Home China Laws 1999 Page 12

1999

PRODUCT QUALITY

Category	TECHNOLOGICAL CONTROL	Organ of Promulgation	The Standing Committee of the National People’s Congress	Status of Effect	In Force
Date of Promulgation	1993-02-22	Effective Date	1993-09-01

Law of the People’s Republic of China on Product Quality

Contents
Chapter I  General Provisions
Chapter II  Supervision and Control over Product Quality
Chapter III  Liability and Obligation of Producers and Sellers
Chapter IV  Compensation for Damage
Chapter V  Penalty Provisions
Chapter VI  Supplementary Provisions

(Adopted at the 30th Meeting of the Standing Committee of the

Seventh National People’s Congress on February 22, 1993,
promulgated by Order No.71 of the President of the People’s
Republic of China on February 22, 1993, and effective as of September 1, 1993)
Contents

Chapter I General Provisions

Chapter II Supervision and Control over Product Quality

Chapter III Liability and Obligation of Producers and Sellers

Concerning Product Quality

Section 1 Liability and Obligation of Producers Concerning

Product Quality

Section 2 Liability and Obligation of Sellers Concerning

Product Quality

Chapter IV Compensation for Damage

Chapter V Penalty Provisions

Chapter VI Supplementary Provisions
Chapter I General Provisions

Article 1 This Law is enacted to strengthen the supervision
and control over product quality, to define the liability for
product quality, to protect the legitimate rights and interests of users and consumers and to safeguard the socio-economic order.

Article 2 Anyone who corducts activities of production and
sale of any product within the territory of the People’s Republic
of China must abide by this Law.

“Product” referred to in this Law means a product which is
processed or manufactured for the purpose of sale.

This Law shall not apply to construction projects.

Article 3 Producers and sellers shall be liable for product
quality in accordance with this Law.

Article 4 It is prohibited to forge or falsely use
authentication marks, famous-and-excellent-product marks or other
product quality marks; it is prohibited to forge the origin of a
product, to forge or use the name and address of a factory of another producer; and it is prohibited to mix impurities or
imitations into products that are produced or sold, or pass a fake
product off as a genuine one, or pass a defective product off as a
high-quality one.

Article 5 The State shall encourage the popularization of scientific methods in product quality control and the adoption of advanced
science and technology. The State shall encourage
enterprises to make their product quality meet and even surpass
their respective trade standards, the national and international
standards. Units and individuals that have made outstanding
achievements in ensuring advanced product quality control and in
raising product quality to the advanced international standards
shall be awarded.

Article 6 The department in charge of supervision and control
over product quality under the State Council shall be responsible
for nation-wide supervision and control over product quality. The
relevant departments under the State Council shall be responsible
for supervision and control over product quality within the scope
of their respective functions and responsibilities.

The administrative departments responsible for supervision
over product quality in the local people’s governments at or above
the county level shall be in charge of supervision and control over
product quality within their administrative regions. The relevant
departments in the local people’s governments at or above the
county level shall be in charge of supervision and control over
product quality within the scope of their respective functions and
responsibilities.
Chapter II Supervision and Control over Product Quality

Article 7 The quality of a product shall be inspected and
proved to be up to the standards. No sub-standard product shall be
passed off as a product up to the standards.

Article 8 Industrial products constituting possible threats to
the health or safety of human life and property must be in
compliance with the national standards and trade standards
safeguarding the health or the safety of human life and property;
In the absence of such national standards or trade standards,
the product must meet the requirements for safeguarding the health
or safety of human life and property.

Article 9 The State shall, in compliance with the
international quality control standards in general use, practise
a rule of authentication for enterprise quality An enterprise may
on voluntary basis apply to the department in charge of supervision
and control over product quality under the State Council or an
authentication agency approved by a department authorized by the
department in charge of supervision and control over product
quality under the State Council for authentication of enterprise
qualitysystem. With respect to the enterprise which has passed the
attestation, the authentication agency shall issue an
authentication certificate of enterprise quality system.

The State shall practise a product quality attestation system
by taking reference to the internationally advanced product
standards and technical requirements. An enterprise may on
voluntary basis apply to the department in charge of supervision
and control over product quality under the State Council or to an
authentication agency approved by a department authorized by the
department in charge of supervision and control over product
quality under the State Council for authentication of product
quality. With respect to the enterprise which has passed the
authentication, the attestation agency shall issue a product
quality authentication certificate and permit it to use the
product quality authentication marks on its products or the
packages thereof.

Article 10 The State shall, with respect to product quality,
enforce a supervision and inspection system with random checking as
its main form. Products constituting possible threats to the health
or safety of human life and property, important industrial products
which have a bearing on the national economy and the people’s
livelihood, and products with quality problems as reported by
users, consumers or relevant organizations shall be subjected to
random checking. Such supervision and random checking shall be
planned and organized by the department in charge of supervision
and control over product quality under the State Council. The
administrative departments responsible for supervision over product
quality of the local people’s governments at or above the county
level may also organize supervision and random checking within
their respective administrative regions. However, overlapping
random checking shall be avoided. The results of random checking of product quality shall be made public. Where the law provides
otherwise with respect to the supervision over and inspection of product quality, the provisions of such law shall apply.

Products may be inspected if the supervision and random
checking of such products so require, but no fees shall be charged
for such purposes from the enterprises concerned. Expenses thus
incurred shall be disbursed in accordance with the relevant
regulations of the State Council.

Article 11 Product testing and inspection institutions must
have appropriate testing facilities and capabilities, and shall
undertake the work of testing and inspection of product quality
only after being appraised and endorsed by a department in charge
of supervision and control over product quality under the people’s
government at or above the provincial level or an organization
authorized by the department. Where the laws, administrative rules
and regulations provide otherwise with respect to the institutions
for testing and inspection of product quality, the provisions of such laws, rules and regulations shall apply.

Article 12 Users and consumers shall have the right to make
inquiriesto the producers and sellers about the quality of their
products. Where a complaint is made to a department in charge of supervision and control over product quality or to an
administrative department for industry and commerce or to any other
department concerned, such department shall be responsible for
handling the case.

Article 13 Social organizations responsible for the protection
of the rights and interests of consumers may, with respect to
matters concerning product quality as reported by consumers,
suggest to the departments concerned that they handle the matters,
and may give support to consumers in bringing a suit to a people’s
court with respect to the damage caused by quality problems of products.
Chapter III Liability and Obligation of Producers and Sellers
Concerning Product Quality

Section 1 Liability and Obligation of Producers
Concerning Product Quality

Article 14 Producers shall be liable for the quality of the
products they produce.

The products shall meet the following quality requirements:

(1) being free from unreasonable dangers threatening the
safety of human life and property, and conforming to the national
standards or trade standards safeguarding the health or safety of human life and property where there are such standards;

(2) possessing the properties and functions that they ought to
possess, except for those with directions stating their functional
defects;

(3) conforming to the product standards marked on the products
or the packages thereof, and to the state of quality indicated by
way of product directions, samples, etc.

Article 15 All marks on the products or the packages thereof shall meet the following requirements:

(1) with certificate showing that the product has passed
quality inspection;

(2) with name of the product, name and address of the factory
that produced the product, all being marked in Chinese;

(3) with corresponding indications regarding the
specifications, grade of the product, the main ingredients and
their quantities contained in the product, where such particulars
are to be indicated according to the special nature and
instructions for use of the product;

(4) with production date, safe-use period or date of invalidity if the product is to be used within a time
limit;

(5) with warning marks or warning statements in Chinese for
products which, if improperly used, may cause damage to the
products perse, or may endanger the safety of human life or
property.

Food products without package and other non-packed products
which are difficult to be marked because of their special nature
may dispense with product marks.

Article 16 The packages of poisonous, dangerous or fragile
products, or products that should be kept upright during storage
and transportation, or other products with special requirements
must meet the corresponding requirements and carry warning marks or
warning statements in Chinese indicating directions for storage
and transportation.

Article 17 No producer may produce any product that has been
officially eliminated by the State.

Article 18 No producer may forge the origin of a product, nor
forge or falsely use another producer’s name and address.

Article 19 No producer may forge or falsely use another
producer’s authentication marks, famous-and-excellent-product marks
or other product quality marks.

Article 20 In producing products, producers may not mix
impurities or imitations into the products, nor substitute a fake
product for a genuine one, a defective product for a high-quality
one, nor pass a substandard product off as a good-quality one.

Section 2 Liability and Obligation of Sellers
Concerning Product Quality

Article 21 A seller shall practise a check-for-acceptance
system while replenishing his stock, and examine the quality
certificates and other marks.

Article 22 A seller shall adopt measures to keep the products
for sale in good quality.

Article 23 A seller may not sell invalid or deteriorated
products.

Article 24 The marks of a seller’s products shall conform to
the provisions of Article 15 of this Law.

