DECISION OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS ON REVISING THE THE ADMINISTRATION OF TAX COLLECTION (APPENDIX: THE FIRST REVISION OF THE LAW)

    Having deliberated on the proposal submitted by the State Council for the
Amendment to the Law of the People’s Republic of China on the Administration
of Tax Collection (Draft) and with a view to suiting the need of the taxation
system reform and keeping abreast of the change in the system of tax
collection, the 12th Meeting of the Standing Committee of the Eighth National
People’s Congress decided to amend the Law of the People’s Republic of China
on the Administration of Tax Collection as follows:

    The first paragraph of Article 14 shall be amended to read as follows:
“The special invoices for Value-Added Tax shall be printed by enterprises
designated by the competent tax department under the State Council; other
invoices shall be printed by enterprises designated respectively by state tax
bureaux or local tax bureaux of the provinces, autonomous regions or
municipalities directly under the Central Government according to the
stipulations by the competent tax department under the State Council.

    No enterprises shall print invoices without designation by the tax
authorities as provided in the preceding paragraph.”

    The second paragraph of Article 14 shall be changed into the third
paragraph.

    Chapter I      General Provisions

    Chapter II     Tax Administration

        Section 1  Tax Registration

        Section 2  Administration of Accounting Books and Vouchers

        Section 3  Tax Declaration

    Chapter III    Tax Collection

    Chapter IV     Tax Inspection

    Chapter V      Legal Responsibilities

    Article 1  This Law is formulated with a view to strengthening the
administration of tax collection, ensuring the tax revenue of the State and
protecting the legitimate rights and interests of taxpayers.

    Article 2  The administration of tax collection in respect of all taxes to
be collected by the tax authorities in accordance with law shall be governed
by this Law.

    Article 3  The imposition of tax or the cessation thereof, tax reduction,
tax exemption and refund of tax as well as payment of tax unpaid shall be
governed by the provisions of relevant laws; where the State Council is
authorized by law to formulate relevant regulations, the provisions of
relevant administrative rules and regulations formulated by the State Council
shall apply.

    No units including governmental organs or individuals may, in violation of
law or administrative rules and regulations, make decisions regarding the
imposition of tax or the cessation thereof, tax reduction, tax exemption or
refund of tax, or payment of tax unpaid.

    Article 4  Units and individuals that are obligated to pay tax as
prescribed by law or administrative rules and regulations are taxpayers.

    Units and individuals that are obligated to withhold and remit tax or
collect and remit tax as prescribed by law or administrative rules and
regulations are withholding agents.

    Taxpayers and withholding agents must pay tax or withhold and remit tax or
collect and remit tax in accordance with the provisions of relevant laws or
administrative rules and regulations.

    Article 5  The competent department of taxation under the State Council
shall be in charge of the administration of tax collection throughout the
country.

    The local people’s governments at various levels shall strengthen their
leadership in the administration of tax collection within their respective
administrative regions and support the tax authorities in carrying out their
duties according to law and accomplishing their tasks of tax collection.

    Departments and units concerned shall support and assist the tax
authorities in carrying out their duties according to law.

    No units or individuals shall obstruct the tax authorities from carrying
out their duties according to law.

    Article 6  Tax officials must implement the law impartially and devote
themselves to their duties. They shall not extort or take bribes, practise
favouritism and commit malpractice, neglect their duties, or fail to collect,
or undercollect the amount of tax payable; nor shall they abuse their powers
to overcollect tax or deliberately create difficulties for taxpayers or
withholding agents.

    Article 7  Every unit or individual shall have the right to report any
acts contravening the law or the administrative rules or regulations relating
to taxation. The tax authorities shall maintain confidentiality in respect of
the informants and grant them rewards in accordance with relevant regulations.

    Section 1  Tax Registration

    Article 9  Enterprises, branches and sites engaged in production or
business operations established in other places by enterprises, individual
businesses as well as institutions engaged in production or business
operations (hereinafter collectively referred to as taxpayers engaged in
production or business operations) shall, within 30 days from receipt of the
business licence, apply to the tax authorities for tax registration on
presentation of the relevant documents. Upon examination and verification of
such documents, the tax authorities shall issue the tax registration
certificate.

    The scope and methods for tax registration for taxpayers other than those
specified in the preceding paragraph shall be laid down by the State Council.  

    Article 10  Any taxpayer engaged in production or business operations
shall, where any change occurs in the contents of tax registration, within 30
days from the date of completing the formalities for such change in the
business registration with the administrative department of industry and
commerce or prior to the submission of an application for cancellation of the
business registration to the administrative department of industry and
commerce, apply to the tax authorities for the change or cancellation of tax
registration on presentation of the relevant documents.

