CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON SOME ISSUES CONCERNING THE TAXATION OF ENTERPRISES WITH FOREIGN INVESTMENT IN THE FIELD OF REAL ESTATE

The State Administration of Taxation

Circular of the State Administration of Taxation on some Issues Concerning the Taxation of Enterprises with Foreign Investment in
the Field of Real Estate

GuoShuiFa [1999] No.242

December 21, 1999

The state and local taxation bureaus of each province, autonomous region, municipalities directly under the Central Government and
the municipalities separately listed on the State plan:

In order to regulate the administration of taxation, some issues concerning the taxation of enterprises with foreign investment in
the field of real estate is notified as follows:

1.

Business and income tax should be counted on the basis of the price paid by the foreign buyer to the foreign enterprise, if an enterprise
with foreign investment sells real estate located in China through the agency of an enterprise abroad by means of signing agreement
or contracts on the basis of commission or exclusive selling rights.

2.

Full and valid documents should be offered for labor charges paid by the above-mentioned enterprise with foreign investment such as
commissions, price difference, handling charge and deductions, and the approval of the competent taxation authority is needed before
they are counted as expenses. And these expenses should not exceed 10% of the sales of the real estate.

This circular shall enter into force as of January 1, 2000.