State Administration of Taxation

Reply of the State Administration of Taxation on Issues concerning the Application of Preferential Tax Policy by Foreign-funded Enterprises
for Their Undertaking of Taxi Business and Other Passenger Transportation Businesses

GuoShuiHan[2004] No. 945

August 3rd, 2004

The Administration of State Taxes of Guangxi Zhuang Autonomous Region:

Your Request for Instructions on the Nanning KangFu Communications Limited Company’ Request for Enjoying Preferential Income Tax Policy
on the Development of Western Areas (No.143 [2003] of the Guangxi Administration of State Taxes) and the Request for Instructions
on Issues regarding the Nanning White Horse Public Traffic Limited Company’s Application for Enjoying Preferential Tax Policy on
the Development of Western Areas (No.130 [2003] of the Guangxi Administration of State Tax) have been received, we hereby make the
following reply:

The “communications and transportation industry” that enjoys the treatment of a production-oriented foreign-funded enterprise as stipulated
in Item (8) of Article 72 of the Detailed Rules for the Implementation of the Income Tax Law of the People’s Republic of China on
Foreign-funded Enterprises and Foreign Enterprises (hereinafter referred to as the Detailed Rules for the Implementation of Tax Law)
shall not include the foreign-funded enterprises engaging in the passenger transportation business; the “traffic enterprises” newly
established in the western areas, which enjoy the exemption of enterprise income tax for two years and collection of half the rate
for three more consecutive years as stipulated in Item (2) of Article 3 of the Notice of the State Council on the Implementation
of Several Policies and Measures for the Development of Western Areas (No.33 [2000] of the State Council) shall refer to the enterprises
engaging in the investment and construction of such traffic infrastructure as roads and bridges. Therefore, the Nanning KangFu Traffic
Limited Company and the Nanning White Horse Public Traffic Limited Company that engage in the taxi business and urban public passenger
transportation business do not fall within the scope of application of the aforesaid preferential enterprise income tax. Please dispose
the issue by referring to other relevant tax provisions.