Article 25 A seller may not forge the origin of a product,
nor forge or falsely use another producer’s name and address.

Article 26 A seller may not forge or falsely use another
producer’s authentication marks, famous-and-excellent-product marks
or other product quality marks.

Article 27 In selling products, sellers may not mix impurities
or imitations into the products, nor substitute a fake product for
a genuine one, a defective product for a high-quality one, nor pass
a substandard product off as a good-quality one.
Chapter IV Compensation for Damage

Article 28 A seller shall be responsible for repair, or change
of the product, or for refund of a product if the it is sold under
any of the following circumstances, and, where the product has
caused any loss on users or consumers, the seller shall compensate
for such loss:

(1) not having the functions it ought to have, and no prior
explanation thereabout being given by the seller;

(2) not conforming to the product standards marked on the
product or its package;

(3) not conforming to the state of quality indicated by way of product directions or sample, etc.

After repair, change, refund or compensation has been made
according to the provisions of the preceding paragraph, if the
liability is attributed to the producer or to another seller who
had supplied the product (hereinafter referred to as supplier), the
seller shall have the right to recover his losses from the producer
or the supplier.

Where a seller fails to make repair, change, refund or
compensation in accordance with the provisions in the first
paragraph, the department in charge of supervision over product
quality or the administrative department for industry and commerce
shall order the seller to make rectification.

Where contracts for purchase and sale of products or for processing
concluded between producers or sellers or between producers and sellers
provide otherwise, the parties concerned shall act in accordance
with the provisions of the contracts.

Article 29 A producer shall be liable for compensation if his
defective product causes damage to human life or property other
than the defective product itself (hereinafter referred to as
another person’s property).

A producer shall not be liable for compensation if he can
prove the existence of any of the following circumstances:

(1) The product has not been put in circulation;

(2) The defect causing the damage did not exist at the time
when the product was put in circulation;

(3) The science and technology at the time the product was put
in circulation was at a level incapable of detecting the defect.

Article 30 Where damage to human life or another person’s
property is due to a product’s defect caused by the fault of a
seller, the seller shall be liable for compensation.

Where the seller can identify neither the producer of the
defective product nor the supplier thereof, the seller shall be
liable for compensation.

Article 31 Where a defective product causes damage to human
life or another person’s property, the victim may claim
compensation from the producer and may also claim compensation from
the seller of such product. Where the liability falls on the
producer, but the seller has made the compensation, the seller
shall have the right to recover the loss from the producer. Where
the liability falls on the seller, but the producer has made the
compensation, the producer shall have the right to recover the loss
from the seller.

Article 32 Where bodily injury is caused by a product due to
its defect, the infringer shall compensate for the medical expenses
of the infringed, the decreased earnings due to the loss of his
working time as well as the subsistence allowance if the infringed
is disabled; where such defect causes death of the infringed, the
infringer shall also pay the funernal expenses, the pension for the
family of the deceased and the living expenses necessary for any
other person(s) supported by the decased before his death.

Where damage is caused to the property of the infringed is
caused due to the defect of a product, the infringer shall restore
the damaged property to its original state, or pay compensation at
the market price. Where the infringed suffers any other serious
losses, the infringer shall also compensate for such losses.

Article 33 The limitation period for bringing an action for
damages arising from the defect of a product is two years, counting
from the day when the party concerned knew or should have known the
infringement of his rights and interests.

The right to claim for damages from defective products shall
be forfeited upon completion of ten years from the day when the
defective product causing the damage is delivered to the first user
or consumer, except that the clearly stated safe-use period has not
expired.

Article 34 “Defect” referred to in this Law means the
unreasonable danger existing in a product which endangers the
safety of human life or another person’s property; where there are
national or trade standards safeguarding the health or safety of human life and property, “defect” means inconformity to such
standards.

Article 35 Where a civil dispute concerning product quality
arises, the parties concerned may seek a settlement through
negotiation or mediation. If the parties are unwilling to resort to
negotiation or mediation, or negotiation or mediation provies to be
unsuccessful, they may apply to an arbitration organization for
arbitration as agreed upon between the parties; if the parties fail
to reach an arbitration agreement, they may bring a suit before a
people’s court.

Article 36 The arbitration organization or the people’s court
may entrust an organization in charge of product quality inspection
specified in Article 11 of this Law with product quality
inspection.
Chapter V Penalty Provisions

Article 37 Where products produced do not comply with the
relevant national or trade standards safeguarding the health or
safety of human life and property, the producer shall be ordered
to stop the production, the products and earnings illegally
produced and made shall be confiscated. And, a fine from twice to
five times the amount of the unlawful earnings shall be imposed
concurrently, and the business licence may be revoked; if the act
constitutes a crime, the offender shall be investigated for
criminal responsibility according to law.

Where products sold do not comply with the relevant national
or trade standards safeguarding the health or safety of human life
and property, the seller shall be ordered to stop the sale. If a
seller intentionally sells products not complying with the relevant
national or trade standards safeguarding the health and safety of human life and property, the products for illegal sale and the
unlawful earnings thus made shall be confiscated. And, a fine from
twice to five times the unlawful earnings shall be imposed
concurrently, and the business licence may be revoked; if the act
constitutes a crime, the offender shall be investigated for
criminal responsibility according to law,.

Article 38 Where a producer or a seller mixes impurities or
imitations into a product, or passes a fake product off as a
genuine one, or passes a defective product off as a high-quality
one, or passes a substandard product off as a good-quality one, the
producer or seller shall be ordered to stop production or sale, the
unlawful earnings shall be confiscated. And, a fine from twice to
five times his unlawful earnings shall be imposed concurrently, and
the business licence may be revoked; if the act constitutes a
crime, the offender shall be investigated for criminal
responsibility according to law.

Article 39 Where a product which has been officially
eliminated by the State is produced, the producer shall be ordered
to stop the production, the products and earnings illegally
produced and made shall be confiscated. And, a fine from twice to
five times the unlawful earnings shall be imposed concurrently, and
the business licence may be revoked.

Article 40 Where invalid or deteriorated products are sold,
the seller shall be ordered to stop the sale, the products for
illegal sale and the unlawful earnings shall be confiscated. And,
a fine from twice to five times the unlawful earnings shall be
imposed concurrently, and the business licence may be revoled; if
the act constitutes a crime, the offender shall be investigated for
criminal responsibility according to law.

Article 41 Where a producer or a seller forges the origin of a product or falsely uses another producer’s name and address, or
forges or falsely uses authentication marks,
famous-and-excellent-product marks or other product quality marks,
the producer or seller shall be ordered to make public
rectification, and the unlawful earnings shall be confiscated; a
fine may be imposed concurrently.

Article 42 Where anyone sells or purchases products mentioned
in Articles 37 to 40 of this Law by offering or accepting bribes or
other unlawful means and if the act constitutes a crime, the
offender shall be investigated for criminal responsibility
according to law.

Article 43 Where the marks of a product do not comply with the
provisions of Article 15 of this Law, the producer or seller
concerned shall be ordered to make rectification; where the marks
of the packed products do not comply with the provisions of item
(4) or (5) of Article 15 of this Law and if the case is serious,
the producer or seller concerned may be ordered to stop production
or sale. And, a fine from 15% to 20% of the unlawful earnings may
be imposed concurrently.

Article 44 Whoever forges inspection data or inspection
conclusion of a product shall be ordered to make rectification, and
a fine from twice to three times the inspection fee may be imposed.
If the circumstance is serious, the business licence shall be
revoked; where the act constitutes a crime, the person held
directly responsible shall be investigated for criminal
responsibility by applying mutatis mutandis the provisions of Article 167 of the Criminal Law.

Article 45 An administrative sanction in the form of revocation of business licence provided for in this Law shall be
decided by the administrative department for industry and commerce,
while other administrative sanctions shall be decided by the
department responsible for supervision over product quality or the
administrative department for industry and commerce according to
the functions and powers prescribed by the State Council. Where the
laws or administrative regulations provide otherwise as to the
authorities exercising the power of administrative sanctions, the
relevent provisions of such laws and administrative regulations
shall apply.

Article 46 If a party is not satisfied with the decision on
administrative sanction, it may, within 15 days of the receipt of the sanction notice, apply for reconsideration to the authorities
at the next higher level to the authorities that have made the
decision on sanction; the party may also bring a suit in a people’s
court directly within 15 days of the receipt of the sanction
notice.

The authorities responsible for reconsideration shall make a
reconsideration decision within 60 days of the receipt of the
application for reconsideration. If a party concerned is not
satisfied with the reconsideration decision, it may bring a suit in
a people’s court within 15 days of the receipt of such decision. If
no decision has been made by the authorities responsible for
reconsideration upon the expiry of the time limit, the party
concerned may bring an action in a people’s court within 15 days of the expiry of the time limit for reconsideration.

