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The State Administration of Taxation
Circular of the State Administration of Taxation on some Concrete Questions Concerning Refunding the Extra Tax Payments Resulting
from the Change-over to the Levy of Value-added Tax and Consumption Tax on Enterprises with Foreign Investment
GuoShuiFa [1994] No.115
April 21,1994
The tax bureaus of various provinces, autonomous regions and municipalities directly under the Central Government, the tax bureaus
of various municipalities separately listed on the State plan and various sub-bureaus of the Offshore Oil Tax Administration:
In the spirit of the Circular of the State Council On Questions Related to the Interim Regulations Concerning the Levy of Applicable
Value-Added Tax, Consumption Tax and Business Tax on Enterprises with Foreign Investment and Foreign Enterprises, questions concerning
refunding the extra tax paid by enterprises with foreign investment after the change-over to the levy of value-added tax and consumption
tax are hereby clarified in detail as follows;
I.
The extra tax paid by enterprises with foreign investment due to change-over to the levy of value-added tax and consumption tax refers
to the actual tax payment calculated in accordance with the Interim Regulations of the People’s Republic of China on Value-Added
Tax, the Interim Regulations of the People’s Republic of China on Consumption Tax and related stipulations for the goods sold, product
processing and labor services provided such as repair, production, and processing taxable consumer goods on a commission basis by
enterprises with foreign investment, that surpasses the part of payable tax calculated in accordance with the Regulations of the
People’s Republic of China On Consolidated Industrial and Commercial Tax (Draft), Provisions On Questions Concerning the Levy of
Special Consumption Tax on Sedan Cars issued by the State Administration of Taxation as well as related stipulations, The calculation
formula is given as follows:
Current extra tax payment = current actual payment of value- added tax + current actual payment of consumption tax-consolidated industrial
and commercial tax payment-special consumer tax payment
The consolidated industrial and commercial tax payment refers to the tax payment (including local surcharge) worked out in accordance
with the table of tax items and tax rates of consolidated industrial and commercial tax attached to the Circular On Questions Concerning
Implementing the Document Coded Guo Shui Han Fa [1993] No.152 , a document of the Foreign Tax Management Department of the State
Administration of Taxation coded Coded Guo Shui Wai Han [1994] No. 009, which is calculated on the basis of the combined total of
the sales volume of the current year and tax on the sale item. For enterprises with foreign investment engaged in wholesale and retail
sale business, consolidated industrial and commercial tax payment on their business income is all calculated at a 3 percent rate.
The special consumption tax payment refers to the tax payment worked out in accordance with the quantity of current taxable products
and the tax items, tax value and calculation methods as listed in the Regulations on Questions Concerning the Levy of Special Consumption
Tax on Sedan Cars, a document of the State Administration of Taxation (GuoShuiLiuZi [1989] No.112).
II.
For the overly paid tax by the enterprise with foreign investment which pays both value-added tax and consumption tax, the tax reimbursement
for the value-added tax and consumption tax shall be calculated in accordance with the proportion of the current value-added tax
and consumption tax actually paid in the total value of the current value-added tax and consumption actually paid. The calculation
formula is given as follows:
Refundable VAT =Current extra tax payment * Current actual VAT payment / Total value of current actual VAT & consumption tax payment
Refundable consumption tax = current extra tax payment * current actual payment of consumption tax / Total value of current actual
VAT & consumption tax payment
III.
“The enterprises with foreign investment approved to be established before December 31, 1993” as mentioned in the Circular On Questions
Involved in the Interim Regulations of the State Council Concerning the Levy of Applicable Value-Added Tax, Consumption Tax and Business
Tax on Enterprises with Foreign Investment and Foreign Enterprises refer to enterprises with foreign investment which had performed
industrial and commercial registration procedures before December 31, 1993: “The approved operational period” refers to the operational
period approved by the industrial and commercial administrative department, excluding the period extended after January 1, 1994;
“The five years” refers to the period from January 1, 1994 to December 31, 1998.
IV.
That part of value-added tax and consumption tax paid for the imported goods of enterprises with foreign investment that exceed the
payable tax for imports calculated in accordance with relevant stipulations of the original Regulations Concerning Consolidated Industrial
and Commercial Tax shall not be refunded in principle. However, for the extra tax paid by individual enterprises with foreign investment
for the raw and semi-finished materials and spare parts and components needed in production but the supply of which cannot be guaranteed
on the domestic market and imported for the production of products which are urgently needed at home or the development of which
is encouraged by the state, may be dealt with as an individual case with approval from the State Administration of Taxation.
The formula for calculating consolidated industrial and commercial tax on imports is given as follows:
Consolidated industrial & commercial tax on imports =(Duty – paid value + tariff )* Consolidated industrial & commercial tax rate
/ (1 – Consolidated industrial & commercial tax rate)
V.
For the goods produced by enterprises with foreign investment and sold to an export-oriented enterprise for export, the extra tax
payment resulting from increased tax burden shall not be refunded.
VI.
A enterprise with foreign investment shall, within 30 days after the end of the Year, send a written application report to the competent
foreign-related tax authorities, fill in the Application Form for Tax Reimbursement Due to Increased VAT and Consumption Tax Burden
(attached at the back), at the same time it shall send a copy of the VAT and consumption tax paid certificate, after the application
has been examined and verified by the competent foreign-related tax authorities and approved by the authorized tax authorities, the
enterprise shall perform the procedures for tax reimbursement.
VII.
The annual tax reimbursement amount of a enterprise with foreign investment that exceeds 1 million Yuan (including 1 million Yuan)
shall be examined and approved by the State Administration of Taxation; an annual tax reimbursement amount that is below 1 million
Yuan shall be examined and approved by the provincial-level sub-bureaus and sub-bureaus of municipalities separately listed on the
State plan under the State Administration of Taxation.
The various provincial sub-bureaus and sub-bureaus of municipalities separately listed on the State plan shall, within 60 days after
the end of the year, submit a report on the information about tax reimbursement of the previous year to the State Administration
of Taxation.
VIII.
The refunding of extra tax payment shall be handled lump sum in principle after the end of the year. If the annual tax reimbursement
amount is large, it may be refunded on a quarterly basis and settlement made at year-end with approval from the provincial-level
sub-bureaus or sub-bureaus of municipalities separately listed on the State plan. For individual enterprises which really have difficulty
in turnover of funds, with approval from the State Administration of Taxation, tax can be refunded in advance on a monthly basis
and settlement be made at year end.
IX.
A enterprise with foreign investment shall accurately declare the amount of tax reimbursement, if more tax payment than required resulting
from inaccurate report or the adoption of illegitimate means is discovered, the matter shall be handled in accordance with the related
stipulations of the Measures of the People’s Republic of China on Administration of Tax Collection.
Attachment:
I.
The Application Form of Tax Reimbursement Due to Increased Value-Added Tax and Consumption Tax Burden (omitted)
II.
Stipulations On Questions Concerning the Levy of Special Consumption Tax on Sedan Cars (omitted)
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