To the local taxation bureaus and branches in each district and county:
????According to Notice on Matters Concerning Strengthening the Approval,
Registration and Management on Foreign Exchange and Taxation of Foreign-Invested
Enterprises (Wai Jing Mao Fa Fa [2002] No. 575) jointly issued by
the four ministries including the Ministry of Foreign Trade &
Economic Cooperation, Notice of the State Administration of Taxation
on Taxation Processing of Foreign-Invested Enterprises with Foreign
Investment Less Than 25% (Guo Shui Han [2003] No. 422) and Notice
of the State Administration of Taxation on Taxation Matters Concerning
Foreign Investors Acquiring the Stock Rights of China??s Domestic Enterprises
(Guo Shui Fa [2003] No. 60) and in consideration of the reality of
Beijing, we hereby clarify related matters as follows:
????1. ??Foreign-invested enterprises with foreign investment less than
25%?? (hereinafter referred to as enterprises with foreign capital
less than 25%) refer to Chinese-foreign equity joint ventures and
Chinese-foreign cooperative enterprises with foreign investment in
which the foreign investors contribute less than 25% of the registered
capital as defined by the current laws and regulations governing foreign
investment, and foreign-invested enterprises established by foreign
investors by acquiring the stock rights of China??s domestic enterprises
as specified in Temporary Regulation on Foreign Investors?? Acquisition
of China??s Domestic Enterprises ([2003] No. 3).
????2. In processing taxation registration, the enterprises with foreign
capital less than 25% shall be treated as domestically funded enterprises
and verified and granted taxation registration of domestically funded
enterprises.
????3. In choosing applicable tax systems, enterprises with foreign
capital less than 25% shall be treated as domestically funded enterprises
without enjoying taxation treatments for foreign enterprises.
Annex:
????1. Notice of the State Administration of Taxation on Taxation
Matters Concerning Foreign Investors Acquiring the Stock Rights
of China??s Domestic Enterprises
????2. Notice of the State Administration of Taxation on Taxation
Processing of Foreign-Invested Enterprises with Foreign Investment
Less Than 25%
????3. Notice on Matters Concerning Strengthening the Approval, Registration
and Management on Foreign Exchange and Taxation of Foreign-Invested
Enterprises
Annex 1:
Document from State Administration of Taxation
Guo Shui Fa [2003] No. 60
Notice of the State Administration of Taxation on Taxation Matters
Concerning Foreign Investors Acquiring the Stock Rights of China??s
Domestic Enterprises
??????????????????????????????????????????????????????????????????????????????????May 28, 2003
????To the national taxation bureaus and local taxation bureaus of
each province, autonomous region and municipality and city with
independent planning:
????In order to promote the foreign investment in China, standardize
the operation, introduce the advanced technology and management
methods from overseas, better utilize foreign investments and more
reasonably allocate resources, the former Ministry of Foreign Trade
& Economic Cooperation, State Administration for Industry &
Commerce, State General Administration of Exchange Control and State
Administration of Taxation jointly released in March 2003 the Temporary
Regulation on Foreign Investors?? Acquisition of China??s Domestic
Enterprises (hereinafter referred to as Temporary Regulation [2003]
No. 3), allowing foreign investors to acquire the stock rights of
China??s domestic enterprises without foreign investment (hereinafter
referred to as domestic enterprises). We hereby clarify the taxation
matters concerning the acquisition of stock rights of domestic enterprises
by foreign investors:
????1. Foreign investors shall, in accordance with the Temporary Regulations,
change the domestic enterprises into foreign-invested ones by acquiring
the stock rights from the domestic enterprise shareholders or subscribing
additional shares of the domestic enterprises (hereinafter referred
to as stock rights acquisition). In case the foreign investors contribute
more than 25% of the stock rights, the various taxes might be levied
according to the applicable taxation laws and regulations for foreign-invested
enterprises.
????2. In case the relevant terms in Income Tax Law of the People??s
Republic of China for Enterprises with Foreign Investment and Foreign
Enterprises (hereinafter referred to as Tax Law) and Rules for the
Implementation of the Tax Law are satisfied, the foreign enterprises
established by foreign investors through stock rights acquisition
might enjoy preferential enterprise income tax rates as specified
in the Tax Law and related regulations. In calculating preferential
enterprise income taxes, the following rules shall be followed:
????(1) The beginning of business period and the business period.
The business period of an established and amended foreign enterprise
begins from the day when the state industry and commerce administration
grants business license for amendment to the ending date of the
business year defined in the industry & commerce amendment registration.
????(2) Processing of losses in prior years. The operation losses
to be made up that occurred accumulatively before the amendment
might be made up by the established and amended foreign-invested
enterprises during the remaining years for making up loss as specified
in Article 11 of the Tax Law.
