CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON ISSUE CONCERNING TAXATION OF THE ENTERPRISES UNDERTAKING LEASING

The State Administration of Taxation

Circular of the State Administration of Taxation on Issue Concerning Taxation of the Enterprises Undertaking Leasing

GuoShuiFa [1997] No.8

January 14, 1997

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

In order to in line with the system reform of the small and medium-sized enterprises and strengthen the collection administration
of corporate income tax of leasing enterprises, the taxation of domestic-funded leasing enterprises should be clarified as follows:

I.

All or parts of enterprises are leased and operated by individual, other enterprises and institutions without changing the name of
leasing enterprises and registration in industry and commerce of lesser enterprise. the lessee enterprises that run the business
in name of lesser enterprises should be the tax-payers of corporate income tax and levied the income tax on all the earnings no matter
how the business earnings are allotted between the lesser and lessee.

II.

All or parts of enterprises leased and operated by individual, other enterprises and institutions, the lessee should register in the
industrial and commercial departments again and engage in business in name of lessee. The corporate income tax should be levied on
the earnings of the enterprises by the enterprises and units newly registered in the industrial and commercial departments as a taxpayer.

III.

All the enterprise is leased by another enterprise or unit and registered in the industrial and commercial departments again. The
enterprise newly-registered should not establish new enterprise and not enjoy the policy of tax exemption that the new enterprise
does.