    Article 11  Use of tax registration certificates by taxpayers shall be
governed by the relevant regulations formulated by the competent department of
taxation under the State Council. The tax registration certificates shall not
be lent, altered, damaged, traded or forged.

    Section 2  Administration of Accounting Books and Vouchers

    Article 12  Taxpayers engaged in production or business operations or
withholding agents shall, in pursuance of the relevant regulations of the
competent departments of finance and taxation under the State Council,
establish accounting books, keep accounts based on legitimate and valid
vouchers and conduct accounting. Individual businesses that are truly unable
to keep accounting books may keep no accounting books upon examination and
approval by the tax authorities.

    Article 13  The financial and accounting systems or financial and
accounting procedures of a taxpayer engaged in production or business
operations shall be submitted to the tax authorities for the record.

    Where the financial and accounting systems or financial and accounting
procedures of a taxpayer engaged in production or business operations
contravene the relevant tax rules of the State Council or the competent
departments of finance and taxation under the State Council, the calculation
and payment of tax shall be made in accordance with the relevant tax rules of
the State Council or the competent departments of finance and taxation under
the State Council.

    Article 14  The special invoices for Value-Added Tax shall be printed by
enterprises designated by the competent tax department under the State
Council; other invoices shall be printed by enterprises designated
respectively by state tax bureaux or local tax bureaux of the provinces,
autonomous regions or municipalities directly under the Central Government
according to the stipulations by the competent tax department under the State
Council.

    No enterprises shall print invoices without designation by the tax
authorities as provided in the preceding paragraph.”

    Measures for the administration of invoices shall be worked out by the
State Council.

    Article 15  Taxpayers engaged in production or business operations and
withholding agents must take care of accounting books, vouchers for the
accounts, tax payment receipts and other relevant information in conformity
with the period for such care prescribed by the competent departments of
finance and taxation under the State Council.

    Accounting books, vouchers for the accounts, tax payment receipts and
other relevant information shall not be forged, altered or destroyed without
due approval.

    Section 3  Tax Declaration

    Article 16  Taxpayers must, within the time limit for tax declaration as
prescribed by law or administrative rules and regulations, or as determined by
the tax authorities in accordance with law or administrative rules and
regulations, complete formalities for tax declaration, submit tax returns,
financial and accounting statements as well as other relevant information on
tax payments required of taxpayers by the tax authorities in light of the
actual needs.

    Withholding agents must, within the time limit for tax declaration as
prescribed by law or administrative rules and regulations, or as determined by
the tax authorities in accordance with law or administrative rules and
regulations, submit statements on taxes withheld and remitted or collected and
remitted as well as other relevant information required of withholding agents
by the tax authorities in light of the actual needs.

    Article 18  The tax authorities shall collect tax in accordance with law
or administrative rules and regulations. They shall not impose, cease to
collect, overcollect or undercollect tax in violation of law or administrative
rules and regulations.

    Article 19  Withholding agents shall perform their obligations of
withholding or collecting tax in accordance with law or administrative rules
and regulations. With respect to units or individuals that are not obligated
to withhold or collect tax as prescribed by law or administrative rules and
regulations, the tax authorities shall not request them to perform any
obligations of withholding or collecting tax.

    When a withholding agent performs its obligations of withholding or
collecting tax in accordance with law, the taxpayer shall have no right to
refuse. Should a taxpayer refuse, the withholding agent shall promptly report
the case to the tax authorities for disposition.

    The tax authorities shall in accordance with the relevant regulations pay
to withholding agents handling fees for withholding or collecting tax.

    Article 20  A taxpayer or withholding agent shall pay or remit tax in
compliance with the time limit as prescribed by law or administrative rules
and regulations, or as determined by the tax authorities in accordance with
law or administrative rules and regulations. Where a taxpayer is unable to pay
tax within the prescribed period on account of special difficulties, it may,
upon approval by a tax bureau (or sub-bureau) at or above the county level,
defer the payment of tax for a maximum period of three months.

    Where a taxpayer fails to pay tax within the time limit as prescribed in
the preceding paragraph or a withholding agent fails to remit tax within the
time limit as prescribed in the preceding paragraph, the tax authorities
shall, in addition to ordering the taxpayer or withholding agent to pay or
remit the tax within a fixed period of time, impose a surcharge on a daily
basis at the rate of 0.2% of the amount of tax in arrears, commencing on the
day the tax payment is in default.

    Article 21  A taxpayer may submit to the tax authorities a written
application for tax reduction or tax exemption in accordance with law or
administrative rules and regulations.

    Applications for tax reduction or tax exemption shall be subject to the
examination and approval by the examination and approval authorities for tax
reduction or tax exemption prescribed by law or administrative rules and
regulations. Any decisions on tax reduction or tax exemption made in violation
of law or administrative rules and regulations by the local people’s
governments at various levels, the competent departments under the people’s
governments at various levels, or by units or individuals shall be null and
void.