????(3) The determination of the profit-making year. In case the established
and amended enterprises make profits in the same year of amendment
and remain profitable after deducting the losses in prior years
that are permitted to be made up, we can say it is a profit-making
year. In case the actual production or operation period in the profit-making
year is less than six months, the enterprises might choose the beginning
year for tax exempt and deduction in accordance with Article 17
of the implementing rules of the Tax Law.
????3. This Notice shall come into effect from January 1, 2003. The
foreign-invested enterprises amended and established before the
release of this Notice shall follow it if they meet the requirements
of the Temporary Regulation and this Notice.
Annex 2:
State Administration of Taxation
Guo Shui Han [2003] No. 422
Notice of the State Administration of Taxation on Taxation Processing
of Foreign-Invested Enterprises with Foreign Investment Less Than
25%
??????????????????????????????????????????????????????????????????????????????April 18, 2003
????To the national taxation bureaus and local taxation bureaus in
each province, autonomous region and municipality and city with
independent planning:
????In order for local bureaus to precisely understand and implement
Notice on Matters Concerning Strengthening the Approval, Registration
and Management on Foreign Exchange and Taxation of Foreign-Invested
Enterprises (Wai Jing Mao Fa Fa [2002] No. 575) jointly issued by
the Ministry of Foreign Trade & Economic Cooperation, State
Administration of Taxation, State Administration for Industry &
Commerce and State General Administration of Exchange Control, we
hereby clarify the taxation matters concerning the processing of
newly established foreign-invested enterprises in which the foreign
investors actually contribute less than 25% of the capital (hereinafter
referred to as enterprises with foreign investment less than 25%).
????1. In terms of applicable tax system, the enterprises with foreign
investment less than 25% shall be treated as domestically funded
enterprises and enjoy no preferential tax treatments for foreign-invested
enterprises, unless the State Council provides otherwise.
????2. In terms of taxation registration, the enterprises with foreign
investment less than 25% shall be treated as domestically funded
enterprises, unless the State Council provides otherwise.
Please follow the above regulations.
Annex 3:
Document from the Ministry of Foreign Trade & Economic Cooperation,
State Administration of Taxation, State Administration for Industry
& Commerce and State General Administration of Exchange Control
Wai Jing Mao Fa Fa [2002] No. 575
Notice on Matters Concerning Strengthening the Approval, Registration
and Management on Foreign Exchange and Taxation of Foreign-Invested
Enterprises
??????????????????????????????????????????????????????????????????????????????December 30, 2002
????To the foreign trade & economic cooperation committees (commissions
or bureaus) in each province, autonomous region and municipality
and city with independent planning; industrial & commercial
administration bureaus in each province, autonomous region and municipality
and other authorized bureaus; State Administration of Foreign Exchange,
branches and foreign exchange management departments of each province,
autonomous region and municipality, and branches of Shenzhen, Dalian,
Qingdao, Xiamen and Ningbo; and state taxation bureaus and local
taxation bureaus in each province, autonomous region and municipality
and city with independent planning:
In order to adapt the work to the new situations for attracting
foreign investment, standardize the management on foreign-invested
enterprises and in the light of the new situations and problems
occurred, the Ministry of Foreign Trade & Economic Cooperation,
State Administration of Taxation, State Administration for Industry
& Commerce and State General Administration of Exchange Control
jointly stipulated the Notice on Matters Concerning Strengthening
the Approval, Registration and Management on Foreign Exchange and
Taxation of Foreign-Invested Enterprises (See the annex) which is
now printed and distributed to you for execution.
Annex
Notice on Matters Concerning Strengthening the Approval, Registration
and Management on Foreign Exchange and Taxation of Foreign-Invested
Enterprises
????To adapt our work to the new situations in attracting foreign
investment, standardize the management on foreign-invested enterprises,
guarantee their sound development, protect the lawful rights and
interests of national and foreign investors and in accordance with
the Law on Chinese-Foreign Equity Joint Ventures, Law on Chinese-Foreign
Contractual Joint Ventures, Company Law, Contract Law, Regulations
on Foreign Exchange Control and other related laws and regulations,
we hereby clarify the matters concerning strengthening the approval,
registration and management on foreign exchange and taxation of
foreign-invested enterprises:
????1. The establishment of foreign-invested enterprises and the formulation
of their contracts and charters (including the amendment to the
contracts and charters) shall be examined and approved following
the foreign-invested enterprises approval procedures in force as
specified in related laws and regulations.
????2. According to the laws and regulations concerning foreign investment,
foreign investors shall in general contribute no less than 25% of
the registered capital in Chinese-foreign equity joint ventures
and Chinese-foreign cooperative enterprises with foreign investment.
In case the foreign investors contribute less than 25% of the capital,
the approval and registration of the enterprise shall follow the
current procedures for establishing foreign-invested enterprises,
unless laws and regulations provide otherwise. For the foreign-invested
enterprises obtaining the approval, permits will be granted noted
with ??foreign investment less than 25%??. For the foreign-invested
enterprises obtaining registration, business licenses will be granted
with ??foreign investment less than 25%?? noted after ??type of business??.
