Minister of Finance or by his authorized
representatives.
2.
With regard to the application of the agreement by a contracting state, any term not defined herein shall, unless the context otherwise
requires, have the meaning in which it has under the law of that contracting state concerning the taxes to which the agreement applies.
However, the definitions of the relevant terms in the tax laws that a contracting state applies shall prevail over the definition
of the same terms in other laws.
Article 4
Residents
1.
For the purposes of this Agreement, the term “resident of a contracting state” means any person who, under the law of that state,
is obligatory to pay tax therein by reason of his domicile, residence, place of management institution, or place of head office or
any other criterion of a similar nature, simultaneously including this contracting state, its administrative regions and local authorities.
But this term does not include the persons who are obligatory to pay tax only because of the income sourced from or situated in this
contracting state.
2.
Where, by reason of the provisions of Paragraph 1, an individual is a resident of both contracting states, his status shall be determined
as follows:
(a)
he shall be deemed as a resident of the contracting state in which he has a permanent domicile available to him; if he has a permanent
domicile available to him in each of the contracting states, he shall be deemed as a resident of the contracting state with which
his personal and economic relations are closer (center of gravity);
(b)
if the state in which his center of gravity lies cannot be determined, or if he does not have a permanent home available to him in
either contracting state, he shall be deemed as a resident of the state in which he has a habitual abode;
(c)
if he has a habitual abode in each of the contracting states or in neither of them, he shall be deemed as a resident of the contracting
state of which he is a national;
(d)
if he is a national in each of the contracting states or in neither of them, the competent authorities of the contracting states shall
settle the issue by mutual agreement.
3.
Where, by reason of the provisions of Paragraph 1 of the present Article, a person other than an individual is a resident of both
contracting states, his identity of resident shall be deemed as a resident of the contracting state where its actual management institution
or head office is located.
Article 5
Permanent Establishment
1.
For the purposes of this Agreement, the term “permanent establishment” refers to a fixed place of business through which the business
of an enterprise is wholly or partly carried out.
2.
The term “permanent establishment”, in particular, includes:
(a)
a place of management;
(b)
a branch organization;
(c)
a representative office;
(d)
a factory;
(e)
a workshop, and
(f)
a mine, quarry or any other place of exploitation of natural resources.
3.
The term “permanent establishment”, likewise, encompasses:
(a)
A building site, construction, assembly or installation project, or the supervisory activities in connection therewith, but only where
such site, project or activities continue for a period of not less than 6 months;
(b)
the provision of services, including consultancy services, by an enterprise of a contracting state through employees or other engaged
personnel for the aforementioned purpose, provided that the period for such activities (for the same project or relevant project)
is continually or aggregately more than 6 months within any 12-month period.
4.
Notwithstanding the aforesaid provisions of this article, the term “permanent establishment” shall not include:
(a)
the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b)
the inventory of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(c)
the inventory of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(d)
the fixed business place established solely for the purpose of purchasing goods or merchandise or of collecting information for the
enterprise;
(e)
the fixed business place established solely for the purpose of carrying out, for the enterprise, any other activity of a preparatory
or auxiliary nature; and
(f)
the fixed business place established solely for the purpose of combining the activities listed in Items (a) through (e) of the present
Paragraph if such combination can be attributed to all the activities of the fixed business place with a preparatory or auxiliary
nature.
5.
Notwithstanding the provisions of Paragraphs 1 and 2, where a person (other than an agent with independent status to whom the provisions
of Paragraph 6 apply) who is acting in a contracting state on behalf of an enterprise of the other contracting state, has and habitually
exercises the authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent
establishment in the first-mentioned contracting state in respect of any activities which that person undertakes for the enterprise,
unless the activities of such person are limited to those mentioned in Paragraph 4 which would not make this fixed place of business
a permanent establishment.
6.
An enterprise of a contracting state shall not be deemed to have a permanent establishment in the other contracting state merely because
it operates its business in that other state through a broker, agent on a commissioned basis, or any other agent with independent
status in the ordinary course of their business. However, if all or nearly all of the activities of the agent are on behalf of the
enterprise, he shall not be deemed as an agent with independent status as mentioned in this Paragraph.
