CIRCULAR OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION ON STOPPING CARRYING OUT THE PREFERENTIAL POLICY OF EXEMPTING THE INCOME TAX OF INTEREST AND RENT WITHDREW IN ADVANCE WHEN THE ENTERPRISES PAY PRINCIPAL AND INTEREST AND RENTAL CHARGE BY WAY OF HANDING OVER THE PRODUCTS

The Ministry of Finance, the State Administration of Taxation

Circular of the Ministry of Finance and the State Administration of Taxation on Stopping Carrying Out the Preferential Policy of Exempting
the Income Tax of Interest and Rent Withdrew in Advance When the Enterprises Pay Principal and Interest and Rental Charge by Way
of Handing over the Products

CaiShui [2001] No.162

September 8,2001

From September 1,2001 on, the companies and enterprises of our country that are provided the equipments and technology by the foreign
enterprises pay principal and interest and rental charge by means of returning the products for sale or handing over the products.
The enterprises also offset principal and interest by the cost of the assembling line labor for the processing of the incoming materials.
All the earnings from the interest and rent should be levied the business income tax following Article 19 of the Law of Income Tax
of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises and the relevant provisions. The
provisions of Subparagraph 5 of Article 2 and the third Paragraph of Article 3 in the Interim Provisions of the Ministry of Finance
on Reducing and Exempting the Income Tax of Interest Obtained in China By the Foreign Businessmen [CaiShuiZi(83) No.348] are stopped
carrying out.