If the party concerned does not apply for reconsideration, nor
bring a suit in a people’s court upon the expiry of the time limit,
nor carry out the decision on sanction, the authorities that have
made the decision on sanction may apply to the people’s court for
compulsory enforcement.

Article 47 Any State functionary engaged in the work of supervision and control over product quality, who abuses power,
neglects duty, engages in malpractice for private benifit, shall
be investigated for criminal responsibility if his act constitutes
a crime; if his act does not constitute a crime, he shall be
subjected to administrative sanction.

Article 48 Any State functionary who clearly knows that an
enterprise, institution or individual has committed criminal
actions in violation of this Law, and takes advantage of his
position to protect the offenders intentionally from prosecution,
shall be investigated for criminal responsibility according to law.

Article 49 Whoever obstructs, by means of violence or
intimidation, State functionaries engaged in the work of supervision and control over product quality from carrying out
their duties according to law shall be investigated for criminal
resposibility in accordance with the provisions of Article 157 of the Criminal Law; whoever refuses or impedes, without resorting
to
violence or intimidation, State functionaries engaged in the work
of supervision and control over product quality to carry out their
duties shall be punished by the public security organs in
accordance with the relevant provisions of the Regulations on
Administrative Penalties for Public Security.
Chapter VI Supplementary Provisions

Article 50 Measures for supervision and control over quality
of military industrial products shall be formulated separately by
the State Council and the Central Military Commission.

Article 51 This Law shall come into force as of September 1,
1993.

PROVISIONAL REGULATIONS ON CONSUMPTION

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-12-13	Effective Date	1994-01-01

Provisional Regulations of the People’s Republic of China on Consumption

Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

Tax

(Adopted at the 12nd Executive Meeting of the State Council on November

26, 1993, promulgated by Decree No.135 of the State Council of the People’s
Republic of China on December 13, 1993 and effective as of January 1, 1994)

Article 1 All units and individuals engaged in the production,
sub-contracting for processing or the importation of consumer goods prescribed
by these Regulations (hereinafter referred to as ‘taxable consumer goods’)
within the territory of the People’s Republic of China are taxpayers of
Consumption Tax (hereinafter referred to as ‘taxpayers’) and shall pay
Consumption Tax in accordance with these Regulations.

Article 2 The taxable items, tax rates (tax amounts) of Consumption Tax
shall be determined in accordance with the Consumption Tax Taxable Items and
Tax Rates (Tax Amounts) Table attached to these Regulations.

Any adjustments to the Consumption Tax taxable items, tax rates (tax
amounts) shall be determined by the State Council.

Article 3 For taxpayers dealing in taxable consumer goods with different
tax rates, the sales amounts and sales volumes for the taxable consumer goods
with different tax rates shall be accounted for separately. If the sales
amounts and sales volumes have not been accounted for separately or if the
taxable consumer goods with different tax rates are combined into a whole set
of consumer goods for sales, the higher tax rate shall apply.

Article 4 Taxable consumer goods produced by the taxpayer shall be
subject to tax upon sales. For self-produced taxable consumer goods for the
taxpayer’s own use in the continuous production of taxable consumer goods, no
tax shall be assessed; tax shall be assessed when the goods are transferred
for other use.

For taxable consumer goods sub-contracted for processing, the tax shall be
collected and paid by the sub-contractor upon delivery to the contractor. For
taxable consumer goods sub-contracted for processing used by the contractor
for the continuous production of taxable consumer goods, the tax paid can be
credited in accordance with the regulations.

Imported taxable consumer goods shall be subject to tax upon import
declaration.

Article 5 The computation of tax payable for Consumption Tax shall follow
either the rate on value or the amount on volume method. The formulas for
computing the tax payable are as follows:

The tax payable computed under the rate on value mentod

= Sales amount * Tax rate

The tax payable computed under the amount on volume mentod

= Sales volume * Tax amount per unit

For taxable consumer goods sold by taxpayer where the sales amounts are
computed in foreign currencies, the taxable amounts shall be converted into
Renminbi according to the exchange rates prevailing in the foreign exchange
market.

Article 6 The “sales amount” as stipulated in Article 5 of these
Regulations shall be the total consideration and other charges receivable from
the buyer for the taxable consumer goods sold by the taxpayer.

Article 7 Self-produced taxable consumer goods for the taxpayer’s own use
that shall be subject to tax in accordance with the stipulations of the first
paragraph in Article 4 of these Regulations shall be assessed according to the
selling price of similar consumer goods produced by the taxpayer. If the
selling price of similar consumer goods is not available, the tax shall be
assessed according to the composite assessable value. The formula for
computing the composite assessable value is as follows:

Composite assessable value = (Cost + Profit) / (1 – Consumption Tax rate)

Article 8 Taxable consumer goods sub-contracted for processing shall be
assessed according to the selling price of similar consumer goods of the
sub-contractor. If the selling price of similar consumer goods is not
available, the tax shall be assessed according to the composite assessable
value. The formula for computing the composite assessable value is as follows:

Composite assessable value

= (Cost of material + Processing fee) / (1 – Consumption Tax rate)

Article 9 Imported taxable consumer goods which adopt the rate on value
method in computing the tax payable shall be assessed according to the
composite assessable value. The formula for computing the composite assessable
value is as follows:

Composite assessable value

= (Customs dutiable value + Customs Duty) / (1 – Consumption Tax rate)

Article 10 Where the taxable value of the taxable consumer goods of the
taxpayer is obviously low and without proper justification, the taxable value
shall be determined by the competent tax authorities.

Article 11 For taxpayers exporting taxable consumer goods, the
Consumption Tax shall be exempt, except as otherwise determined by the State
Council. The measures for exemption of exported taxable consumer goods shall
be regulated by the State Administration for Taxation.

Article 12 Consumption Tax shall be collected by the tax authorities.
Consumption Tax on the importation of taxable consumer goods shall be
collected by the customs office on behalf of the tax authorities.

Consumption Tax on taxable consumer goods brought or mailed into China by
individuals shall be levied together with Customs Duty. The detailed measures
shall be formulated by the Tariff Policy Committee of the State Council
together with the relevant departments.

Articie 13 Taxpayers selling taxable consumer goods and self-producing
taxable consumer goods for their own use, except otherwise as determined by
the State, shall report and pay tax to the local competent tax authorities
governing the taxpayers.

For taxable consumer goods sub-contracted for processing, the Consumption
Tax due shall be paid to the local competent tax authorities where the
sub-contractors are located.

For imported taxable consumer goods, the tax shall be reported and paid by
the importers or their agents to the customs offices where the imports are
declared.

Article 14 The Consumption Tax assessable period shall be one day, three
day, five days, ten days, fifteen days or one month. The actual assessable
periods of the taxpayers shall be separately determined by the competent tax
authorities according to the magnitude of the tax payable of the taxpayers;
tax that cannot be assessed in regular periods can be assessed on a
transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assesable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period, and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.

Article 15 Taxpayers importing taxable consumer goods shall pay tax
within seven days after the completion and issuance of the tax payment
certificates by the customs office.

Article 16 The collection and administration of Consumption Tax shall be
conducted in accordance with the relevant provisions of the Law of the
People’s Republic of China on Tax Collection and Administration and these
Regulations.

Article 17 The collection of Consumption Tax from foreign investment
enterprises and foreign enterprises shall be conducted in accordance with the
resolutions of the Standing Committee of the National People’s Congress.

Article 18 The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.

Article 19 These Regulations shall come into effect from January 1, 1994.
The relevant regulations of the State Council regarding the collection of
Consumption Tax prior to the promulgation of these Regulations shall be
superseded on the same date.

Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

Taxable Items Scope
of charge Tax Unit Tax Rate/Amount

I. Tobacco

1. Grade A cigarettes Including Imported
45%

Cigarettes

2. Grade B cigarettes
40%

3. Cigars
40%

4. Cut tobacco 30%

II. Alcoholic drinks and

alcohol

1. White spirits made from 25%

cereal

2. White spirits made from 15%

potatoes

3. Yellow spirits
ton 240yuan

4. Beer
ton 220yuan

5. Other alcoholic drinks
10%

6. Alcohol 5%

III. Cosmetics Including
cosmetics 30%

sets

IV. Skin-care and hair-care 17%

products

V. Precious jewelry and Including all kinds of
10%

precious jade and stones gold, silver, jewelry,

and precious stone

ornaments

VI. Firecrackers and
15%

fireworks

  VII. Gasoline
litre         0.2yuan
VIII. Diesel oil
litre         0.1yuan

IX. Motor vehicle tyres 10%

X. Motorcycles 10%

Xl. Motor Cars

1. Those with a cylinder 8%

capacity (i.e. emission

capacity) of more than

2,200 ml (including

2,200 ml)

Those with a cylinder 5%

capacity of between

1,000-2,200 ml

(including 1,000 ml)

Those with a cylinder 3%

capacity of less than

1,000 ml

2. Cross-country vehicles

(four-wheel drive)

Those with a cylinder 5%

capacity of more than

2,400 ml (including

2,400 ml)

Those with a cylinder 3%

capacity of less than

2,400 ml

3. Minibuses and vans less than 22 seats

Those with a cylinder 5%

capacity of more than

2,000 ml (including

2,000 ml)

Those with a cylinder 3%

capacity of less than

2,000 ml

CIRCULAR OF THE STATE COUNCIL CONCERNING THE STRICT EXAMINATION AND APPROVAL AND CHECKS ON VARIOUS DEVELOPMENT ZONES

Category	SPECIAL ECONOMIC ZONES AND COASTAL ECONOMIC DEVELOPMENT ZONES	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-04-28	Effective Date	1993-04-28

Circular of the State Council Concerning the Strict Examination and Approval and Checks on Various Development Zones

(Promulgated by the State Council on April 28, 1993)

It is one of the important measures of China’s reform and opening-up
policy to set up rationally distributed development zones in places where
conditions permit, concentrate the effort in developing their infrastructure
construction, put into effect preferential policies and create a good
investment environment in order to attract foreign investment. Practice shows
that this is an effective measure and should be maintained in the future.
However, since last year there has been a boom in development zones with
increasing numbers involved in a wider range of activities. As a result, they
have taken over large plots of cultivated land and needed considerable
funding. It is obvious that they have now gone beyond practical needs and,
indeed, economic endurance. In a few places, the tax and land laws issued by
the State are ignored and governments of various levels have exceeded their
authority to make and issue tax-free measures without permission, which has
caused harmful effects. Without strict and resolute measures to check this
trend, it will aggravate the shortage of funding, energy resources,
communications and transportation and supply of raw materials, which will
effect the normal running of the national economy and the healthy development
of opening to the outside world. The following circular is hereby issued
concerning this issue.

1. Development zones should follow a double level system of examination
and approval — the State Council and the people’s government of provinces,
autonomous regions and municipalities directly under the Central Government.
The people’s governments at various levels under the provinces, autonomous
regions and municipalities under the Central Government cannot examine and
approve the establishment of various development zones.

2. The State Council has the authority to examine and give approval for
the establishment of economic technology development zones, bonded areas,
hi-tech industrial development zones, state tourist and holiday zones and
frontier economic cooperation zones. If any of the above-mentioned development
zones are to be set up, the people’s government of the concerned province,
autonomous region or municipality directly under the Central Government and
the department of the State Council in charge of the project should guide the
primary planning and the study of its feasibility, then report to the State
Council.

3. In order to attract foreign investment to develop projects in industry,
agriculture, international tourism and hi-tech industry, the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government can, according to local resources, practical needs and
conditions, approve the establishment of a small number of development zones
(tourist and holiday zones), make related preferential policies within the
limit of their authority, and report to the State Council. But the development
zones set up with the approval of the people’s governments of the provinces,
autonomous regions and municipalities directly under the Central Government
cannot continue to use the post_title and policy of the development zones set up
with the approval of the State Council.

4. The examination and approval of development zones should strengthen
overall planning and rational distribution, and pay attention to
socio-economic efficiency. The government should strictly control the areas of
development zones and emphasize that such projects should actually result in
development. It will insist that progress on such projects should only be made
according to the capability of those involved to develop the plot, build and
make profits. The government should examine and approve the land strictly
according to the law, save land resources and strictly control the occupation
of cultivated land. In principal, cultivated land within the basic farmland
protective region is not to be occupied.

5. Every region should carry out an inspection of the various development
zones set up without the approval of the State Council or the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government. The government should firmly and resolutely terminate
approval for the continued development of zones where the basic construction
conditions are lacking, the project or funding is unsettled, too much land is
occupied or the land is occupied without use. The land should then be returned
to the peasants. To abandon cultivated land or leave a land uncultivated is
strictly forbidden.

6. All regions and departments should uphold the State policies, laws and
regulations, strictly abide by the tax and land laws, and related policies and
regulations issued by the State. It is forbidden to ignore or exceed the
authority of the State and to make preferential policies, reduce tax or yield
interest in disguised form without permission. The people’s governments and
the department of the State Council concerned should strengthen supervision of
this issue.

7. The people’s governments of provinces, autonomous regions and
municipalities directly under the Central Government should report before the
end of June 1993 to the General Office of the State Council on the inspection
work carried out on various development zones.

CIRCULAR OF THE STATE COUNCIL CONCERNING PROMOTING SELF-OPERATED IMPORT AND EXPORT OF THE PRODUCTION ENTERPRISES

Category	FOREIGN TRADE	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-05-12	Effective Date	1993-05-12

Circular of the State Council Concerning Promoting Self-operated Import and Export of the Production Enterprises

(May 12, 1993)

To authorize the large- and medium-size production enterprises to operate
import and export so as to enable them to participate directly in competition
in the international market is one of the important measures of deepening
enterprise reform and vitalizing the large- and medium-size state-owned
enterprises, which is of great importance to quicken the pace of reform and
opening to the outside world and develop foreign trade in this country. Since
issuing of Circular of the State Council Concerning Vitalizing the Large- and
Medium-Size State-Owned Enterprises and Circular of the State Council
Concerning Approval and Transmitting of Suggestions by the Ministry of Foreign
Economic Relations and Trade and the Production Office of the State Council on
Authorizing the Production Enterprises to Operate Import and Export, the
production enterprises which are authorized to operate import and export have
amounted to more than one thousand due to the effort made by the relevant
departments. The growth rate of the aggregate export value and self-operated
expert value of these enterprises are higher than the average growth level of
export throughout the country, they have obviously become one of the important
sources of foreign currency.

With a view of implementing in an all-round way the Regulations on
Transformation of Operational Mechanism of the State-Owned Enterprises,
keeping abreast of the socialist market economy regime and giving full play to
the superiority of the production enterprises in self-operated import and
export, the measure on the relevant matters are hereunder provided for:

1. The production enterprises which are authorized to operate import and
export (hereinafter referred to as “the self-operated enterprises”), after
going through the formalities of registration with the industry and commerce
administration, are to qualify as external legal person. The self-operated
enterprises may establish organization for import and export internally when
necessary. Qualified large-scale enterprise group(s) may establish a wholly
owned subsidiary company for import and export subject to approval. The
self-operated enterprises may export their products and relative technology
and import technology, equipment, spare parts and accessories, raw materials
needed in their production. Eligible self-operated enterprises may be granted
contractual management right for construction projects abroad.

The self-operated enterprises are obligated to fulfill the tasks of
export and earning foreign exchange assigned by the state, subordinate
themselves to the management and coordination by the local competent economic
and trade departments and submit information on their business operation and
statistics to the competent foreign economic and trade departments as required.

2. The local people’s governments and the departments concerned of the
State Council shall give support to the self-operated enterprises in every
respect. With a view to promoting the import and export of the self-operated
enterprises, the rights and the preferential policies to which the
self-operated enterprises are enpost_titled shall be positively granted, timely
guidance and assistance shall be rendered and personnel training for the
self-operated enterprises shall be given importance to. To the enterprises
which shoulder heavier task of earning foreign exchange by export, necessary
assistance and guarantee shall be provided in respect of raw material supply,
power supply, transportation arrangement, loans for circulating funds, etc.
so as to help them solve the difficulties in production and operation.

The State Economic and Trade Commission and the Ministry of Foreign Trade
and Economic Co-operation shall strengthen the coordination and administration
in self-operated import and export, resolve the problems and difficulties
in time and help the enterprises to enhance their ability to participate in
the competition on the world market. The competent authorities of foreign
trade at all levels shall incorporate the self-operated enterprises into
uniform administration and statistics at the state or local level, assign
annual export task and formulate tax refund plan in the light of actual
conditions prevailing in the self-operated enterprises and give necessary
guidance in respect of foreign trade policy and business.

3. The self-operated enterprises shall be treated equally with the foreign
trade enterprises in respect of the preferential import and export policy of
the state. The self-operated enterprises should apply for quota and licence
according to the relevant regulations of the state in their import and export
business involving commodities covered by the quota and licence control.

The self-operated enterprises may participate in bid on an equal basis
with the foreign trade enterprises for the export quota and licence
distributed through tendering or auction. The tax refund on export for the
foreign trade enterprises shall be uniformly practised for the self-operated
enterprises and timely, adequate refund shall be made to them based on the
principle of “refund to the full amount of export”.

4. The self-operated enterprises, after fulfilling the task of handing
over the required amount of foreign exchange earnings to the state, are
enpost_titled to use the foreign exchange self-retained and to make adjustment, no
department or unit is allowed to appropriate or withhold the foreign exchange
retained by the enterprises, to withhold the RMB repayable to the enterprises
after handing over the reimbursable foreign exchange earnings or to attach any
condition to the use of the foreign exchange earnings retained. The qualified
self-operated enterprises may open cash account in foreign currency with the
bank(s) authorized to handle foreign exchange business subject to approval by
the competent authorities. The self-operated enterprises are encouraged to
develop the business of import for the expansion of export, for the foreign
exchange earnings from it, within the amount and turnover approved, the amount
handing over to the state treasury shall be calculated in terms of net foreign
exchange earnings on the scale stipulated by the state.