7.
The fact that a company which is a resident of a contracting state controls, or is controlled by, a company which is a resident of
the other contracting state, or which operates business in that other contracting state (whether through a permanent establishment
or not), shall not itself render either company a permanent establishment of the other.
Article 6
Income from Immovable Property
1.
Income derived by a resident of a contracting state from immovable property (including income from agriculture or forestry) situated
in the other contracting state may be taxed in that other contracting state.
2.
The term “immovable property” shall have the meaning it has under the law of the contracting state in which the property in question
is situated. The term shall, in any case, include the property accessory to the immovable property, livestock and equipment used
in agriculture and forestry. The rights to which the provisions of general law respecting real property apply, the usufruct of immovable
property and the rights to variable or fixed payments as consideration for the exploiting of, or the right to exploit, the mineral
resources, water sources and other natural resources, but ships and aircrafts shall not be regarded as immovable property.
3.
The provisions of Paragraph 1 shall apply to the income derived from the direct use, lease, or use in any other form, of immovable
property.
4.
The provisions of Paragraphs 1 and 3 shall apply to the income from immovable property of an enterprise and to the income from immovable
property used for the performance of independent personal services.
Article 7
Business Profits
1.
The profits of an enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on its business
in the other contracting state through a permanent establishment situated therein. If the enterprise carries out its business in
the other contracting state through a permanent establishment situated therein, the profits of the enterprise may be taxed in the
other state, but only limited to those attributable to that permanent establishment.
2.
In addition to applying the provisions of Paragraph 3, where an enterprise of a contracting state carries out its business in the
other contracting state through a permanent establishment situated therein, the permanent establishment shall be regarded as an independent
affiliated enterprise engaging in the same or similar activities under the same or similar conditions. It shall be treated differently
and separately as an independent establishment from the enterprise. The profits of this permanent establishment that may be obtained
shall belong to the permanent establishment itself in each contracting state.
3.
When determining the profits of a permanent establishment, it is allowed to deduct the expenses incurred in the business of the permanent
establishment, including the executive and general administrative expenses, no matter whether they are incurred in the state in which
the permanent establishment is situated or elsewhere. However, no such deduction shall be allowed in respect of the amounts, if any,
paid (otherwise than the reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or
any of its other offices, by way of royalties, remunerations or other similar payments in return for the use of patents or other
rights, or by way of commission for specific services performed or for management, or, except in the case of a banking enterprise,
by way of income from credit against the permanent establishment. Likewise, no consideration may be taken, in the determination of
the profits of a permanent establishment, for the amounts charged (otherwise than the reimbursement of actual expenses), by the permanent
establishment to the head office of the enterprise or any of its other offices, by way of royalties, remunerations or other similar
payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management,
or, except in the case of a banking enterprise, by way of income from credit against the head office of the enterprise or any of
its other offices.
4.
Insofar as it has been customary in a contracting state to determine the profits to be attributed to a permanent establishment on
the basis of distribution of the total profits of the enterprise to its various parts, the provisions in Paragraph 2 shall not preclude
that contracting state from determining the profits to be taxed by this method of profit distribution. However, the result of adopting
the method of profit distribution shall be in line with the principles provided for in the present Article.
5.
No profits may be attributed to a permanent establishment by reason of mere purchase by that permanent establishment of goods or merchandise
for the enterprise.
6.
For the purposes of the aforesaid Paragraphs, the profits belonging to the permanent establishment shall be determined by the same
method each year unless there is good and sufficient reason to change.
7.
If the profits include the income items that are dealt with separately in other Articles of this Agreement, the provisions of those
Articles shall not be affected by the provisions of the present article.
Article 8
Shipping and Air Transport
1.
The profits from the operations of ships or aircrafts in international transport by an enterprise of a contracting state shall be
taxable only in that contracting state where the actual management institution or head office of this enterprise is located.
2.
If the actual management institution or head office of an enterprise is established on a ship, the profits from the operations of
ships shall be taxable only in that contracting state where the parent port of the ship is located; if there is no parent port, the
profits from the operations of the ship shall be taxable only in that contracting state of which the operator of the ship is a resident;
3.
