CIRCULAR OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION ON THE APPLICABLE TAXATION POLICY OF THE FOREIGN PETROLEUM COMPANIES INVOLVING IN EXPLOITATION OF COAL GAS

The Ministry of Finance, the State Administration of Taxation

Circular of the Ministry of Finance and the State Administration of Taxation on the Applicable Taxation Policy of the Foreign Petroleum
Companies Involving in Exploitation of Coal Gas

CaiShuiZi [1996] No.62

July 5, 1996

The financial departments (bureaus), the state tax bureaus and the local tax bureaus in various provinces, autonomous regions, municipalities
directly under the Central Government and municipalities separately listed on the State plan:

In order to encourage the foreign enterprises and enterprises with foreign investment (hereinafter referred to as enterprises ) to
exploit the overland coal gas level of our country, the taxation policy should be clarified as following:

I.

The tax of the business earnings and other income of enterprises that exploit the overland coal gas level in our country should be
paid on basis of the Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises
and Rules for its implementation.

II.

The provisions on the enterprises with undertaking of the petroleum exploitation in Rules for the Implementation of the Income Tax
Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises apply to the enterprises which
exploit the overland coal gas level.

III.

The provisions on the income tax of the enterprises that undertake the petroleum exploitation by collaboration stipulated by the Ministry
of Finance, the State Administration of Taxation and Offshore Oil Tax Administration are all applied to the enterprises which exploit
the overland coal gas resource unless the additional prescriptions serve.

IV.

The enterprises with undertaking of exploiting the coal gas should pay the value-added tax and mine usage fee according to Circular
of the State Administration of Taxation on the Payment of Value-added Tax on Chinese-foreign Cooperative Exploitation of Petroleum
Resource (GuoShuiFa [1994] No.114) and Interim Provisions on the Payment of Mine Usage Fee for Chinese-foreign Cooperative Exploitation
of Land Petroleum Resource (Decree [1990] No.3 of the Ministry of Finance)

V.

The enterprises with the undertaking of exploiting coal gas should pay the tax of real estate, the tax of licences and the stamp tax
on basis of the Interim Regulations on Tax of Urban Real Estate, the Interim Regulations on Tax of Licences for Vehicles and Vessels
and the Interim Regulations of the People’s Republic of China on Stamp Tax respectively.