5. The self-operated enterprises may open a circulating fund account of
RMB and foreign exchange with the bank(s) handling business of foreign
exchange settlement. The foreign trade circulating fund loan application filed
by the self-operated enterprises shall be considered by the bank on the
merits of their performance in production and operation, and requirements for
import and export, and the preferential interest rate for foreign trade shall
be applied. The self-operated enterprises may apply for export credit with the
relevant banks of the state in accordance with relevant regulations. The
self-operated enterprises are enpost_titled to decide on the use of fund retained
upon entry into force of the General Rules Governing Enterprise Financial
Affairs and the Accounting Criteria for Enterprises. The self-operated
enterprises may establish an export risk fund, withdrawal, utilization and
management of which shall be done as provided for by the Ministry of Finance.

6. The self-operated enterprises are enpost_titled to decide on theirown the
number and list of business personnel of the enterprises going abroad
frequently, and one-time approval for multiple trips within one year shall be
followed subject to approval by the competent authorities. Political scrutiny
in the case of director(general manager)of the enterprise going abroad shall
be carried out by the personnel department at a higher level, and in the case
of other persons of the enterprise going abroad shall be conducted by the said
enterprise’s personnel department. The enterprise may submit an application to
its responsible department for its persons going abroad with the letter(cable)
of invitation by a foreign firm, and the visa application and other procedures
in relation to departure shall be handled by the department in charge of
foreign affairs after approval.

The self-operated enterprises which are authorized by the State Council
to approve temporary business trips abroad (out of the territory) and
invitation to China may within their scope of business approve in their power
temporary business trips abroad (out of the territory) of the personnel from
their enterprises and invitation to foreign businessmen to China, and may
accomplish the formalities of departure from and entry into the country as
stipulated. In the case of directors(general managers), approval shall be
given by competent departments.

the self-operated enterprises may use their own foreign exchange earnings
to finance business trips abroad of their personnel out of the need of
developing their foreign business; in case of shortage in their own foreign
exchange earnings, they may apply to competent authorities for adjustment.
The relevant departments shall provide necessary assistance and facilities
for the self-operated enterprises to participate in or hold exhibitions,
business talks or trade fairs both at home or abroad.

7. The self-operated enterprises are encouraged to establish maintenance
and repair service network out of the territory (excluding Hongkong and
Macao), for this purpose the approval procedures shall be further simplified.
The establishment of the service network to meet the needs of their business
operations out of the territory (excluding Hongkong and Macao) for which the
investment by the Chinese side is less than one million US dollars may be
approved by the enterprises themselves, in the case of more than one million
US dollars (including one million US dollars), it shall be submitted for
approval as stipulated by the state. The maintenance and repair network so
established out of the territory shall strictly abide by the state regulations
on assets, finance, taxation and foreign exchange, etc. as well as the regime
and provisions for investment out of the territory provided for by the state.

8. The self-operated enterprises shall build up a reputation for their
brands in the market both at home and abroad. In the case of one trade mark,
the registration of which at home is by a production enterprise and by a
foreign trade enterprise abroad, the production enterprise after being
authorized to operate import and export business itself may become transferee
of the trade mark registered abroad by the foreign trade enterprise on the
basis of reimbursement; if the self-operated enterprise intends to use a
trade mark which has been registered by a foreign trade enterprise in china,
it shall sign a licencing agreement with the foreign trade enterprise in
accordance with the relevant law and guarantee the quality of the products
bearing the trade mark.

9. The self-operated enterprises of machinery and electronic products
shall be encouraged to expand their export for increasing foreign exchange
earnings while improving their economic efficiency. For the self-operated
enterprises of machinery and electronic products with linkage of the
aggregate salary with its economic performance, one more scale factor linking
the aggregate salary to the increase of their export value (or the foreign
exchange earnings received) may be added apart from the fixed coefficient
between total wage quota and the profits and taxes realized in pursuance of
the Circular of the State Council on Approval and Transmitting of the
Suggestions by the Machinery and Electronic Products Export Office of the
State Council on Further Promoting Export of Machinery and Electronic
Products, with the factors not exceeding 1 accumulatively. The calculation
therefor shall be governed by the Circular on the Calculation of Wage
Increases on the Basis of the Increased Floating Ratio of the Foreign
Exchange Earned by Export for the Production Enterprises of Machinery and
Electronic Products for Export by the former Machinery and Electronic
Products Export Office of the State Council, the Ministry of Labour and the
Ministry of Finance.

10. the self-operated enterprises must strictly abide by the policies,
laws and regulations on foreign trade by the state and operate under the
guidance and supervision of the competent authorities for foreign trade at
all levels. They must be oriented towards both the domestic and international
markets, aggressively develop new products, improve product quality, upgrade
their products and enhance the ability of competition in the international
market. They shall transform their operational mechanism, streamline internal
management, reduce cost and raise economic efficiency. They should positively
join the relevant chamber of commerce of importers and exporters, and be
subordinate to the guidance and coordination of the chamber in consideration
of the state interest. To keep a breast of the healthy development of
internationalized operation, the leading cadres and foreign trade personnel
of the enterprises shall enhance their political and business quality.

Reference shall be made to the above measures for the scientific and
research institutions which are authorized to manage import and export
business.

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE QUESTIONS CONCERNING THE APPLICABLE TAX RATE AND DEDUCTION OF CALCULATED TAX AMOUNT RELATED TO INCOME OF ENTERPRISES WITH FOREIGN INVESTMENT FROM OUTSIDE CHINA

The State Administration of Taxation

Circular of the State Administration of Taxation on the Questions Concerning the Applicable Tax Rate and Deduction of Calculated Tax
Amount Related to Income of Enterprises with Foreign Investment from Outside China

GuoShuiFa [1993] No.39

July 14,1993

In accordance with the related stipulations of the Income Tax Law on Enterprises with Foreign Investment and Foreign Enterprises and
its Rules for the Implementation (hereinafter referred to as the Tax Law and Rules), we hereby clarify the question concerning the
applicable tax rate related to the income gained by an enterprise with foreign investment from outside China and the question concerning
calculation of deduction of the income tax already paid outside China:

In accordance with Article 71 of the Rules, the reduced tax rate as stipulated in the Tax Law is applicable only to the income gained
by a enterprise with foreign investment from production and operation carried out in appropriate districts. Therefore, with regard
to the income gained by a enterprise with foreign investment from outside China, enterprise income tax and 1ocal income tax shall
be calculated and levied without exception in accordance with the stipulations of Article 5 of the Tax Law.

II.

As regards the item which states “the total amount of payable tax calculated in accordance with the Tax Law on incomes gained from
inside and outside China” as set in the formula for calculating the quota of overseas tax payment to be deducted as listed in Article
84 of the Rules, the total amount of income gained from inside and outside China shall be calculated in accordance with the enterprise
income tax rate and local income tax rate as stipulated in Article 5 of the Tax Law.

III.

This Circular shall enter into force as of the day of receipt of the document.

The State Administration of Taxation
1993-07-14

PROVISIONAL REGULATIONS ON VALUE-ADDED

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-12-13	Effective Date	1994-01-01

Provisional Regulations of the People’s Republic of China on Value-added

Tax

(Adopted at the 12nd Executive Meeting of the State Council on November

26, 1993, promulgated in Decree No.134 by the State Council of the People’s
Republic of China on December 13, 1993 and effective as of January 1, 1994)

Article 1 All units and individuals engaged in the sales of goods,
provision of processing, repairs and replacement services, and the importation
of goods within the territory of the People’s Republic of China are taxpayers
of Value-Added Tax (hereinafter referred to as ‘taxpayers’), and shall pay VAT
in accordance with these Regulations.

Article 2 VAT rates:

(1) For taxpayers selling or importing goods, other than those stipulated
in items (2) and (3) of this Article, the tax rate shall be 17%.

(2) For taxpayers selling or importing the following goods, the tax rate
shall be 13%:

i. Food grains, edible vegetable oils;

ii. Tap water, heating, air conditioning, hot water, coal gas, liquefied
petroleum gas, natural gas, methane gas, coal/charcoal products for household
use;

iii. Books, newspapers, magazines;

iv. Feeds, chemical fertilizers, agricultural chemicals, agricultural
machinery and covering plastic film for farming;

v. Other goods as regulated by the State Council.

(3) For taxpayers exporting goods, the tax rate shall be 0%, except as
otherwise stipulated by the State Council.