The provisions of Paragraph 1 shall also apply to the profits from the operations under partnership, joint operations or participation
in an international operating agency.
Article 9
Associated Enterprises
1.
Where
(a)
an enterprise of a contracting state participates directly or indirectly in the management, control or capital of an enterprise of
the other contracting state, or
(b)
a same person participates directly or indirectly in the management, control or capital of an enterprise of a contracting state and
an enterprise of the other contracting state, and in either of the above cases, the commercial and financial relations between the
two enterprises are different from those between two independent enterprises, so the profits which would, but for those conditions,
have been obtained by either enterprises, may be included in the profits of that enterprise and be taxed accordingly.
2.
Where a contracting state includes in the profits of an enterprise of that contracting state (and taxes accordingly) the profits on
which an enterprise of the other contracting state has paid taxes in that other contracting state and the profits so included are
profits which should have been obtained by an enterprise within the contracting state, then that other contracting state shall make
appropriate adjustment to the amount of the tax charged therein on those profits, where that other contracting state considers such
adjustment justifiable. In determining such adjustment, the other provisions of this Agreement shall be taken into consideration,
and the competent authorities of the contracting states shall consult each other, if necessary.
Article 10
Dividends
1.
Dividends paid by a company that is a resident of a contracting state to a resident of the other contracting state may be taxed in
that other state.
2.
However, such dividends may also be taxed in the contracting state of which the company paying the dividends is a resident and according
to the laws of that state, but if the recipient is the beneficial owner of the dividends, the tax so levied shall not exceed 5 percent
of the total amount of the dividends. The competent authorities of both contracting states shall determine the method to execute
this limited tax rate through negotiation.
3.
Notwithstanding the provisions of Paragraphs 1 and 2, if the beneficial owner of the dividends is the government of the other contracting
state, department under it, or any other entity directly or indirectly owned by it, the dividends paid by a resident company of a
contracting state to a resident of the other contracting state shall only be taxable in the other contracting state.
4.
The term “dividends” as used in the present Article refers to the income from shares, mining shares, promoters’ shares or other rights
of participating in the profits not of credit relationship, as well as the income from other corporate rights that are subject to
the same taxation treatment as the income from the shares by the laws of the state of which the company making the profit distribution
is a resident.
5.
The provisions of Paragraphs 1 through 3 shall not apply if the beneficial owner of the dividends, being a resident of a contracting
state, carries out business in the other contracting state of which the company paying the dividends is a resident, through a permanent
establishment situated therein, or provides in that other state independent personal services through a fixed base situated therein,
and the shares for which the dividends are paid are effectively connected with such permanent establishment or fixed base. In such
cases, the application of the provisions of Article 7 or Article 14 shall depend on the concrete circumstances.
6.
Where a company that is a resident of a contracting state derives profits or income from the other contracting state, that other contracting
state may not impose any tax on the dividends paid by or undistributed profits of the company, except insofar as such dividends are
paid to a resident of that other contracting state or insofar as the holding in respect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed base situated in that other contracting state, even if the dividends paid or
the undistributed profits consist wholly or partly of the profits or income arising in such other state.
Article 11
Credit Income
1.
The credit income arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other
contracting state.
2.
However, such credit income may also be taxed in the contracting state where it arises according to the laws of that contracting state,
but if the recipient is the beneficial owner of the credit income, the tax so collected shall not exceed 10 percent of the total
amount of the income. The competent authorities of both contracting states shall determine the method to execute the limited tax
rate through negotiation.
3.
Notwithstanding the provisions of Paragraph 2 of the present Article, the credit income arising in a contracting state and paid to
the government, local authority or central bank of the other contracting state, or to any financial institution wholly owned by the
government of the other contracting state shall be exempted from taxation in the first-mentioned contracting state; or the debt,
from which a resident of the other contracting state obtains income, is indirectly funded by the government, local authority or central
bank of the other contracting state, or to any financial institution wholly owned by the government of the other contracting state,
such credit income shall be exempted from tax in the contracting state.