????3. Unless otherwise provided by laws and regulations, foreign-invested
enterprises with foreign investment less than 25% shall not enjoy
tax exemption or deduction for equipment and materials imported
for private use under the total investment, nor enjoy the treatments
for foreign-invested enterprises in terms of other taxes. Companies
limited by shares with foreign investment that have enjoyed treatment
for foreign-invested enterprises shall continue to enjoy such treatments
when raising additional capital or transferring stock rights to
foreign investors.
????4. For foreign-invested enterprises with foreign investment less
than 25%, investors shall pay up all the capital within three months
upon the issuance of the business licenses when contributing capital
in cash and within six months upon the issuance of the licenses
when making contributions in kind or using industrial property as
capital.
????5. In case foreign investors acquire stock rights from domestic
enterprises of various nature and types, the domestic enterprises
shall, in accordance with the related laws and regulations and the
industrial policies for foreign investment, be amended to foreign-invested
enterprises by going through the effective approval procedures for
foreign-invested enterprises and accord with the industry policies
of foreign investment. Upon the approval, the enterprises will obtain
permits for foreign-invested enterprises by the approval authorities
and business licenses for foreign-invested enterprises by industrial
& commercial administrations.
????Upon approval, the Chinese shareholders of natural persons in
the former domestic enterprises who have been shareholders for over
one year in the former enterprise might continue to be the Chinese
investors in the foreign-invested enterprises amended and established.
????The Chinese domestic natural persons are prohibited temporarily
from establishing new foreign-invested enterprises with foreign
companies, enterprises, other economic organizations or individuals
or establishing by acquiring foreign-invested enterprises.
????6. When acquiring the stock rights of domestic enterprises, the
foreign investors shall pay up all the purchasing capital within
three months upon the issuance of the business licenses for foreign-invested
enterprises. In case the period needs to be prolonged for special
reasons, the foreign investors shall, upon the approval of competent
authorities, pay up over 60% of the total purchasing capital within
six months upon the issuance of the business licenses, pay up all
the purchasing capital within one year and obtain income according
to the proportion of the actual capital paid up. Before paying up
all the purchasing capital, the dominant investors shall not make
decisions in the enterprises or enter his/her interests or assets
in the enterprises to his/her financial statements by combining
statements. The Foreign Capital & Exchange Registration Certificate
issued by the local foreign exchange control departments where the
party transferring stock rights is located is the valid document
to certify that the enterprises are fully funded by the foreign
investors.
????In case the foreign investors acquire the stock rights from domestic
enterprises, both parties of stock rights transfer shall define
in the transfer agreement the time limit for the foreign investors
to pay up purchasing capital. The competent authorities shall not
approve the agreement without such time limits defined.
????7. Foreign-invested enterprises shall go to the local foreign
exchange control departments for foreign exchange registration on
the strength of the permits for foreign-invested enterprises and
the business licenses.
????When approving foreign investors to acquire the stock rights of
the domestic enterprises, the examination and approval authorities
shall send a copy of the written reply concerning the stock rights
transfer to the local foreign exchange control departments of the
domestic enterprises and the parties transferring stock rights.
The local foreign exchange control departments of the party transferring
stock rights shall supervise the collection of foreign exchange.
????8. The examination and approval authorities, industrial &
commercial registration authorities and foreign exchange control
departments shall strictly enforce this Notice. Upon the enforcement
of this Notice, no approval, industrial & commercial registration
or foreign exchange registration shall be granted to enterprises
that fail to follow the examination and approval procedures as specified
in this Notice.
????Enterprises with foreign investment less than 25% established
before the execution of this Notice shall go through the examination
and approval procedures within six months upon the execution of
this Notice. The industrial & commercial registration authorities
will order the enterprises that fail to go through the procedures
to fulfill them within a prescribed time limit. In case the enterprises
fail to go through the procedures within the prescribed time limit,
the industrial & commercial registration authorities will impose
a punishment in accordance with the provisions set forth in Article
63 of the Regulations on Administration of Registration of Enterprises.
In case the enterprises fail to go through the related procedures
after the punishment has been imposed, they shall not pass the annual
examination for the same year.
????The industrial & commercial registration management departments
shall, in accordance with the provisions set force in this Notice,
complete the statistical work of related enterprises, adjustment
of registration management and transference of enterprises?? archives.
After going through the procedures and obtaining approval, the enterprises,
in case of registration for amendment, subject to the management
of the local registration authorities authorized with the power
of registration for foreign-invested enterprises.
????9. In case the prior regulations discord with this Notice, this
Notice shall prevail.
????10. This Notice is applicable to the investors from Taiwan, Hong
Kong and Macao who establish foreign-invested enterprises in Mainland
China.
????11. This Notice shall come into effect from January 1, 2003.
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