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The State Council
Official Reply of the State Council to the Report Submitted by the Ministry of Finance Requesting the Instruction on the Reduction
of the Appraised and Specified Rate of Profit for Taxation on the Resident Representative Offices of Foreign Enterprises
September 29, 1986
The State Council hereby approves the following amendment to the Interim Provisions of the Ministry of Finance of the People’s Republic
of China concerning the Imposition of Consolidated Industrial and Commercial Tax and Enterprise Income Tax on the Resident Representative
Offices of Foreign Enterprises: The provisions in Article 4 which read, “tax shall …… be calculated and determined on the basis
of an appraised and specified rate of profit, provisionally determined to be 15% of the amount of business revenue”, shall be amended
as follows: “tax shall …… be calculated and determined on the basis of an appraised and specified rate of profit, provisionally
determined to be 10% of the amount of business revenue”. The aforesaid amendment shall be announced by your Ministry, and the amendment
shall enter into force as of October 1, 1986. Attachment:Circular of the Ministry of Finance Concerning the Reduction of the Appraised and Specified Rate of Profit for Taxation on the Resident
Representative Offices of Foreign Enterprises
With the approval of the State Council, this Ministry promulgated, on May 15, 1985, Interim Provisions Concerning the Imposition of
Consolidated Industrial and Commercial Tax and Enterprise Income Tax on the Resident Representative Offices of Foreign Enterprises,
and Article 4 of these Provisions stipulates “in respect of the assessment of enterprise income tax, except for those cases in which
accurate cost and expense vouchers can be provided and where the correct amount of tax can be calculated, tax shall, in accordance
with the provisions of Article 24 of the Rules for the Implementation of the Income Tax Law of the People’s Republic of China for
Foreign Enterprises, be calculated and determined on the basis of an appraised and specified rate of profit, provisionally determined
to be 15% of the amount of business revenue.” in order to further encourage the aforesaid representative offices to expand business
operations, and in consideration of the actual condition of the differences in profit rates between the representative offices, it
is decided, with the approval of the State Council, to reduce, for the benefit of the resident representative offices, the appraised
and specified rate of profit from 15% to 10%.
This Provision shall enter into force as of October 1,1986.
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