4.
The term “credit income” as used in the present Article refers to the income derived from various creditor’s rights, whether or not
secured by mortgage and whether or not carrying a right to share the debtor’s profits, and in particular, the income derived from
public debts, bonds or debentures, including premiums and bonuses. The penalties for late payment shall not be regarded as a credit
income provided in the present Article.
5.
The provisions of Paragraphs 1, 2 and 3 shall not apply, if the beneficial owner of the credit income, being a resident of a contracting
state, carries out business in the other contracting state in which the interest arises through a permanent establishment situated
therein, or provides in that other contracting state independent personal services through a fixed base situated therein, and the
creditor’s right in respect of which the proceeds is paid is effectively connected with such permanent establishment or fixed base.
In such cases, the provisions of Article 7 or Article 14 shall apply according to the actual circumstances.
6.
The credit income shall be deemed as arising in a contracting state when the payer is the government, a local authority or a resident
of that contracting state. Where, however, the person paying the proceeds of debt, whether he is a resident of the contracting state
or not, has, in that contracting state a permanent establishment or a fixed base, and the debts on which the proceeds of debt are
paid is connected with the permanent establishment or a fixed base, and such credit income is borne by such permanent establishment
or fixed base, then such credit income shall be deemed as arising in the state where the permanent establishment or fixed base is
situated.
7.
Where, due to any special relationship between the payer and the beneficial owner or between both of them and any other person, if
the amount of the credit income, regarding the credit for which it is paid, exceeds the amount which have been agreed upon by the
payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In such case, the excessive part of the payments shall remain taxable according to the laws of each contracting state, but
the other provisions of this Agreement shall be taken into consideration.
Article 12
Royalties
1.
Royalties arising in a contracting state and paid to a resident of the other contracting state may be taxed in that other contracting
state.
2.
However, such royalties may also be taxed in the contracting state in which they arise according to the laws of that state, but if
the recipient is the beneficial owner of the royalties, the tax so collected shall not exceed 10 percent of the total amount of the
royalties. The competent authorities of both contracting states shall determine the method for the execution of the limited tax rate
by mutual agreement.
3.
The term “royalties” as mentioned in this Article refers to the payments of any kind received as a consideration for the use of, or
the right to use, any copyright of literary, artistic or scientific work, including cinematographic films, or films or tapes for
radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for the use of or the
right to use any industrial, commercial, or scientific equipment, or for any information concerning industrial, commercial or scientific
experience.
4.
The provisions of Paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a contracting state,
carries out business in the other contracting state in which the royalties arise through a permanent establishment situated therein,
or provides in that other state independent personal services from a fixed base situated therein, and the right or property in respect
of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such cases, the provisions
of Article 7 or Article 14 shall, as the case may be, apply.
5.
The royalties shall be deemed as arising in a contracting state when the payer is the government, a local authority or a resident
of that contracting state. Where, however, the person paying the royalties, whether he is a resident of a contracting state or not,
has in that contracting state a permanent establishment or a fixed base in connection with the liability to pay the royalties, and
such royalties are borne by the permanent establishment or fixed base, then such royalties shall be deemed as arising in the contracting
state in which the permanent establishment or fixed base is situated.
6.
Where, due to any special relationship between the payer and the beneficial owner or between both of them and some other person, the
amount of the royalties, regarding the use, right or information for which they are paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this article shall apply
only to the last-mentioned amount. In such case, the excessive part of the payments shall remain taxable according to the law of
each contracting state, but the other provisions of this Agreement shall be taken into consideration.
Article 13
Capital Gains
1.
Gains derived by a resident of a contracting state from the alienation of immovable property referred to in Article 6 and situated
in that other contracting state may be taxed in that other contracting state.
2.