(4) For taxpayers providing processing, repairs and replacement services
(hereinafter referred to as ‘taxable services’), the tax rate shall be 17%.

Any adjustments to the tax rates shall be determined by the State Council.

Article 3 For taxpayers dealing in goods or providing taxable services
with different tax rates, the sales amounts for goods or taxable services with
different tax rates shall be accounted for separately. If the sales amounts
have not been accounted for separately, the higher tax rate shall apply.

Article 4 Except as stipulated in Article 13 of these Regulations, for
taxpayers engaged in the sales of goods or the provision of taxable services
(hereinafer referred to as ‘selling goods or taxable services’), the tax
payable shall be the balance of output tax for the period after deducting the
input tax for the period. The formula for computing the tax payable is as
follows:

Tax payable = Output tax payable for the period – Input tax for the period

If the output tax for the period is less than and insufficient to offset
against the input tax for the period, the excess input tax can be carried
forword for set-off in the following periods.

Article 5 For taxpayers selling goods or taxable services, the output tax
shall be the VAT payable calculated based on the sales amounts and the tax
rates prescribed in Article 2 of these Regulations and collected from the
purchasers. The formula for computing the output tax is as follows:

Output tax = Sales amount * Tax rate

Article 6 The sales amount shall be the total consideration and all other
charges receivable from the purchasers by the taxpayer selling goods or
taxable services, but excluding the output tax collectible.

The sales amount shall be computed in Renminbi. The sales amount of the
taxpayer settled in foreign currencies shall be converted into Renminbi
according to exchange rate prevailing in the foreign exchange market.

Article 7 Where the price used by the taxpayer in selling goods or
taxable services is obviously low and without proper justification, the sales
amount shall be determined by the competent tax authourties.

Article 8 For taxpayers who purchase goods or receive taxable services
(hereinafter referred to as ‘purchasing goods or taxable services’), VAT paid
or borne shall be the input tax.

The amount of input tax that can be credited against the output tax, other
than the situations specified in Paragraph 3 of this Article, shall be
restricted to the amount of VAT payable as indicated on the following VAT
credit document:

(1) VAT indicated in the special VAT invoices obtained from the sellers;

(2) VAT indicated on the tax payment receipts obtained from the customs
office.

The creditable input tax for the purchasing of tax exempt agricultural
products is calculated based on a deemed deduction rate at 10% on the actual
purchasing price. The formula for calculating the input tax is as follows:

Input tax = Purchasing price * Deduction rate

Article 9 Where taxpayers purchasing goods or taxable services have not
obtained and kept the VAT credit document in accordance with the regulations,
or the VAT payable and other relevant items in accordance with the regulations
are not indicated on the VAT credit document, no input tax shall be credited
against the output tax.

Article 10 Input tax on the following items shall not be credited against
the output tax:

(1) Fixed assets purchased;

(2) Goods purchased or taxable services used for non-taxable items;

(3) Goods purchased or taxable servides used for tax exempt items;

(4) Goods purchased or taxable services used for group welfare or personal
consumption;

(5) Abnormal losses of Goods purchased;

(6) Goods purchased or taxable services consumed in the production of
work-in-progress or finished goods which suffer abnormal losses.

Article 11 Small-scale taxpayers engaged in selling goods or taxable
services shall use a simplified method for calculating the tax payable.

The criteria for small-scale taxpayers shall be regulated by the Ministry
of Finance.

Article 12 The rate leviable on the small-scale taxpayers selling goods
or taxable services shall be 6%.

Any adjustment to the leviable rate shall be determined by the State
Council.

Article 13 For small-scale taxpayers selling goods or taxable services,
the tax payable shall be calculated based on the sales amount and the leviable
rate prescribed in Article 12 of these Regulations. No input tax shall be
creditable. The formula for calculating the tax payable is as follows:

Tax payable = Sales amount * leviable rate

The sales amount shall be determined in accordance with the stipulations
of Article 6 and Article 7 of these Regulations.

Article 14 Small-scale taxpayers with sound accounting who can provide
accurate taxation information may, upon the approval of the competent tax
authorities, not be treated as small-scale taxpayers. The tax payable shall be
conmputed pursuant to the relevant stipulations of these Regulations.

Article 15 For taxpayers importing goods, tax payable shall be computed
based on the composite assessable price and the tax rates prescribed in
Article 2 of these Regulations. No tax will be credited. The formulas for
computing the composite assessable price and the tax payable are as follows:

Composite assessable price

= Customs dutiable value + Customs Duty + Consumption Tax

Tax payable = Composite assessable price * Tax rate

Article 16 The following items shall be exempt from VAT:

(1) Self-produced agricultural products sold by agricultural producers;

(2) Contraceptive medicines and devices;

(3) Antique books;

(4) Importation of instruments and equipment directly used in scientific
research, experiment and education;

(5) Importation of materials and equipment from foreign governments and
international organizations as assistance free of charge;

(6) Equipment and machinery required to be imported under contract
processing, contract assembly and compensation trade;

(7) Articles imported directly by organizations for the disabled for
special use by the disabled;

(8) Sale of goods which have been used by the sellers.

Except as stipulated in the above paragraph, the VAT exemption and
reduction items shall be regulated by the State Council. Local Governments or
departments shall not regulate any tax exemption or reduction items.

Article 17 For taxpayers engaged in tax exempt or tax reduced items, the
sales amounts for tax exempt or tax reduced items shall be accounted for
separately. If the sales amounts have not been separately accounted for, no
exemption or reduction is allowed.

Article 18 For taxpayers whose sales amounts have not reached the VAT
minimum threshold stipulated by the Ministry of Finance, the VAT shall be
exempt.

Article 19 The time at which a liability to VAT arises is as follows:

(1) For sales of goods or taxable services, it is the date on which the
sales sum is received or the documented evidence of right to collect the sales
sum is obtained.

(2) For importation of goods, it is the date of import declaration.

Article 20 VAT shall be collected by the tax authorities. VAT on the
importation of goods shall be collected by the customs office on behalf of the
tax authorities.

VAT on self-used articles brought or mailed into China by individuals
shall be levied together with Customs Duty. The detailed measures shall be
formulated by the Tariff Policy Committee of the State Council together with
the relevant departments.

Article 21 Taxpayers selling goods or taxable services shall issue
special VAT invoices to the purchasers. Sales amounts and output tax shall be
separately indicated in the special VAT invoices.

Under one of the following situations, the invoice to be issued shall be
an ordinary invoice rather than the special VAT invoice:

(1) Sale of goods or taxable services to consumers;

(2) Sale of VAT exempt goods;

(3) Sale of goods or taxable services by small-scale taxpayers.

Article 22 The place for the payment of VAT is as follows:

(1) Businesses with a fixed establishment shall report and pay tax with
the local competent tax authorities where the establishment is located. If the
head office and branch are not situated in the same county (or city), they
shall report and pay tax separately with their respective local competent tax
authorities. The head office may, upon the approval of the State
Administration for Taxation or its authorised tax authorities, report and pay
tax on a consolidated basis with the local competent tax authorities where the
head office is located.

(2) Businesses with a fixed establishment selling goods in a different
county (or city) shall apply for the issuance of an outbound business
activities tax administration certificate from the local competent tax
authorities where the establishment is located and shall report and pay tax
with the local competent tax authorities where the establishmnent is located.
Businesses selling goods and taxable services in a different county (or city)
without the outbound business activities tax administration certificate issued
by the local competent tax authorities where the establishment is located,
shall report and pay tax with the local competent tax authorities where the
sales activities take place. The local competent tax authorities where the
establishment is located shall collect the overdue tax which has not been
reported and paid to the local competent tax authorities where the sales
activities take place.

(3) Businesses without a fixed base selling goods or taxable services
shall report and pay tax with the local competent tax authorities where the
sales activities take place.

(4) For importation of goods, the importer or his agent shall report and
pay tax to the customs office where the imports are declared.

Article 23 The VAT assessable period shall be one day, three days, five
days, ten days, fifteen days or one month. The actual assessable period of the
taxpayer shall be determined by the competent tax authorities according to the
magnitude of the tax payable of the taxpayer; tax that cannot be assessed in
regular periods may be assessed on a transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assessable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.

Article 24 Taxpayers importing goods shall pay tax within seven days
after the issuance of the tax payment certificates by the customs office.

Article 25 Taxpayers exporting goods with the appliable 0% tax rate
shall, upon completion of export procedures with the customs office, apply for
the tax refund on those export goods to the tax authorities on a monthly basis
based on such relevant documents as the export declaration document. The
detailed measures shall be formulated by the State Administration for
Taxation.

Where the return of goods or the withdrawal of the customs declaration
occurs after the completion of the tax refund on the export goods, the
taxpayer shall repay the tax refunded according to the laws.

Article 26 The collection and administration of VAT shall be conducted in
accordance with the relevant provisions of the Law of the People’s Republic of
China on Tax Collection and Administration and these Regulations.