    Article 22  When the tax authorities collect tax and withholding agents
withhold or collect tax, they must issue tax payment receipts to the
taxpayers.

    Article 23  If a taxpayer is under one of the following circumstances, the
tax authorities shall have the power to assess the amount of tax payable by
the taxpayer:

    (1) Establishment of accounting books is not necessary under this Law;

    (2) Accounting books are required to be established by this Law, but they
are not established;

    (3) Accounting books are established, but the accounts are not in order or
the information on costs, receipt vouchers and expense vouchers are incomplete
and difficult to check;

    (4) Where an obligation to pay tax arises, the taxpayer fails to complete
the formalities for tax declaration within the prescribed time limit, and,
after having been ordered by the tax authorities to make tax declaration
within a fixed period of time, still fails to do so upon expiration of the
period.

    Article 24  The payment or receipt of prices or charges in business
transactions between an enterprise or an establishment or a site set up in
China by a foreign enterprise engaged in production or business operations,
and its associated enterprises, shall be made in the same manner as the
payment or receipt of prices or charges in business transactions between
independent enterprises. Where the payment or receipt of prices or charges is
not made in the same manner as in business transactions between independent
enterprises and results in a reduction of the taxable revenue or income, the
tax authorities shall have the right to make reasonable adjustments.

    Article 25  With respect to a unit or an individual engaged in business
operations without a business licence, the case shall be dealt with by the
administrative department of industry and commerce in accordance with law. In
addition, the tax authorities shall assess the amount of tax payable by such
unit or individual and order it or him to make the tax payment. Should such
unit or individual fail to make the tax payment, the tax authorities may
distrain the commodities or goods of a value corresponding to the amount of
tax payable. If the amount of tax payable is paid after the distraint, the tax
authorities must immediately remove the distraint and return the commodities
or goods distrained. If the amount of tax payable is still not paid after the
distraint, the commodities or goods which have been distrained shall, upon
approval of the commissioner of a tax bureau (or sub-bureau) at or above the
county level, be sold by auction and the proceeds therefrom shall be used to
offset the amount of tax payable.

    Article 26  Where the tax authorities have grounds to believe that a
taxpayer engaged in production or business operations has committed any act of
tax evasion, the tax authorities may order the taxpayer to pay the tax payable
within a time limit prior to the prescribed date of tax payment. If within
such time limit the tax authorities discover that there are obvious signs that
the taxpayer has transferred or concealed its taxable commodities, goods or
other property, or taxable income, the tax authorities may order the taxpayer
to provide a guaranty for tax payment. If the taxpayer is unable to provide a
guaranty for tax payment, the tax authorities may, upon approval of the
commissioner of a tax bureau (or sub-bureau) at or above the county level,
adopt the following tax preservative measures:

    (1) To notify in writing the bank or any other financial institution with
which the taxpayer has opened an account to stop payment on a temporary basis
from the taxpayer’s deposits of an amount corresponding to the amount of tax
payable;

    (2) To distrain or seal up the taxpayer’s commodities, goods or other
property of a value corresponding to the amount of tax payable.

    In the event that the taxpayer makes the tax payment within the time limit
prescribed in the preceding paragraph, the tax authorities must immediately
lift the tax preservative measures. Should the taxpayer fail to make the tax
payment on expiration of the time limit, the tax authorities may, upon
approval of the commissioner of a tax bureau (or sub-bureau) at or above the
county level, notify in writing the bank or any other financial institution
with which the taxpayer has opened an account to withhold and remit the amount
of tax payable from the taxpayer’s deposits from which payment has been
stopped on a temporary basis, or sell by auction the commodities, goods or
property which has been distrained or realed up and use the proceeds therefrom
to offset the amount of tax payable.

    Where the legitimate interests of a taxpayer are jeopardised due to the
inappropriate adoption of tax preservative measures or the failure of the tax
authorities to immediately lift such measures after the taxpayer has made the
tax payment within the prescribed time limit, the tax authorities shall be
liable for compensation.

    Article 27  Where a taxpayer engaged in production or business operations
or a withholding agent fails to pay or remit tax within the prescribed time
limit, or a tax payment guarantor fails to pay the guaranteed amount of tax
within the prescribed time limit, the tax authorities shall order the same to
pay the tax within a fixed period of time. In case of failure to pay the tax
within such period, the tax authorities may, upon approval of the commissioner
of a tax bureau (or sub-bureau) at or above the county level, adopt the
following compulsory enforcement measures:

    (1) To notify in writing the bank or any other financial institution with
which the taxpayer, withholding agent or tax payment guarantor has opened an
account to withhold and remit the amount of tax from its deposits;

    (2) To distrain, seal up or sell by auction the commodities, goods, or
other property of the taxpayer, withholding agent or tax payment guarantor, of
a value corresponding to the amount of tax payable, and to use the proceeds
therefrom to offset the amount of tax payable.