Gains from the alienation of movable property forming the part of the business property of a permanent establishment which an enterprise
of a contracting state has in the other contracting state or of the movable property pertaining to a fixed base available to a resident
of a contracting state in the other contracting state for the purpose of providing independent personal services, including the gains
from the alienation of such a pe
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Ministry of Finance
Accounting Standard for Business Enterprises No. 6 – Intangible Assets
Cai Kuai [2006] No. 3
February 15, 2006
Chapter I General Provisions
Article 1
To standardize the confirmation and measurement of intangible assets and disclosure of related information, these Standards are formulated
in accordance with the Accounting Standard for Business Enterprises – Basic Standards.
Article 2
The following items shall be subject to other relevant accounting standards:
(1)
The right to use the land as investment real estates shall be subject to the Accounting Standard for Business Enterprises No. 3 -Investment
properties;
(2)
The business reputation formed during the merger of enterprises shall be subject to the Accounting Standard for Business Enterprises
No. 8 -Impairment of assets and Accounting Standard for Business Enterprises No. 20 -Business Combinations; and
(3)
The rights and interests related to oil and natural gas mining areas shall be subject to the Accounting Standard for Business Enterprises
27 -Extraction of Petroleum and Natural Gas.
Chapter II Confirmation
Article 3
The term “intangible asset” refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical
shape.
An asset, which satisfies any of the following conditions, shall meet the identifiable standards as mentioned in the definition of
intangible assets:
(1)
Being able to separate or divide from the enterprise and being able to be sold, transferred, licensed, rented or exchanged independently
or along with the relevant contracts, assets or liabilities; or
(2)
Being derived from any contractual right or other statutory rights, no matter whether or not these rights can be transferred or separated
from the enterprise or other rights and obligations.
Article 4
Intangible assets may be confirmed when it meets the conditions simultaneously as follows:
(1)
The economic benefits related to intangible assets are likely to flow into the enterprise; and
(2)
The cost of intangible assets can be measured reliably.
Article 5
When making a judgment on whether or not the economic benefits generated by intangible assets is likely to flow into it, an enterprise
shall make a reasonable estimation to all potential economic factors within the expected service life of intangible assets and present
clear evidences.
Article 6
The expenditures for an intangible item of an enterprise shall all be recorded into the profit or loss for the current period, unless
it is under any of the following circumstances:
(1)
The part meeting the confirmed conditions as prescribed in these Standards and consisting of the cost of intangible assets; and
(2)
The part obtaining from the merger of enterprises not under the same control or cannot being independently confirmed as intangible
assets, or composing the business reputation confirmed on the day of purchase.
Article 7
The expenditures for its internal research and development projects of an enterprise shall be classified into research expenditures
and development expenditures.
The term “research” refers to the creative and planned investigation to acquire and understand new scientific or technological knowledge.
The term “development” refers to the application of research achievements and other knowledge to a certain plan or design, prior to
the commercial production or use, so as to produce any new material, device or product, or substantially improved material, device
and product.
Article 8
The research expenditures for its internal research and development projects of an enterprise shall be recorded into the profit or
loss for the current period.
Article 9
The development expenditures for its internal research and development projects of an enterprise may be confirmed as intangible assets
when they satisfy the following conditions simultaneously:
(1)
It is feasible technically to finish intangible assets for use or sale;
(2)
It is intended to finish and use or sell the intangible assets;
(3)
The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that
there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the
intangible assets itself or the intangible assets will be used internally;
(4)
It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of
sufficient technologies, financial resources and other resources; and
(5)
The development expenditures of the intangible assets can be reliably measured.
Article 10
For an on-going research and development project which is obtained by an enterprise and has been confirmed as intangible assets, the
post-obtainment expenditures shall be treated in accordance with Articles 7 to 9 of these Standards.
Article 11
The self-created business reputation of an enterprise, or its internally made brand, newspaper or magazine name shall not be confirmed
as intangible assets.
Chapter III Initial Measurement
Article 12
The intangible assets shall be initially measured according to its cost. The cost of outsourcing intangible assets shall include the
purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for the expected purpose.
Where the payment of purchase price for intangible assets is delayed beyond the normal credit conditions, which is of financing intention,
the cost of intangible assets shall be determined on the basis of the current value of the purchase price. The difference between
the actual payment and the current value of the purchase price shall be recorded into profit or loss for the credit period, unless
it shall be capitalized under the Accounting Standards for Enterprises No. 17 – Borrowing Cost.