Article 27 The collection of VAT from foreign investment enterprises and
foreign enterprises shall be conducted in accordance with the resolutions of
the Standing Committee of the National People’s Congress.

Article 28 The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.

Article 29 These Regulations shall come into effect from January 1, 1994.
The Draft Regulations of the People’s Republic of China on Value-Added Tax and
the Draft Regulations of the People’s Republic of China on Product Tax
promulgated by the State Council on September 18, 1984 shall be superseded on
the same date.

CIRCULAR OF THE STATE COUNCIL ON BANNING THE TRADE OF RHINOCEROS HORN AND TIGER BONE

Category	FOREIGN TRADE	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-05-29	Effective Date	1993-05-29

Circular of the State Council on Banning the Trade of Rhinoceros Horn and Tiger Bone

(May 29, 1993)

Rhinoceros and tiger are the wild animals on the brink of
extinction under the special protection in the world. They are
listed into the species of Annex I of the Convention on
International Trade of Species of Wildlife on the Brink of
Extinction signed by our country. In accordance with the relevant
stipulations of the Law of the People’s Republic of China on
Protection of Wildlife, of the Regulations for the Implementation
of the People’s Republic of China on the Protection of Terrestrial
Wildlife and of the Convention on International Trade of Species
of Wildlife on the Brink of Extinction, this Circular is
issued for the purpose of protecting the rare species in the world
and reiterating the banning of all trade activities of rhinoceros
horn and tiger bone:

1. It is strictly forbidden to import or export rhinoceros horn
or tiger bone (including those identifiable parts or medicine, crafts
or other such products containing their ingredients, the same below).
No unit or individual may transport, carry or send by post the
rhinoceros horn or tiger bone into or out of the territory. In the
case of using with the indication in characters “rhinoceros horn”
and “tiger bone” on the packing of commodities, the commodities
shall be treated as those containing the rhinoceros horn and tiger
bone without exception.

2. Selling, purchasing, transporting, carrying and sending by
post the rhinoceros horn and tiger bone shall be prohibited. With
respect to reserve of rhinoceros horn and tiger bone, the unit
concerned must check up promptly, register and seal up for
safekeeping again, and take care of them appropriately. The owner
thereof shall make an accurate declaration to the competent
departments of forestry administration at provincial level or their
designated unit. The competent departments of forestry
administration at provincial level or their designated unit must
compile the information on the reserve of rhinoceros horn and
tiger bone into book form, and submit it to the State Office for the
Administration of the Import and Export of Species on the Brink of
Extinction for the record.

3. The medicinal standards for rhinoceros horn and tiger bone
shall be abolished. From now on, rhinoceros horn or tiger bone
shall not be used in making medicine anymore. With respect to the
produced medicaments with set prescription of traditional Chinese
medicine containing the ingredient of rhinoceros horn and tiger
bone, they must be sealed within six months as of the date of the
promulgation of this Circular and be prohibited from selling.

4. The state encourages the medicinal development and research
for the substitute of rhinoceros horn and tiger bone, and
actively propagate and spread the researching achievement. Where
using rhinoceros horn and tiger bone is necessary for studying of
substitute of rhinoceros horn and tiger bone or other special
purposes, the unit concerned must be approved by the Ministry of
Public Health in advance, submit to the Ministry of Forestry for
file, and be subject to the supervision and inspection by the
competent departments of forestry administration in localities.

5. Anyone who violates the stipulations of this Circular to sell,
purchase, transport, carry and send by post rhinoceros horn and
tiger bone, shall be investigated and handled by the State
Administrative Department for Industry and Commerce and the
Customs of the People’s Republic of China according to law. If
constituting a crime of speculation or smuggling, the violator
shall be prosecuted for the criminal liability according to law
by the judicial organ. The rhinoceros horn and tiger bone thus
confiscated shall, in accordance with the relevant provisions, be
transmitted to the competent departments of forestry administration
above the county level in localities to be disposed of.

6. This Circular shall enter into force on the date of
promulgation. In the event of any conflicts between this
Circular and other relevant provisions promulgated before, this
Circular shall prevail.

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE QUESTIONS CONCERNING THE TAXATION OF PROFITS FROM THE TRANSFER OF STOCKS (STOCK RIGHTS) AND DIVIDEND INCOME OF ENTERPRISES WITH FOREIGN INVESTMENT, FOREIGN ENTERPRISES AND INDIVIDUAL FOREIGNERS

The State Administration of Taxation

Circular of the State Administration of Taxation on the Questions Concerning the Taxation of Profits from the Transfer of Stocks (Stock
Rights) and Dividend Income of Enterprises with Foreign Investment, Foreign Enterprises and Individual Foreigners

GuoShuiFa [1993] No.045

July 21,1993

The tax bureaus of various provinces, municipalities directly under the Central Government and autonomous regions, the tax bureaus
of various municipalities separately listed on the State plan and various sub-bureaus of the Offshore Oil Taxation Administration:

In accordance with related stipulations on the experimentation with the shareholding system, the state permits some pilot enterprises
to issue domestic special shares (referred to as B-shares for short) in Renminbi and shares issued and 1isted abroad (referred to
as overseas shares for short), we hereby clarify the question concerning tax on the profits earned by enterprises with foreign investment,
foreign enterprises and individual foreigners from the transfer of the above-mentioned stocks (stock rights) which they hold and
from the incomes gained from dividends (bonuses):

Profits earned from the transfer of stocks (stock rights)

The net income earned by enterprises with foreign investment from the transfer of stocks or stock rights, as well as the net incomes
gained by foreign enterprises through the offices and sites they set up within China from the transfer of China’s domestic enterprise
shares which they hold shall be charged into the amount of the enterprise’s current taxable incomes and income tax shall be paid.
The net loss caused by the transaction of the above-mentioned stocks may eat up the amount of the enterprise’s current taxable income.

The net profit earned by a foreign enterprise from the transfer of B-shares issued by China’s domestic enterprises and overseas stocks
held not by its offices and sites set up within China and the net incomes gained by individual foreigners from the transfer of Be-shares
issued by China’s domestic enterprises and overseas stocks are temporarily exempt from income tax.

A foreign enterprise and individual foreigner, who earns income from the transfer of the stock rights of an enterprise with foreign
investment within China that exceeds the income gained from the transfer of part of the amount of his investment, shall still pay
withholding income tax or individual income tax at a 20 percent rate in accordance with the stipulations of the Documents of the
Ministry of Finance (87) coded Cai Shui Wai Zi No. 033 and the Document of the Ministry of Finance (84) coded Cai Shui Zi No.114.

II.

Income from dividends

In accordance with the stipulations of Article 19 of the Income Tax Law of the People’s Republic of China on Enterprises with Foreign
Investment and Foreign Enterprises and the stipulations of Paragraph 2 of Article 5 of the Rules for the Implementation of the Individual
Income Tax Law of the People’s Republic of China, the profits (dividends) gained by foreign investors from the enterprises with foreign
investment and the dividends and bonuses gained by individual foreigners from the Chinese-foreign equity joint ventures are exempt
from income tax.

The income from dividends (bonuses) gained by foreign enterprises and individual foreigners who hold B-shares or overseas shares from
China’s domestic enterprises which issue B-shares or overseas shares, is temporarily exempt from enterprise income tax and individual
income tax.

III.

This Circular shall enter into force as of the day of receipt of the document.

The State Administration of Taxation
1993-07-21

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON QUESTIONS CONCERNING APPLICABLE REGULAR TAX REDUCTION AND EXEMPTION ON INCOME FROM LIQUIDATION BY ENTERPRISE WITH FOREIGN INVESTMENT

The State Administration of Taxation

Circular of the State Administration of Taxation on Questions Concerning Applicable Regular Tax Reduction and Exemption on Income
from Liquidation by Enterprise with Foreign Investment

GuoShuiFa [1993] No.8

June 15, 1993

With regard to the question as to whether or not enterprise with foreign investment which conduct liquidation within the regular tax
reduction and exemption period as stipulated in Article 8 of the Income Tax Law of the People’s Republic of China for Enterprise
with Foreign Investment and Foreign Enterprises (hereinafter referred to as Tax Law) can enjoy enterprise income tax reduction and
exemption, it is hereby clarified as follows:

The stipulation set in Article 8 of the Tax Law which states “Productive enterprise with foreign investment scheduled to operate
for a period over 10 years shall be exempted from enterprise income tax in the first two profit-making years and be granted a 50
percent enterprise income tax reduction in the third to the fifth year” applies only to the income gained during the enterprise’s
operational period. Therefore, income gained from liquidation which is conducted during the above- mentioned tax reduction and exemption
period shall not be granted enterprise income tax reduction and exemption in accordance with Article 8 of the Tax Law.

This Circular shall enter into force as of the day of receipt of the document.

