CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE TAXATION ON INCOME GAINED DURING ESTABLISHMENT OF ENTERPRISES WITH FOREIGN INVESTMENT

The State Administration of Taxation

Circular of the State Administration of Taxation on the Taxation on Income Gained During Establishment of Enterprises with Foreign
Investment

GuoShuiFa [1995] No.140

July 24, 1995

The state tax bureaus of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities
separately listed on the State plan:

This is to specify what to do with the income tax about the non-productive income gained by a manufacturing enterprise with foreign
investment during its launching, which has been recently inquired about:

According to Article 4 of the Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign
Enterprises of the People’s Republic of China (hereinafter referred to as the Tax Law), the non-productive income gained by a manufacturing
enterprise with foreign investment during its launching, with concerned cost, charges and loss detracted, should count as taxable
income according to the tax rate stated in Articles 5 and 7 of the Tax Law. But the year may not be counted as the year of preferential
treatment in tax reduction or exemption.