Notice on Business Tax & Enterprise Income Tax on Direct Flights across the Taiwan Strait

The Ministry of Finance of P. R. China and the State Administration of Taxation of P. R. China jointly issued a Notice on the policies for business tax and enterprise income tax on direct flights across the Taiwan Strait.

Directives to local Departments of Finance, local Offices under the State Administration of Taxation, and local taxation bureaus in each province, autonomous region, municipality directly under the Central Government, and municipality with independent planning status, and to the Finance Bureau of Xinjiang Production and Construction Corps:

In order to promote direct flights across the Taiwan Strait, approved by the State Council of China, relevant tax policies concerning the direct-flight services across the Taiwan Strait are hereby notified as follows:

I As from June 25, 2009, exemption of business tax shall apply to the transport income gained from Chinese mainland by Taiwan airlines engaged in direct flights across the Taiwan Strait.

The business tax paid in by Taiwan airlines from June 25, 2009 to the date of receiving the Notice, which shall apply to exemption, shall be deducted from later business tax payable, and those not deductible within 2010 shall be refunded to such Taiwan airlines.

II As from June 25, 2009, exemption of enterprise income tax shall apply to the income gained from Chinese mainland by Taiwan airlines engaged in direct flights across the Taiwan Strait.

The enterprise income tax paid in by Taiwan airlines from June 25, 2009 to the date of receiving the Notice, which shall apply to exemption, shall be refunded to such Taiwan airlines within 2010.

The Taiwan airlines enjoying the exemption from enterprise income tax shall, in accordance with the implementation rules for the enterprise-income-tax law, conduct separate accounting of their incomes, costs, and expenses gained or incurred from Chinese mainland; where failing to make separate accounting, they may not enjoy the exemption policy on enterprise income tax.

III The Taiwan airlines described in the Notice refer to the airline companies with a "business license" issued by the Civil Aviation Administration of P. R. China (CAAC) or those approved to operate non-scheduled (chartered) carrier services for cross-strait passengers, goods, and mails in accordance with the Cross-Strait Air Transport Agreement and Added Cross-Strait Air Transport Agreement, with their addresses registered in Taiwan region.