The State Administration of Taxation
1993-06-15

CIRCULAR OF THE STATE COUNCIL CONCERNING ENFORCING TAX ADMINISTRATION AND STRICTLY CURBING TAX EXEMPTION AND REDUCTION

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-07-23	Effective Date	1993-07-23

Circular of the State Council Concerning Enforcing Tax Administration and Strictly Curbing Tax Exemption and Reduction

(July 23, 1993)

This year, based on the foundation of rapid development in national
economy, there is also an increase in tax revenue, but, its increasing
range does not correspond to that of production, one of the important
reasons of which is that, some localities and units violate state tax law,
overstep their competence, provide tax reduction and exemption without
authorization and enlarge the scope of tax exemption and reduction, formulate
policies for tax incentives without authorization, prolong time limit for tax
exemption and reduction, contract turnover tax, even evade state taxation with
illegal means and consequently cause serious loss of taxation. For purpose of
enforcing state tax law, to guarantee the timely and full turning of national
tax which should be submitted into State Treasury, to fulfill the tax task of
this year better and increase financial revenue, to curb the national
financial deficit within the budgeted amount, and promote the development
of national economy in a quicker and better way, some issues relating to
enforcing tax administration and strict curbing of tax exemption and
reduction are hereby notified as follows:

1. Strictly curbing tax (including tariff) exemption and reduction this
year, the State shall issue no more new policies for tax exemption and
reduction, all provisional and difficulty-caused tax exemption and reduction
shall be stopped for examination and approval. The tax exemption and reduction
regulated by national policy shall be examined and approved strictly according
to tax administrative system, those among which, on expiration of their tax
exemption and reduction period according to related policy, shall resume to
their tax liability immediately. The withholding agency system shall be
strictly applied for Individual Income Regulation Tax, those who do not
perform their withholding liability, shall pay the tax due, otherwise, they
shall be handled according to the provisions in the Law of the People’s
Republic of China on the Administration of Tax Collection. Administration of
the regulation tax on investment orientation for fixed assets shall be
enforced and there shall be no exemption and reduction.

2. Earnestly clear up tax incentive policies made in illegal and
unauthorized way. All kinds of tax incentive policies (including foreign
related tax policies) made be respective regions and departments which
overstepped their own authority and at their own discretion in violation of
the provisions of the Law on the Administration of Tax Collection and policies
of the State shall be invalidated uniformly. All kinds of economic
development zones with no approval from the State Council shall not benefit
uniformly from respective tax incentive policies provided by the State for
the economic development zones at national level.

3. Take decisive measures, resolutely correct wrong practice of
contracting turnover tax. Turnover tax being the main tax of the State and
the main source of state revenue, must be collected according to law and
brought into line with budgetary system. No matter what kind of finance
system is followed by respective regions and departments, it is not
permissible to contract turnover tax for enterprises at one’s own discretion.
All whose who have contracted turnover tax by themselves must correct it
immediately.

4. Clear up delinquent tax in earnest. The system to collect additional
pecuniary penalty for delinquent payment must be strictly applied; For those
in arrears with tax payment, tax departments or customs office shall inform
banks to withhold the tax due and turn it into State Treasury. Banks should
ensure the timely and full submission of tax to the Treasury, it is not
allowed to seize or hold tax, otherwise, leading personnel of the work units
of the seizers and holders shall be investigated for their responsibility.

5. Enforce administration concerning tax refund for exportation. Strictly
implement `the 2-invoices-and-2-forms` (i.e. specified tax invoice, invoice
of input goods and declaration form for exportation, verification form for
payment receipt) system, no refund is allowed for cases inconsistent with
the provisions. Those who try to obtain refund by fraud shall be severely
dealt with according to law.

6. Actually enforce administration of tax collection for individual
industrial and commercial households, private-owned enterprises,
collective-owned enterprises and enterprises with foreign investment. To
individual industrial and commercial households, a general adjustment on their
fixed tax amount shall be carried out timely in combination with the
adjustment on business tax rate. Strict administration of tax collection for
large private-owned enterprises shall be enforced vigorously, the book-keeping
and financial system should be set up and the tax should be levied according
to verification. To enterprises with foreign investment, effective measures
should be taken to strengthen the work against tax avoidance and to block
the loopholes of fiscal omission and evasion through transfer of profits by
enterprises with foreign investment, to ensure that the tax due is
collected fully.

7. Regarding respective kinds of banks, financial, insurance enterprises,
and nonbank financial institutions set up by respective regions and
departments, their income tax liability must be fulfilled in accordance with
the regulations of the State. Henceforth, income tax on respective newly
established banks, financial, insurance enterprises by respective regions and
departments shall be paid uniformly to the central finance.

8. Strictly enforce administration of tax collection of the `2 funds`
(i.e. the key construction fund for energy and communication and the
budgetary adjustment fund). Respective local governments at all levels and
departments concerned are not allowed to provide tax exemption or reduction
on the `2 funds` without authorization. Those who have overstepped their
authority by granting reduction or exemption must immediately make correction.
For the ones who have omitted or are owing the `2 funds`, a plan of making
the payment due should be worked out and the funds in arrears shall be paid
within a limited time period. For the respective localities who have failed to
perform the task of turning the `2 funds` to the center due to tax exemption
and reduction without authorization, the sharing part of the localities from
the `2 funds` shall be reduced and deducted accordingly by the central finance.

People’s Governments at all levels should further enforce the leadership
in respect of taxation, vigorously support legal tax collection by tax
organizations. Departments of industrial and commercial administration, public
security, supervision, auditing and judicature should energetically support
and coordinate with tax organizations in the performance of their
responsibilities according to law. Tax organizations at all levels should
strictly enforce the law on tax collection, abide by the principles and
collect tax in accordance with law. Taxable units and individuals should
increase the conscientiousness of having overall point of view and a sense
of legal system, and pay tax spontaneously according to law. With a view to
safeguarding the sanctities of the laws on finance and taxation and to
enhancing macrocontrol and supervision, the State Council has decided that,
starting from August a general nation-wide check on taxation and finance shall
be carried out, with the emphasis that whether respective taxes and the
`2 funds` have been turned to the State Treasury according to national
policies. In the general check respective omitted revenue should be recovered
and turned over to the State Treasury, additionally the units and those
directly responsible who repeatedly break the rules in frequent checks, and
violate laws with full knowledge of them shall be penalized with more
severity in accordance with law.

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1999

REGULATIONS FOR THE IMPLEMENTATION OF WILD AQUATIC ANIMAL PROTECTION

SUPPLEMENTARY PROVISIONS CONCERNING THE PUNISHMENT OF CRIMES OFCOUNTERFEITING REGISTERED TRADEMARKS MADE BY THE STANDING COMMITTEE NATIONAL PEOPLE’S CONGRESS

PRODUCT QUALITY

PROVISIONAL REGULATIONS ON CONSUMPTION

CIRCULAR OF THE STATE COUNCIL CONCERNING THE STRICT EXAMINATION AND APPROVAL AND CHECKS ON VARIOUS DEVELOPMENT ZONES

CIRCULAR OF THE STATE COUNCIL CONCERNING PROMOTING SELF-OPERATED IMPORT AND EXPORT OF THE PRODUCTION ENTERPRISES

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE QUESTIONS CONCERNING THE APPLICABLE TAX RATE AND DEDUCTION OF CALCULATED TAX AMOUNT RELATED TO INCOME OF ENTERPRISES WITH FOREIGN INVESTMENT FROM OUTSIDE CHINA

PROVISIONAL REGULATIONS ON VALUE-ADDED

CIRCULAR OF THE STATE COUNCIL ON BANNING THE TRADE OF RHINOCEROS HORN AND TIGER BONE

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE QUESTIONS CONCERNING THE TAXATION OF PROFITS FROM THE TRANSFER OF STOCKS (STOCK RIGHTS) AND DIVIDEND INCOME OF ENTERPRISES WITH FOREIGN INVESTMENT, FOREIGN ENTERPRISES AND INDIVIDUAL FOREIGNERS

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON QUESTIONS CONCERNING APPLICABLE REGULAR TAX REDUCTION AND EXEMPTION ON INCOME FROM LIQUIDATION BY ENTERPRISE WITH FOREIGN INVESTMENT

CIRCULAR OF THE STATE COUNCIL CONCERNING ENFORCING TAX ADMINISTRATION AND STRICTLY CURBING TAX EXEMPTION AND REDUCTION

CONSTITUTION ACT, 1982 – page 22

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

CONSTITUTION ACT, 1982 – page 17

CONSTITUTION ACT, 1982 – page 16

CONSTITUTION ACT, 1982 – page 12

CONSTITUTION ACT, 1982 – page 11

CONSTITUTION ACT, 1982 – page 10

CONSTITUTION ACT, 1982 – page 9

CONSTITUTION ACT, 1982 – page 8

CONSTITUTION ACT, 1982 – page 7