    The tax authorities shall, while adopting the compulsory enforcement
measures, carry out compulsory enforcement with regard to the surcharge on tax
in arrears which has not been paid by the above-mentioned taxpayer,
withholding agent or tax payment guarantor.

    Article 28  Should a taxpayer who has not paid or has underpaid the amount
of tax payable need to leave China, it shall settle the amount of tax payable
with, or provide a guaranty to, the tax authorities, before leaving the
country. If the taxpayer neither settles the amount of tax payable nor
provides a guaranty, the tax authorities may notify the exit administration
authorities to prevent the taxpayer from leaving the country.

    Article 29  The tax authorities must issue a receipt when distraining
commodities, goods or other property, and issue a detailed list when sealing
up commodities, goods or other property.

    Article 30  After discovering that a taxpayer has paid an amount of tax in
excess of the tax payable, the tax authorities must immediately refund the
excess amount; where a taxpayer discovers its excess payment within three
years from the date of the tax payment, it may claim a refund of the excess
amount of tax from the tax authorities, which shall immediately refund it
after examination and verification of the case.

    Article 31  In case that a taxpayer or withholding agent fails to pay tax,
or underpays tax, due to the responsibility of the tax authorities, the tax
authorities may within three years require the taxpayer or withholding agent
to pay the tax in arrears, without, however, the imposition of any surcharge
thereon.

    Article 32  The tax authorities shall have the power to conduct the
following tax inspections:

    (1) To inspect a taxpayer’s accounting books, vouchers for the accounts,
statements and relevant information; to inspect a withholding agent’s
accounting books, vouchers for the accounts and relevant information in
respect of the amount of tax withheld and remitted or collected and remitted;

    (2) To inspect a taxpayer’s taxable commodities, goods or other property
at the taxpayer’s sites where production or business operations are conducted
and places where goods are stored; to inspect a withholding agent’s
operational conditions relating to the withholding and remittance of tax or
the collection and remittance of tax;

    (3) To order a taxpayer or withholding agent to furnish documents,
evidentiary materials and information pertaining to the payment of tax or the
amount of tax withheld and remitted or collected and remitted;

    (4) To make inquiries of a taxpayer or withholding agent regarding issues
and particulars relevant to the payment of tax or the amount of tax withheld
and remitted or collected and remitted;

    (5) To inspect, at railway stations, docks, airports, postal enterprises
and their branches, supporting documents, vouchers and information pertaining
to the taxable commodities, goods or other property which a taxpayer has
delivered for carriage or sent by post;

    (6) Upon approval of the commissioner of a tax bureau (or sub-bureau) at
or above the county level, to examine and verify the deposit accounts that a
taxpayer engaged in production or business operations or a withholding agent
has opened with a bank or any other financial institution, on the strength of
a permit, which is of a nationally unified form, for the inspection of deposit
accounts. The examination and verification of the savings deposits of a
taxpayer engaged in production or business operations shall be subject to the
review by a county sub-branch or a municipal (at the county level) sub-branch
of a bank or a district office of a municipal branch of a bank, which shall
designate a subordinate savings office to provide the relevant information.

    Article 33  A taxpayer or withholding agent must subject itself to tax
inspections conducted by the tax authorities in accordance with law, report
the particulars truthfully and provide relevant information, and shall not
refuse to be inspected or conceal any facts.

    Article 34  When the tax authorities conduct tax inspections in accordance
with law, the departments and units concerned shall give support and
assistance, truthfully report the particulars of taxpayers, withholding agents
and other parties concerned in respect of the payment of tax and the amount of
tax withheld and remitted or collected and remitted, and furnish the relevant
information and evidentiary materials to the tax authorities.

    Article 35  The tax authorities may, when investigating a case concerning
violation of any tax laws or regulations, make notes, tape-recordings,
video-recordings, photographings and duplications of the relevant particulars
and information pertaining to the case.

    Article 37  Where a taxpayer has committed any of the following acts, the
tax authorities shall order it to rectify within a fixed period of time. Those
failing to rectify upon expiration of the period may be punished by the tax
authorities with a fine of not more than 2,000 yuan, if the circumstances are
serious, with a fine of not less than 2,000 yuan but not more than 10,000
yuan.

    (1) Failure to apply for tax registration, change or cancellation of tax
registration within the prescribed time limit;

    (2) Failure to establish and take care of the accounting books, or to take
care of the vouchers for the accounts and the relevant information in
accordance with relevant regulations;

    (3) Failure to furnish reports on the financial and accounting systems or
the financial and accounting procedures to the tax