Article 13
The cost of self-developed intangible assets shall include the total expenditures incurred during the period from the time when it
meets the provisions of Articles 4 to 9 of these Standards to the time when the expected purposes of use are realized, except that
the expenditures which have already been treated prior to the said period shall not be adjusted.
Article 14
The cost invested into intangible assets by investors shall be determined according to the conventional value in the investment contract
or agreement, except for those of unfair value in the contract or agreement.
Article 15
The costs of intangible assets acquired from non-monetary assets transaction, debt recombination, government subsides, and merger
of enterprises shall be determined respectively according to the Accounting Standard for Business Enterprises No. 7 -Exchange of
non-monetary assets, Accounting Standard for Business Enterprises No. 12 – Debt Restructurings, Accounting Standard for Business
Enterprises No. 16 – Government Grants and Accounting Standard for Business Enterprises No. 20 -Business Combinations.
Chapter IV Subsequent Measurement
Article 16
An enterprise shall analyze and judge the service life of intangible assets, when it obtains intangible assets.
As for the intangible assets with limited service life, the enterprise shall estimate the years of its service life, or the amount
of the output or any other similar measurement unit, which constitutes its service life. If it is unable to forecast the period when
the intangible asset can bring economic benefits to the enterprise, it shall be regarded as an intangible asset with uncertain service
life.
Article 17
With regard to intangible assets with limited service life, its amortization amount shall be amortized within its service life systematically
and reasonably.
An enterprise shall amortize intangible assets from the time when it is available for use to the time when it is not confirmed as
the intangible assets any more.
The method chosen by an enterprise for the amortization of intangible assets shall reflect the expected realization pattern of the
economic benefits which relevant to the intangible assets. If it is unable to determine the expected realization pattern reliably,
intangible assets shall be amortized by the straight-line method.
Generally, the amortized amount of intangible assets shall be recorded into profit or loss for the current period, unless there are
other accounting standards.
Article 18
The reasonable amortization amount of intangible assets shall be its cost minus the expected residual value. For intangible assets
with an impairment provision, the accumulative amount of impairment provision shall be deducted from the cost as well. For intangible
assets with a limited service life, its residual value shall be regarded as zero, unless it is under the circumstances as follows:
(1)
A third party promises to purchase the intangible assets at the end of its service life; and
(2)
The information about the expected residual value is able to obtain from the active market and the market is most likely to remain
when the service life of the intangible asset ends.
Article 19
Intangible assets with uncertain service life may not be amortized.
Article 20
The impairment of intangible assets shall be treated in accordance with the Accounting Standards for Enterprises No. 8 -Impairment
of Assets.
Article 21
An enterprise shall, at least at the end of each year, check the service life and the amortization method of intangible assets with
limited service life. When the service life and the amortization method of intangible assets are different from those before, the
years and method of the amortization shall be changed.
An enterprise shall check the service life of intangible assets with uncertain service life during each accounting period. Where there
are evidences to prove the intangible assets have limited service life, it shall be estimated of its service life, and be treated
according to these Standards.
Chapter V Disposal and Discarding
Article 22
The balances of the price acquired and the carrying value of intangible assets shall be recorded into the profit or loss for the current
period, where an enterprise sells intangible assets.
Article 23
In case no economic benefit is expected to be brought by some intangible assets to the enterprise, the carrying value of the intangible
assets shall be written off.
Chapter VI Disclosure
Article 24
An enterprise shall disclose the following information related to its intangible assets according to their categories in the annotation:
(1)
The beginning and ending book balances, accumulative amount of amortization, and accumulative amount of provision for impairment of
intangible assets;
(2)
The estimation about the service lives of intangible assets with limited service lives; the basis for the judgment about the uncertain
service life of intangible assets with uncertain service lives;
(3)
The methods for the amortization of intangible assets;
(4)
The carrying value of intangible assets used for guaranties, the amortization amount for the current period, and other information;
and
(5)
The amount recorded into profit or loss for the current period and those confirmed as the research and development expenditures for
intangible assets.
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